When the Emotional Toll of a Mass Shooting Requires a Building to be Torn Down, How Can Risk Managers Foot the Bill?

October 01, 2018

Mass shootings bring nominal damage to an infrastructure, yet property owners still choose to tear down and rebuild sites of violence. How can risk managers prepare?

When a young man bent on mass murder entered Sandy Hook Elementary on Dec. 14, 2012, no one could have predicted the loss and devastation that followed. Twenty school children, ages six and seven years old, and six adult staff members lost their lives.

Four years later, a would-be killer entered the Pulse Nightclub in Orlando, killing 49 and wounding 53. This past February, a former student stormed the Marjory Stoneman Douglas High School in Parkland, Fla., fatally shooting 17 students and faculty.

In the wake of a mass shooting, the tremendous human cost is front and center. And rightfully so; the grieving never ends, and the lives lost cannot be replaced.

But the ever-prepared risk manager knows that other factors play a role during a mass shooting event: Namely, what happens to the building after the violence subsides?

“A challenge with this [risk] is that some active shooter events have resulted in minimal or no physical damage to an insured property,” said James English, property practice lead, Gallagher’s Great Lakes and Midwest regions.

“Respect for shooting victims and compassion for their families is a priority. Therefore, some decision makers and other stakeholders have evaluated significant modification to, or even demolition of, a location where an active shooting incident has occurred, despite reduced indemnity from coverage limitations.”

In the case of Sandy Hook, the entire building was demolished and rebuilt. The Pulse Nightclub was slated for demolition, but later the owner decided to renovate the facility as a memorial and build her nightclub elsewhere. Parkland shuttered the ninth-grade building where the horrors happened, with no immediate plans to reopen.

“Liability exposures, crisis management resources and other relevant services were the primary focus of many early active shooter insurance policies,” said English.

“These policies contained a nominal limit, if any, to remediate direct physical loss or damage to insured property.

“No doubt underwriters and brokers continue to look for better ways to address this unmet coverage need, some of which has not historically ‘fit’ within a traditional property insurance policy.”

The Insurance Challenge of Rebuilding

Gun violence has erupted in schools, churches, movie theaters, entertainment venues, workplaces, newsrooms, government buildings and more. That’s a lot of property to protect with different needs in terms of coverage.

A typical active shooter policy would be focused on medical expenses, funeral costs, public relations firms, security firms and the like. It would not cover the demolition or rebuild of the building.

Yet places like Virginia Tech, Columbine, the Aurora Theater in Colorado and a church in Charleston, S.C. still looked to completely renovate the areas affected by violence.

“It’s clear that there is a potential need for an insurance product to address these situations,” said Fazio. “I view this as something that would be better addressed under a property policy than an active shooter policy.”

However, property still has its limits.

“These active shooter events result in minimal to no physical damage to the asset. And if there’s no damage to the asset, does it trigger the property policy?” asked English.

Reiner Braun, West Coast property practice leader, Beecher Carlson, echoed English’s sentiment. For a teardown/rebuild policy to work, a definitive coverage trigger would need to be designated. He also added that, in order for this type of coverage to really come to light, wording must be crafted to address various scenarios.

“Is it worse if there’s a mass shooting at an elementary school versus gang violence at a Friday night football game? Who decides how bad a situation needs to be for the building to come down?” he said.

“Should this exposure — the cost of taking down and rebuilding an elementary school — be transferred to the insurance marketplace or should society take on that cost?” Cliff Simpson, national property practice leader, Beecher Carlson, added.

Sandy Hook spent $50 million to demolish its building and rebuild. A $250,000 to $1 million coverage isn’t nearly close enough to cover that cost, Simpson said.

“The industry would need to brainstorm and come up with very specific wording to define insured events and assets and how decisions are made after an event to trigger cover.”


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