Managing negligent security risks — Part 1
These cases typically involve violent crime, broad press coverage, sympathetic juries and significant awards.
Out of the countless number of negligent security cases filed each year, only a handful of those matters ever go to trial. Most cases settle out of court, and the outcomes go unreported. However, the legal costs involved in the discovery and settlement process continue to rise, and the payouts to claimants are often substantial.
When negligent security cases do go to trial, they typically involve victims of violent crime, which can mean broad press coverage, sympathetic juries and oversized awards. One landmark case, where an individual was shot in a nightclub parking lot and permanently paralyzed, resulted in a jury award of nearly $103 million, which was later negotiated down to the insurance policy’s limit of $26 million.
Negligent security cases are a significant and growing subset of premises liability and based on the obligation of a property owner or manager to provide a safe environment for their customers, residents or visitors. A key factor in determining liability in these cases involves the concept of foreseeability, which examines whether the property owner knew, or should have known, that a security risk existed.
Property owners and their insurance carriers can address foreseeability in two ways. Ideally, they can apply proven crime prevention best practices, in advance of any crime that might occur on the property, so they are prepared to demonstrate that they followed reasonable precautions. After a violent incident has already occurred, they can also conduct a comprehensive investigation to either establish or disprove the foreseeability of that crime.
Risk management before an incident
Converting potentially dangerous conditions into preventative action requires a shared appreciation and commitment between the insured and the underwriter, involving the need to evaluate the property’s exposure to criminal activity and to take whatever steps are appropriate to address those conditions.
The starting point for understanding an insured’s exposure involves a review of all security policies and practices, which provides insight into how seriously the client is addressing the reasonably anticipated risks. How the client manages security-related issues on a day-to-day basis not only enables the claims professional to help remedy exposures but also to provide quick and effective service following an event.
There are several ways that a claims professional can evaluate an insured’s security practices to be prepared before and after any attack, including:
- Obtain a copy of any security manuals or emergency procedure manuals, which are often the focus of any litigation after the event. It is important to keep updated copies of this material.
- Learn what types of incident and security reports the insured maintains so requested information is quickly obtained following an event.
- Understand how the insured’s security department is organized, including reporting structure and individual roles and responsibilities.
- Know exactly what type of security measures exist at the property. Whether employees or outside contractors are used, obtain copies of contracts to understand how the scope of their responsibilities is described.
- Learn which employees were trained in security-related practices at the property level, how and when that training was provided, and how the insured can prove the training was effective.
Best practices call for all of this information to be organized for each insured, and that those files be updated and disseminated each year to all claims professionals handling security cases. Legal counsel can assist in this effort by preparing a convenient worksheet that identifies the information needed.
Importance of immediate response following an incident
If, despite your insured’s best efforts, a violent attack occurs on their property and people are harmed, response time is the most critical aspect of managing the claim. Any delays in investigating, retaining legal counsel, engaging a premises security expert, and developing a defense plan can negatively affect the outcome and value of the case.
The most effective defense in these matters is always found in the details, and as time passes, those details can fade or be lost completely. In the majority of negligent security cases, the plaintiff relies on emotions to win, while the defense must rely on facts and the law. Because these are fact-intensive cases, the only way to learn all the facts is to investigate the incident immediately.
To win, the plaintiff must put a company in a position to take the blame for the criminal acts of a third-party individual or individuals. And to establish liability, the plaintiff must try to find any weak spot — a security protocol not followed, physical security measures not functioning properly, insufficient training or retention, a lack of security staffing, a disgruntled employee — anything to ground their argument so that blame for the tragic event can be shifted from the criminal to the property owner or manager.
If an adjuster can react quickly and thoroughly investigate the claim, he is in a significantly stronger position to validate the conditions and circumstances; to control the witnesses; to calculate any potential weakness in the case and to develop an initial defense plan even in advance of plaintiff’s counsel being retained.
Most often, this is accomplished by engaging, as quickly as possible, defense counsel who is experienced in these matters, as well as a seasoned security expert, to organize the investigation, evaluate the liability and establish a strategy tailored to the circumstances of the case. Security is not ‘one size fits all’.
By following this protocol, a security incident can be fully investigated, and the liability can be assessed, often within a matter of days. This not only can be accomplished in a fraction of the time and expense it will take to investigate the same matter following a long delay; it also delivers results that are unlikely to be achieved if months or years are allowed to pass following the event.
Part 2 of this series looks at how to conduct an investigation following an incident and the role of a premises security risk professional in reducing an insured’s risk profile.
Stacy Fulco (SFulco@bodellbove.com) is a partner with Bodell Bove, LLC in Chicago and has represented retail, restaurant and hospitality companies for over 20 years, specializing in negligent security claims. Jon D. Groussman, J.D., (jgroussman@lowersriskgroup.com) is executive vice president-consulting practice with Lowers Risk Group and has been providing security management/crime risk mitigation consulting services to organizations for over 25 years.
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