SB 553: Insurance Considerations Following a Workplace Violence Event

SB 553 requires California employers that are not otherwise exempt to have a comprehensive Workplace Violence Prevention Plan (WVPP) in place. Some entities exempt from SB 553 are worksites with fewer than 10 employees (where the public does not have access to those employees) and healthcare facilities. This article examines insurance-related concerns associated with workplace violence events (WVEs).
 

Learn more: 

• Read the full text of SB 553
• Get Woodruff Sawyer’s primer on the nuts of bolts of SB 553

SB 553’s Impact on Insurance

SB 553 does not appear to have any impact on the type of insurance a company must purchase or what insurance coverage is available in the event of a WVE. Additionally, failure to comply with SB 553 should not result in litigation against a non-compliant company.  

However, SB 553 does allow the Division of Occupational Safety and Health within the Department of Industrial Relations to issue citations and notices of civil penalties to non-complaint companies. Generally, civil penalties are not covered by insurance.  

Additionally, while non-compliance with SB 553 should not directly result in civil lawsuits, lack of compliance with its policy and training requirements may be used in litigation to attempt to (1) establish liability under some other law and/or (2) increase recoverable damages. It would not be surprising to see the plaintiffs’ bar argue that failure to comply with SB 553 should open employers to punitive damages, which are not insurable under California law.  

Here are some insurance- and risk-management related questions that typically arise following a WVE:

• Who pays for counselling and/or rehabilitation expenses for employees impacted by a WVE
  • Likely an Employee Assistance Program, if one is in place
  • Possibly an employee’s personal health insurance
• What happens if the premises are damaged, need to be shut down, or even demolished due to a WVE?
  • Likely turn to property or terrorism insurance
• Could an employer face claims of negligence arising from a WVE?
  • Yes, and a variety of coverages might apply depending on the source of the claimant (for example, employee versus customer or other bystander versus company stockholder)
• Does a company have access to pre- and/or post-crisis management resources surrounding (threatened) WVEs?
  • As always, potential coverage for any scenario is highly dependent on allegations, facts, and policy language. With that said, the following coverages/resources are potentially applicable for a WVE:
    • Directors & Officers
    • Employee Assistance Program
    • Employer’s Liability  
    • Employment Practices Liability  
    • General Liability  
    • Property
    • Terrorism
    • Workers’ Compensation
    • Workplace Violence  

Directors & Officers Liability Insurance

Providing notice to the relevant director’s and officer’s (D&O) insurance program might be prudent, depending on the severity of a given WVE and other potentially relevant factors, including:

1. Whether the company is publicly traded
2. Whether the company has endured prior similar incidents
3. Whether the company has robust policies and procedures in place to help avoid or minimize WVEs
4. Whether any directors or officers were aware of threats of a WVE

Coverage could ultimately be available to both the insured organization as well as any directors or officers who might be named in any lawsuits that could arise from the WVE.  

D&O policies can also provide crisis management coverage, depending on the facts of the loss and the terms of the policy. D&O policies are more likely to apply if a company director or officer is a victim of the WVE but can apply even if they are not. Crisis management coverage through a D&O policy can vary widely (if available at all) and is often limited to first-party costs of the insured organization, for things like public relations assistance.  

Employee Assistance Program

If it’s available, provide employees with access to an Employee Assistance Program (EAP) immediately upon learning of a WVE. The EAP can help employees and the organization cope with the emotional and mental fallout from a WVE. EAPs can help connect impacted employees with timely, short-term counseling, as well as provide referrals to long-term counseling resources.  

EAPs can even help organizations prepare for and attempt to prevent WVEs from occurring in the first place. This could be a way to help comply with SB 553.  

Employer’s Liability Insurance

While workers compensation (WC) is often referred to as an employee’s “exclusive remedy” to recover for work-related bodily injury, there are instances where employees (and/or their dependents) can recover outside of WC, and a WVE may be such an instance.

When an employee seeks recovery outside of a WC scheme, employer’s liability (EL) is the most likely place to find insurance coverage. Depending on the circumstances of a WVE, it may be prudent to provide notice to any EL carrier(s) of bodily injuries suffered by any employees during a WVE—even before any claims have been made by any employees or their dependents.  

Employment Practices Liability Insurance

The core coverages under an employment practices liability (EPL) policy are for claims made by employees against their employer for things like discrimination, harassment, retaliation, and wrongful termination. Coverage for negligent hiring and supervision can be available, but typically only for claims made by employees. So, any claims made by non-employees, such as vendors or customers, would not likely be covered under an EPL policy.  

Further, EPL policies typically do not provide coverage for bodily injury (other than emotional distress from an otherwise covered claim). An organization would likely turn to either WC or EL to find coverage for bodily injury suffered by any employee due to a WVE.  

Many carriers that provide EPL coverage are willing to endorse WVE coverage onto EPL policies, typically on a sublimited basis. That coverage is usually limited to things like additional security guards, public relations consulting, and group counseling for employees (not other bystanders) for a set period following a WVE.  

General Liability Insurance

A general liability (GL) policy may respond to third-party claims for bodily injury or property damage, but typically would not provide any pre- or post-WVE services prior to the presentation of a claim by a third party against an insured.  

GL policies traditionally contain an exclusion for “’bodily injury’ or ‘property damage’ expected or from the standpoint of the insured.” While the exclusion has been interpreted to provide coverage, in several situations involving shootings on the insured premises, the application of that exclusion may become a point of contention if the shooter during a WVE is an employee of the insured. GL policies also typically have assault and battery exclusions that could become a point of contention if third-party claims are made following a WVE. Additionally, some carriers have been introducing exclusions specifically targeted to remove coverage for liability arising from WVE.  

Property Insurance

Examine property coverage following a WVE to determine whether coverage might be available. Under many policies, damage that occurs to insured premises would be covered.

Additional coverage could be available, as well. For example, some property policies provide crisis management coverage to insure loss of “gross earnings, gross profits, rental insurance, and extra expense” if a civil or military authority prohibits access to an insured location due to certain events, such as violent crimes, suicide, or armed robbery. Additionally, a property policy might respond to any bodily fluid or debris removal issues presented by a WVE.  

Terrorism Insurance

While a property policy is probably more likely to provide property-related coverage, a terrorism policy may apply if the perpetrator of the WVE intends to further political, ideological, religious, social, or economic objectives.  

Knowledge of a perpetrator’s intent may be difficult to know at the time of or immediately following a WVE, but keep in mind the potential application of a terrorism policy.  

Workers’ Compensation Insurance

Typical WC coverage is limited to bodily injuries to employees during the normal scope of employment. Look to GL for possible coverage for independent contractors, volunteers, or other business invitees. While questions can certainly arise about whether WC coverage would apply to a WVE, it is prudent to advise a WC carrier of any bodily injury employees suffer as soon as practicable following a WVE.  

Workplace Violence/Deadly Weapons Insurance

As noted above, workplace violence coverage can be added to several other lines of coverage, like D&O, EPL, and property. However, such coverage can be limited in scope. 

While other lines of insurance, such as GL and property, can step in to help close some exposures, standalone workplace violence policies do exist in the insurance marketplace. These standalone workplace violence policies can centralize coverages that are otherwise found piecemeal throughout an insurance program and are tailored specifically to (possible) WVEs.  

A standalone workplace violence policy can provide a variety of coverages, including:

• Third-party liability
• Property damage, including exposures like business interruption, extra expense (including salaries of victims and replacement workers), and decreased income following the WVE
• Medical expenses
• Accidental death/dismemberment
• Crisis management
• Counseling/victim support services
• Funeral expenses

These policies can even trigger before a WVE occurs due to the threat of a WVE. For example, the estranged spouse of an employee may threaten to harm the employee “as they leave work.” Such a threat can trigger obligations of a workplace violence carrier to pay for increased security, legal counsel to advise on options, and other costs associated with threat assessments and background checks of the threatening spouse in the hopes of preventing a WVE from taking place.  

Preparing for the Unthinkable

Ultimately, if a company suffers a WVE, a thorough review of its insurance program would be vital to maximize both potential resources for victims and potential coverage for insured entities and individuals.

While it does not appear that SB 553 alters any insurance-related requirements, the implementation of the legislation provides a good inflection point for companies to review their insurance programs and consider whether better alternatives exist to:

• Protect against a WVE from occurring
• Respond immediately in the event a WVE does occur
• Assist employees or other victims in the aftermath of a WVE
• Financially protect against the fallout from a WVE

As a practical matter, in the immediate wake of a WVE, engage any available workplace violence/deadly weapons policy, EAP resources, and crisis management resources.  

Giving notice to other policies and resources—especially third-party liability coverages—can likely wait until the immediate WVE has ended and potential liability exposures can be accurately accessed. If an organization suffers a WVE, providing notice of circumstance/potential claim to liability carriers that could reasonably see a claim down the road is likely prudent, as providing notice should tie any future claims to the current policy period and likely would prevent any future carrier from being able to argue that the organization had prior knowledge of a likely claim.  

While SB 553 applies only to California employers, it would not be surprising to see other jurisdictions implement similar laws, especially as the prevalence of WVE and gun-related incidents in general continues to increase. 

Regardless of whether legal mandates are in place, having a comprehensive WVPP is a sound business planning and risk mitigation strategy.