30 January 2020Analysis

Choosing an active shooter insurance policy

Each insurer has a different idea of which risks in an active shooter/workplace violence insurance programme should be covered and at what cost, obliging buyers to weigh each policy provision carefully to make sure they have all the coverage they need.

It’s not safe to assume your standard business liability coverage applies to active shooter or workplace violence attacks. Many policies were written before the rate of mass shootings surged in the past decade and may exclude gun-related violence.

“Active shooter coverage should account for the costs of risk management, funerals, media relations, post-event hotlines, and counselling.”

“Similar to the emergence and severity of cyber liability attacks, the coverage lines currently offered in standard commercial insurance policies don’t contemplate these kinds of random and violent attacks,” says Karl Seebacher, vice president of McGowan Program Administrators’ active shooter and workplace violence division.

“As these events unfold, extreme risks and costs to businesses and victims occur immediately after an attack, in addition to any legal fees, judgments or settlements years down the road.”

As a pioneer of active shooter/workplace violence insurance programmes, McGowan has seen substantial shortcomings in policies that could leave organisations unprotected in the aftermath of an active shooter incident. McGowan urges insurance buyers to look for the following items in an active shooter policy.

  1. Primary coverage

Primary coverage means the policy kicks in immediately and does not have to wait for the exhaustion of other coverage. Primary coverage is akin to an emergency medical technician who rushes to the scene of a car crash and then stays with injured persons until they reach the hospital.

An active shooter incident is a crisis requiring an immediate response and there is no time for delays that might result from concerns about insurance coverage. Responding quickly and appropriately can save lives, reduce injuries, and potentially mitigate the severity of damage awards.

  1. Third-party liability

Active shooter incidents often trigger third-party liability issues, especially when they happen in the workplace. A standard general liability policy might cover an employer and its workforce but exclude third parties such as visitors, customers, or bystanders.

The random nature of an active shooting and its potential victims requires coverage that includes third-party liability.

  1. Lawsuit coverage beyond defence costs

Some policies pay only the defence costs of a lawsuit—which might make sense when the likelihood of fatal or crippling injuries seems slight. However, gunshot wounds that kill or maim can produce six or seven-figure damage awards. It is therefore crucial that coverage extends beyond simply defence costs, to also include damages and judgments.

  1. Coverage definitions

Be careful of restrictive language about active shooting incidents. Policy language might include “deadly weapon protection,” “workplace violence”, or “active assailant”.

You want to make sure your “active shooter” coverage is not limited to gunfire. Knives, homemade bombs, vehicle attacks, and many other weapons can be just as deadly, and require just as much cover.

  1. Coverage triggers

A policy may contain deductible-like casualty thresholds and may only pay if the attacker causes three or more casualties, while also limiting coverage if the casualty count exceeds 50. This leaves significant gaps in coverage if one or two people die and/or suffer crippling injuries, or if there’s a large-scale attack such as the 2017 Mandalay Bay shooting in Las Vegas.

It only takes one terrible incident combined with negligence on the part of a single staff member to produce a crippling lawsuit. You’re far better off with broad coverage with no limits on the number of victims in a potential incident.

  1. No terrorism exclusion

Organisations that have a terrorism policy might think they are already insured for an active shooter situation. However, to trigger coverage under the Terrorism Risk Insurance Act (which provides reinsurance for terrorism insurance), the US government must certify it as an “act of terrorism”.

The attack must (1) be violent or dangerous to human life, property, or infrastructure; (2) cause damage in the US or to US property; (3) be an effort to coerce US civilians or the US government; and (4) cause expected minimum losses of at least $50 million.

Despite the 2017 incident in Las Vegas being the deadliest US mass shooting to date, it was not declared an official terrorist attack. The US government has not certified any terrorist attacks on US soil since September 11, 2001.

Untold damage can happen in incidents with any number of casualties and it’s imprudent to assume terrorism policies will cover most active shooter/workplace violence incidents.

  1. Crisis-response coverage

Organisations in the midst of an active shooter emergency need skilled crisis response assistance. Active shooter coverage should account for the costs of risk management, funerals, media relations, post-event hotlines, and counselling.

You need a team of professionals who jump into action quickly and directly address the crisis. You don’t want a distant voice on the phone trying to walk you through it with little or no real-world experience.

  1. Property damage

An active shooter event could trigger fire suppression systems. Water damage could ruin computers, desks, carpeting, files, and much more, and there’s a risk of water causing costly structural damage. So, don’t overlook property damage coverage when searching for an active shooter policy.

  1. Business income

The flip side of property damage coverage is business income protection. Standard business policies that restore lost profits may require property damage in order to trigger the business income/interruption cover. This works fine in the fire suppression scenario mentioned above, but what if the active shooter/workplace violence incident doesn’t cause much property damage?

A mass shooting in a restaurant or an office could cause minor physical damage (broken glass, bullet holes in walls, soiled carpet, etc) while inflicting substantial human trauma that forces a closure for months, or even permanently.

After the 2012 shooting at the Cinemark movie theatre in Aurora, Colorado, the structural damage to the business was such that it could have reopened soon after the shooting. In fact, the theatre didn’t reopen for about six months—meaning half a year of income and wages were lost. Business interruption insurance would not cover this.

Linking lost business income to physical property damage can create a substantial vulnerability. The two do not necessarily occur together.

  1. Medical/death benefits

The unique trauma of an active-shooter incident requires coverage that extends beyond basic medical coverage. It also should help the people close to the victims, especially surviving beneficiaries.

  1. Extras

Look for an active shooter policy that offers additional benefits, such as:

  • The cost of employee travel or offsite business locations;
  • Reward money and a post-event tip line;
  • No exclusion from coverage if an employee harms a third party; and
  • Coverage for workplace violence/stalking threats. 

A critical risk-management tool

McGowan Program Administrators has scanned the insurance landscape and studied the toll of mass shootings to find the best ways to address risks, while helping victims and organisations to recover after an incident.

Our active shooter programmes plug the leaks in general liability policies and create a framework for economical-yet-comprehensive coverage for businesses and organisations of every size.

Paul Marshall is managing director of active shooter and workplace violence at McGowan Program Administrators. He can be contacted at: