Preparing for the Unimaginable: Active shooter insurance protects businesses in mass shootings

Puneet Prakash: Even small businesses should anticipate the possibility of a mass shooting.

Chase Marable: Active shooter coverage limits range $1 million-$100 million.

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In 2023, through May 15 – the 135th day of the year – the United States had 225 mass shootings.

The nonprofit Gun Violence Archive keeps count of mass shootings, defined as single incidents in which four or more people, not including the shooter, are shot and/or killed.

It’s a reality that would have been unthinkable as recently as two decades ago, said Puneet Prakash, professor of finance and Baker Chair of Risk Management and Insurance at Missouri State University.

“Twenty years ago, if you were operating a small business – even an educational institution or a day care center – no reasonable person would actually expect an event where an active shooter would be involved on their premises,” he said.

Changing times call for a change in how businesses protect themselves, and active shooter insurance has become an essential safeguard for many businesses, according to Chase Marable, managing director of the local office of Higginbotham Insurance Agency Inc.

Citing figures from independent research group Gun Violence Archive, Marable said the U.S. passed 100 mass shootings on the 64th day of the year – the earliest point for triple-digit mass shootings in more than a decade.

“It’s sad that we have to live in a time like this, but I think it’s important for us to understand as employers, how do we protect our businesses from these types of tragedies?” Marable said.

The nonprofit Everytown for Gun Safety released a report in July 2022 that estimated the cost of gun violence overall at $557 billion annually – roughly 2.6% of the U.S. gross domestic product.

Active shooter insurance
Active shooter insurance has existed for years under various names, like active assailant insurance and deadly weapons coverage.

“This product has been around, but it is gaining traction amongst even small-business owners now,” said Prakash.

It’s a kind of coverage, he said, that makes sense for commercial enterprises that hold public gatherings where mass casualties could take place.

Prakash gave the example of the MGM Grand in Las Vegas, where 58 people died and almost 500 were injured in a 2017 mass shooting during the Route 91 Harvest music festival. The hotel settled with victims at a cost of $800 million instead of going to court, he said.

Educational institutions, like Virginia Tech, where a 2007 mass shooting left 32 dead, are known to be susceptible, Prakash said.

But he said retail stores are also candidates for active shooter insurance because operations are open to the public without an invitee list, and people can congregate.

“Even small organizations should be expecting this could happen,” Prakash said.

According to insurance broker Marsh, the price of active shooter coverage rose 5%-10% from 2021 to 2022, Reuters reported. The news outlet added that Lloyd’s of London insurer Beazley recorded a 25% jump in revenue in the first half of 2022 for its deadly weapon policy, with a 30%-35% jump in inquiries and a 10%-15% rise in rates, driven by an increase in number and severity of gun attacks.

In the last four to five years, courts have begun to apply a reasonably prudent person standard to shooting events in determining liability. Prakash compared it to drinking and driving.

“If you are a layperson, but a reasonable person, you would know that driving under the influence is going to impair your ability and increase your likelihood of getting into an accident,” he said. “A reasonable person standard would be that you don’t drink and drive.”

Similar standards have been applied by courts to small businesses where shootings have occurred.

“Proving negligence on the part of a business owner where this event actually takes place would be a bear,” Prakash said.

For negligence to be present, there has to have been a loss, and the owner of the premises must have breached a duty to protect it.

A litigant would have to prove the loss occurred because a business didn’t take appropriate precautions.

Prakash said usually a worker who gets hurt on premises is covered under workers’ compensation insurance, and commercial general liability covers an injury from a slip and fall.

“Regardless of how many policies you have for each of these events, none of these policies would be able to cover mass casualties,” he said, adding, “If they don’t have this kind of coverage, it becomes a legal challenge for their lawyers to figure out where they can go.”

He added that typical insurance coverage may exclude losses caused by a firearm.

“In that particular case, there’s a very obvious gap in coverage,” Prakash said.

Costs from mass shootings
The following are some expenses that can arise from a mass shooting that insurance can help to cover, Marable said:

• Cost of funerals.
• Help for living victims, including medical coverage, rehabilitation and loss of income.
• Trauma counseling.
• Third-party liability, including lawsuits from employees and customers.
• Business interruption or loss of attraction causing a decrease in revenue.
• Crisis management coverage, like fees for consultants to work with news media.
• Temporary security.
• Property damage from the shooting or from attempts by law enforcement to enter the premises.
• Cleanup of debris and biological material.

Active shooter insurance covers these expenses, Marable said. He noted every carrier has minimum premiums, which range $1,850-$2,500 annually for a small business, such as a bakery, depending on coverage needs and exposure.

Exposure depends on susceptibility, Marable said, and coverage limits may range $1 million-$100 million.

“Most organizations need to consult with their insurance broker to identify the risk that may or may not be present,” Marable said.

A business like a bakery is less exposed, hosting fewer people at one time and offering very little interaction, Marable said. A business that has a large number of people interacting on the premises will have higher exposure.

Prevention
Prevention of a slip-and-fall accident might mean putting up a sign or erecting a barrier.

Preventing a mass shooting requires the same kind of foresight.

“If we understand and can recognize those warning signs, that gives us the ability to prevent tragedy from happening before it takes place,” Marable said.

Measures that can be taken vary from business to business, he noted. A convenience store can’t reasonably require key card access, but an advertising firm can.

Marable said a consultant can help to analyze weak spots and prevention measures, and each business should consider where it might shelter employees and visitors and whether exit signage is present and visible.

“There’s so much on the front end we can do, from employee training to having a security professional come and examine the facilities,” Marable said. “A lot can happen even if we do try to prevent it.”

Officer Ben Wilson, a police area representative with the community services section of the Springfield Police Department, said businesses can take steps to prevent mass shootings. SPD provides free walk-throughs for those businesses that request them.

Wilson said a building can be made more secure, and environmental design measures can increase visibility so that a problem can be identified more quickly. Perimeter security and alarm systems are additional measures.

Wilson added that businesses should create an environment where information sharing is encouraged. Some do this through anonymous tip emails.

He said a disgruntled person can be stymied in an attempt to enact violence if a business is forewarned.

“If they know for a fact that they’re going into a place that has taken measures to be prepared for this, they have to think maybe this isn’t the best idea,” he said.

Wilson cautioned, however, that a 20-year FBI study of active shooter incidents found 58% of shooters had no affiliation with their victims at all, though 18% are employees or former employees.

He added that small retail operations are a target in about 20% of attacks in businesses that are open to the public.

“One of the things that we deal with are employers who want to hold trainings, but they don’t want to scare their employees,” he said.

Making sure employees are ready for a potential attack is a powerful preventive method, according to Wilson.