How these risks in Florida are shaping the future of the security insurance market
By Tory Brownyard
This spring, across the country, there is one risk on everyone’s mind: COVID-19. Not only is this having tragic effects on people’s lives and health, but it is reshaping in profound ways how people do business. This has been as true in the security industry as any other.
Security officers are in demand, and with many other professions working at home or suddenly unemployed, firms are being asked to provide personnel for duties beyond their typical post orders. Many of these new requests, such as being asked to take individuals’ temperatures, place guards at risk of illness. This creates tough choices for security firms in terms of how much risk they ask their officers to assume.
Rates are increasing and underwriting guidelines have been tightening, particularly for security firms that serve clients with significant actives hooter exposures, like malls, arenas and—sadly—schools.
Unfortunately, this comes at an already challenging time for the security industry. In recent years, a slew of high-profile acts of violence have put the industry in the spotlight. Meanwhile, many of these tragedies have resulted in large settlements against guard firms. Taken together, these realities have led to a hardening security insurance market, and few states will feel this pinch as acutely as Florida.
Severe and unpredictable
When we talk about acts of violence in Florida, none of us can forget the horrific Stoneman Douglas High School or Pulse Nightclub tragedies. Unfortunately, these are far from isolated incidents.
Measures of active shooter incidents vary based on who is counting and how they define an active shooter incident. Yet, by many standards, these tragedies are a serious problem in Florida. According to the FBI, Florida had three active shooter incidents in 2018—the most of any state other than California. The Gun Violence Archive reports 145 mass shootings in Florida between 2014 and 2020—with five incidents this year alone.
Security officers, even those whose post orders are ostensibly to “observe and report,” often are the first people to respond to active shooter incidents. Though there are no absolutes in protection, security firms’ clients often expect them to provide total protection from harm. Unfortunately, we know all too well that it takes far more than one security officer to stop an active shooter.
This means that, in active shooter incidents, security firms are often held liable for allegations such as negligent security, failure to protect, and failure to anticipate foreseeable violence. These lawsuits have a profound impact on the security industry from a reputational and financial perspective, and they result in significant claims that often reach the limits of insurance policies.
Plus, these are not the only large settlements the industry has seen over the past decade; accidents and single-victim shootings have also generated settlements as high as $58 million.
The security industry does not incur frequent claims and there are few patterns to discern, other than the unfortunate rise of active shooter incidents. This means the industry experiences unpredictable and severe claims, and this is taking its toll.
During the time period when active shooter incidents increased, the insurance market for security firms was soft, with somewhat generous underwriting guidelines and premium reductions. This has changed dramatically now, as the impact of these large settlements has rippled throughout the market. Rates are increasing and underwriting guidelines have been tightening, particularly for security firms that serve clients with significant active shooter exposures, like malls, arenas and—sadly—schools. Firms operating in Florida, in particular, may feel this pinch.
While policy renewals for 2020 included higher rates and insurers reconsidered certain risks, individual security firms can still take steps to mitigate the effects, implementing effective loss control and improving their risk profile.
No matter the market conditions, security firms should carefully consider the wording of their contracts. Clients place a great deal of trust in security officers, expecting them to be able to halt any imminent threat. This can lead to contracts with indemnification clauses that place all liability on the security firm, with language such as “protect all visitors and staff from harm.” Ideally, a force majeure clause can be used to help protect a firm against assuming all liability in a severe loss. At the least, contract language should only hold a firm responsible for their officers’ negligence—not the client’s.
In addition, the contract should have clear wording about the security officers’ duties and post orders. Rather than stating that officers are responsible for “enforcing all rules,” the contract can stipulate specific rules that officers are expected to enforce. This sets reasonable expectations and puts firms in a defensible position in the event of a loss. Of course, any contract should be reviewed by a lawyer, but insurance brokers can help insureds understand the insurance perspective on contract language.
Insurers are also looking more closely at how security firms prepare guards for violent incidents. Security officers with law enforcement experience are better equipped to respond effectively to acts of violence. In addition, firms often find their officers benefit from situational training that prepares them for working in specific environments and responding to specific scenarios. Specialized active shooter training, policies and procedures are now common for security firms.
With public places empty of people as we all do our part to stem the spread of the novel coronavirus, Florida and the rest of the United States have experienced a reprieve in active shooter incidents. Unfortunately, we are all still feeling the effects of these acts of violence, and that includes the security industry. We don’t know how long this hard market will stick around, and brokers can help insureds adjust to this reality.
Tory Brownyard, CPCU
(TBrownyard@brownyard.com), is president of Brownyard Group, an insurance program administrator with specialty programs for select industry groups. In addition to his responsibilities as president, he currently spearheads the Brownguard security guard insurance program and is a highly regarded subject matter expert in the field of security insurance.