Part 6: Insurance and Risk Management

Tuesday, July 22, 2014

Consequence 6

There is an immediate need for funds to pay for the company’s response to the incident. There is the immediate and long-term compensation requirements for those directly affected people, their families, and other businesses, which may have been affected. There will also likely be multiple civil trials or settlement hearings, which may go on for years after the incident, to apportion blame and determine liability amongst insurers and reinsurers. Finally, there may also be multiple criminal trials, again stretching for years after an incident. Likely defendants will be those with actual involvement in the incident and those with accountability such as Board Members, CEO, COO, and Managing Directors.


Involve your risk manger, insurance brokers, insurers, insurers’ lawyers, and your own lawyers in the crisis management planning process. Traditionally, risk managers focus on preventing incidents and they are not included in the consequence management process. However, they are typically the ones who place polices and deal with claims if an incident does occur. Because incidents involving large loss of life are rare, few people in any company have much experience with them. It is important that they participate in all aspects of the planning, so there is clear understanding and mutual expectations regarding these key areas:

  1. Adequate coverage to fund search and recovery of deceased people and their personal effects.
  2. Adequate coverage to establish and operate a family assistance centre, and provide support and travel for family members to go to the family assistance centre. For planning purposes, airlines expect from 4 to 6 family members for every person onboard an aircraft.
  3. Adequate coverage to treat employees and their families in the same manner you will provide support to your customers / guests and their families.
  4. A plan to fund and quickly issue assistance payments to survivors and families of the missing or deceased. These payments are to help with the immediate costs until compensation is determined.
  5. Appropriate insurance coverage to provide for the defence of all company employees during any criminal proceedings. Incidents are caused by many things, most being accidents. Safety and prevention is improved if people feel they can be honest and forthright during investigations. Knowing that there is a defence if they are prosecuted will help ensure transparency.

Another key reason to involve this group is to understand their philosophy and perhaps refine yours. Here you will see who is going to take the lead. Some underwriters want the company to be in control of the response and the insurer to simply support the response with advice and funds. Other underwriters want to be in complete control, they want to make all the decisions. If that is your insurer’s philosophy, consider whose name is in the media, whose reputation is primary? Are decisions cost driven or best practice/protect your reputation driven?

Similarly, following an incident, legal counsel are prone to advising companies to close ranks, not to say they are sorry or even address the directly affected people. This does not work in large loss of life incidents. Today the CEO is expected to come to the family assistance centre and say they are sorry and condolence letters should be written and sent. These apologies are not admissions of guilt, but simply human expressions of sympathy. Therefore, the lawyers and others who will be involved in reviewing or writing correspondence and advising company leadership should be brought in before a crisis occurs. They should work with the crisis communications staff to develop letter templates that all can agree on before they are ever needed.

In many events that I have been involved in, when the CEO addressed the families, said they were sorry, sent sympathy letters, met with the families, the corporate culture has followed. The settlements were quicker, and therefore more cost effective. Company reputation was left intact and survivors and families have an easier time. Conversely, in other cases, I have seen the opposite effect – a lack of sympathy and not meeting with families helped drive new legislation, criminal prosecution and prolonged settlement processes.


Following the September 11 terrorist attacks on the United States, the U.S. government established a settlement fund and appointed mediators for those killed in the attacks. One mediator in the case stated, “Many of the legal battles hinged not on money,” she added, “but on a chance for families to express their losses and anger.” Another mediator said it was, “Apparent that an obstacle to settling many cases was a desire by the families to tell their stories and express their feelings to the court or to a representative of the airlines and to receive condolences from the airlines.”

This is not just the case in mass fatality events, but in single loss events also. In a 2014 interview, actor Liam Neeson commented that he, “had not received a sympathy card from the ski resort where his late wife Natasha Richardson died in 2009. The ski resort where Natasha met her death … and we got hundreds, maybe a couple of thousand sympathy cards, mails and stuff from all over the world. Not one from that ski resort. I kid you not, not one.”