IE S FOR THE SHOPPING CENTER & RETAIL INDUSTRY...The courts have also ruled that foreseeability may be established by “all facts and circumstances,” not just prior violent acts;

WILLIS REAL ESTATE

AND HOTEL PRACTICE

THE BEST OF 2011-2013

VIEWS FOR THE SHOPPING CENTER

& RETAIL INDUSTRY

2 Willis North America • 3/13

Certainly from a real estate point of view 2012 will be rememberedprimarily for Superstorm Sandy, which will generate approximately$20 billion in insured losses and will likely change forever the wayunderwriters view wind and flood exposures in the Northeast.1 Oneunderwriter told us, “We are looking for rate increases in theNortheast and in some cases reducing limits for wind and flood.”

The past year was profitable for the industry despite the $ 72 billionin catastrophe losses (well above the 10-year average of $ 53 billion2

but considerably below 2011, which saw $116 billion in catastrophelosses).3 Travelers, for example, reported net income was up 73%year over year.4 Prior to Superstorm Sandy the industry waspositioned to enjoy a banner year for profitability.

During 2012 we saw a general rise in rates. Market Scout reported,“After 7 years of a soft market the P&C industry showed consistentrate increases through 2012 beginning in January with an averageincrease of 1 percent and finishing the year with an average increaseof 5 percent.”5 Looking ahead into 2013, Keefe Bruyette & Woodsreported, “The industry will see modest rate increases and not muchimprovement in underwriting profitability as low interest ratesweaken investment returns.”6 Citigroup reported that “insurers willstruggle to post a 10 percent return on equity as low interest ratesweigh on investments.”7

The low interest rate environment is fuelingthe trend for higher rates as underwriterscannot rely on investment returns to offsetunderwriting losses. In addition, a recentConning Study reported that GL rates fell by40% from 2005 through 2011.8 Underwritersbelieve this trend needs to be adjusted as thecost of claims, driven by medical cost inflationand other factors, continues to increase whilerates were declining.

Many carriers acknowledge that reservereleases, which have contributed tounderwriting profitability over the past fewyears, will abate; some believe reserves havegone from redundant to deficient – anotherargument for higher rates.

We believe that the overall trend towardhigher rates will continue in 2013. Accounts inthe Northeast may see the highest increaseswith a renewed focus on capacity for thecatastrophe perils of windstorm and flood.

MARKET TRENDS UPDATE


It is becoming increasingly important to offer detailed information onloss prevention and mitigation strategies as underwriters, we expect,will redouble their efforts to achieve underwriting profitability andwill therefore be more discerning on a risk-by-risk-basis. They willreward profitable accounts that control their exposures and seekincreases and possible reductions in limits for those with poor lossrecords and no attempt to control losses. Our perennial advice is tostart the renewal process early, tell your story, review the status ofopen claims and take appropriate steps to prevent and mitigate losses.

This article was reprinted from the February 2013 issue of Views.

DANGER AHEAD?FORESEEING CRIME ANDVIOLENCEViolence swept the risk landscape in 2012. While shootings in malls,places of worship and elementary schools captured national and globalmedia attention, countless other incidents of crime and violence remainout of the national spotlight. These crimes of property and person rangefrom thefts to assault, and if not appropriately prepared for, or if leftunchecked, can sharply impact a business and its reputation.Anticipating trouble, recognizing early indicators and alerting keydecision makers is inherent in a risk manager’s job and more importantthan ever, since crime and violence have become almost daily front-pagestories. For property owners, improving risk predictions for suchcrimes is truly a matter of foreseeability.

THE CONCEPT OF FORESEEABILITY

Foreseeability is the traditional basis determining questions of liability.A property owner has a duty to exercise “reasonable” care to protectagainst reasonably foreseeable criminal conduct. This dutyrequirement is applicable to all types of business where you havebusiness invitees: retailers, condominium associations, apartments,hotels, restaurants, bars, malls, etc. Courts have become more willing tohold property owners legally responsible for a failure to identifycriminal conduct which has or is likely to impact their property and fornot taking appropriate steps to reduce the risk of crime or violence.

A property owner’s failure to provide adequate protection can result intremendous financial and reputational loss to an organization, butmost importantly, this failure can result in loss of life. This is why riskpredictions of this sort are so critical to the long-term success of theproperty owner. The concept of foreseeability can also be applied toacts of criminal conduct that have occurred near their location. Also,the basic nature of certain locations/operations within a propertyowner’s venue (e.g., parking garages) can trigger the concept offoreseeability due to the numerous acts of theft and vandalism that

routinely plague these areas. If a criminal incident resulting in an injury occurs, and it isdeemed to have been a foreseeable event and a duty of care is established, the victim mustthen prove the property owner failed to exercise reasonable care to protect the invitee fromthe foreseeable criminal conduct. This standard for protection and foreseeability will thenbe determined case-by-case in the courts.

The courts have also ruled that foreseeability may be established by “all facts andcircumstances,” not just prior violent acts; meaning, prior thefts on or near a property owner’spremises may be sufficient to establish foreseeability, since these offenses could reasonablylead to acts of violence and assault resulting in injury or death. Failure to recognize present oremerging criminal trends, patterns or risks could lead to a finding of liability or negligenceagainst a property owner. The courts have ruled that property owners should have knowledgeof recent criminal activity and incidents at or in the vicinity of their property, and suchrecords can create a duty on the part of the owner to ensure adequate and responsive securitymeasures are in place. An owner can also be expected to meet the customary industrystandards in the region for similar types of property and premises security.

RISK QUESTIONS

Many of the catastrophic acts of violence we have seen in the past few years remain, relativelyspeaking, low-frequency, high-impact events; nevertheless, the task for property owners is toidentify those foreseeable risks. While it may be difficult to predict the probability of such acts,every effort must be made by a property owner to do so.

To determine the current or future potential for criminal conduct that may fall within aproperty owner’s scope of responsibility, begin by answering the following risk questions:

1. What are the location assets to be protected (people, property, intellectual, etc.)? Areany business operations or activities conducted on the property conducive to criminalconduct?

2. What is the three-year criminal loss history for the property and surrounding area(include acts of burglary, robbery, theft, vandalism, assaults, homicides,trespassing/loitering, illegal narcotic sales, and civil disturbances)?

3. What high-frequency criminal acts are most likely to impact the location on a recurringbasis?

4. What is the impact of the risk upon the organization (financial loss, operational loss,reputational loss or loss of life)?

5. What is the current level of protection for the property?

6. Is the current level of protection likely to be considered adequate should it come intoquestion in a court of law?

SOURCES OF PREDICTIVE INFORMATION

Risk managers have no crystal balls to reveal the future, but they do have methodologies –proven sound practices to help them address the above predictive risk questions.

Mining the following sources of information should help risk managers gain a clearer pictureof exposures of foreseeable crime and violence.

Willis North America • 3/134


n Review area crime statistical data from local law enforcementcrime analysis units.

n Tap local community police/relations officers as a source ofinformation

n Google. Yes Google. Employ online search engines to uncoverinformation regarding criminal events that have previouslyimpacted your property and neighborhood.

n Review known sources of internal information regarding yourproperty (e.g., security incident reports, newsletters,occupant/tenant alerts).

n Encourage tenants, occupants, visitors and customers to reportcrimes and suspicious behavior. Use this information as a forcemultiplier in your intelligence gathering efforts.

n Subscribe to external intelligence resource providers (e.g.,CRIMECAST reports and site maps via organizations such asCAP Index).

SOLUTIONS

Most security experts agree that no single level of protection willserve all of a property’s security needs but rather a multi-layeredrisk management system that brings together practices thatoverlap and complement an overall security and insuranceprogram. No basic agreement or national standard governs what is“enough” or “adequate” security. While the evaluation of whatconstitutes a proper level of protection can be subjective and opento interpretation, one constant remains: property owners have aduty to protect their customers and employees.

For many property owners, security is often not addressedthoroughly until after an incident occurs. The hotel andapartment/condominium industries continue to be the leaders inpremises liability and negligent security claims, with settlementsand verdicts reaching into the millions of dollars.

By their very nature, security and risk management are proactiveand preventative processes. Maintaining a proactive posture andhaving the necessary systems in place to foresee and quickly respondto emerging criminal trends or risks, is a property owner’s bestdefense against a liability judgment.

For more information contact Kevin C. Wilkes, Vice PresidentMidwest Regional Director, Risk Control Services Security PracticeLeader, Security Risk Consulting Strategic Outcomes Practice at +1412 645 8531 or [email protected].


5

If signs of emerging criminal conduct or

trends are noted, the following may help

property owners develop strategies to

mitigate the impact of crime, violence or

loss.

n Conduct a quarterly analysis of the

criminal threats/trends on or near your

location. Be aware.

n At a minimum, annually assess, review

and audit your property’s protection

practices. Correct and enhance where

needed.

n At a minimum, annually conduct drills

and training exercises to test any

emergency action response plans you

may have in place. Know your plan.

n Benchmark your property’s level of

protection against other properties that

are similar to yours on a local, regional

and national level. Always employ

industry best practices.

n Strengthen your relationships with local

law enforcement and other public safety

first responders and partner with other

organizations, merchants or crime

prevention groups to responsibly and

aggressively address the risk. Strong

partnerships can often create strong

deterrents.

n As all crime and violence cannot be

prevented and no form of protection is

absolute, annually review and adjust

your insurance policies as needed to

transfer a portion of your exposure

based upon the changing risk conditions

of your property. Always adopt an

appropriate risk management strategy.

Failure to do so could prove costly in

more ways than one. A balanced and

right-sized approach is the best

approach for success in mitigating your

risk for crime and violence.


A successful outcome to a large and complex property lossadjustment is dependent on many factors; some tangible and somenot so tangible. From our experience, a common thread is beingprepared, knowing what to expect and managing the various aspectsof the process. Although no one can predict the exact outcome of aloss adjustment, the following are some best practices we have foundthat take some of the uncertainty out of the process.

n Plan for the loss before it occurs. Review your policy and befamiliar with the terms and conditions. Make certain that anyunique risks and concerns are addressed in the coverage before theloss. Work with your broker to identify any outside consultingservices that might be required and develop a loss procedure whichaddress internal roles and responsibilities, reporting protocols andcommunications as well as procedures to document a claim as wellas protocols for working with your insurer(s) and their adjustmentteam. Review your business continuity plan and make certain itencompasses the insurance aspect of the recovery effort. If you donot have a business recovery/continuity plan, create one!

n Review your leases and contracts. Be certain you understandyour responsibilities under those agreements and that yourpolicy properly reflects same.

n Once a loss occurs, report the loss at the earliest possibleopportunity. You do not need pages and pages of data to report aloss. If you have questions regarding the event being covered orthe applicable deductible, err on the side of caution and report it.Courts in some states have held that late notice can be anacceptable reason for a carrier to deny a loss even if there hasbeen no prejudice by the late report.

n Understand the internal capabilities of your organization andutilize outside assistance when appropriate. The people whoclean your offices each evening may not be the most appropriatefirm to handle a water or smoke remediation. Putting together alarge, complex claim, especially a business interruption claim,requires certain skills and knowledge many accountants, evenCPAs, lack the experience to handle. Insurers will not hesitate toretain outside consultants they think are needed and you shouldnot hesitate to do the same if needed.

n Proceed with loss mitigation andremediation at the earliest opportunity.Come to an agreement at the earliestpossible opportunity with the adjuster onemergency and temporary steps to betaken immediately following the event.

n Make certain you understand theadjuster’s plan and their expectations andevaluate whether they are reasonable.You also need to convey to the adjusterwhat your expectations and special needsmay be and try to come to agreement onthese at the start of the adjustmentprocess.

n Agree with the adjuster on a commonmethodology for developing the scope ofdamages, both physical damage and timeelement, and try to develop a commonscope if possible. It is usually ourrecommendation that the parties effect ajoint process in an attempt to agree on ascope of damages as soon as possible.Then work on a plan on how to effectrepairs and to develop a dollar value forthe repairs and other aspects of the loss.We also recommend you work closelywith the adjuster and his team to helpthem develop an accurate and realisticreserve for the insurer. We have seenmany losses become overly complicatedby an unrealistic reserve presented to aninsurer.

n No one likes surprises on a loss. Werecommend you and your teamcommunicate often and clearly with theadjuster and his team throughout theestimating, adjustment and rebuildingprocess.

PROPERTY CLAIM BEST PRACTICES


n Collect and organize all costs associated with the event. Startimmediately following the event and we recommend you set up aspecial account to track all loss-related expenses, keeping themseparate from your normal operational expenses. An insurancepolicy has specific terms and conditions and some costs youmight need to incur to protect your labor force or your marketshare may not be insured. However, if no one knows those costsare out there, they cannot be considered in the adjustment. Makecertain your formal claim presentations are clear, concise anddetailed.

n Try to identify as early as possible any areas or issues which maybecome problematic and address them as soon as practicable.Work with your broker and consultants to develop a disputeresolution process to deal with these issues.

n Look for every opportunity to obtain partial or advancepayments for properly documented expenses. Contrary to urbanmyths, insurers very rarely have difficulty issuing partialpayments as long as they are supported by estimates or incurredexpense documentation.

n Make certain you understand your short term as well as long termgoals throughout the adjustment process. Like opinions,perspectives are funny things; everyone has one. Whennegotiating settlements, try to understand where the adjuster andinsurer are coming from. You may have total disagreement onissues but it is important to understand if a position is being takenis a “money issue” or a “principal issue” or both. Although bothare important, understanding that can help focus discussions toarrive at a common goal.

n Like you, your insurer wants to closetheir file and move on. However,insurance companies are not charitiesand we always need to be as thorough aspossible as we work hard towards asatisfactory settlement. In today’seconomy, every dollar is important toboth sides. Try not to lose sight of the bigpicture; understand there may be a timeto dig in and hold the line, and there maybe a time to consider compromise. Noinsurance company really ever wants toget involved in litigation with a client,especially if there is a way to avoid thelitigation, but insurers are not frightenedby the threat of litigation and litigation isusually a last resort if all else fails.

Recovery from a large loss and the insuranceadjustment process are not a day at ClubMed. However, with proper planning andadherence to a plan, a business can recoverand a loss adjustment can be completedwithout total disruption of the lives ofeveryone involved.

For more information contact David J.Passman, National Director NationalProperty Claims, Strategic OutcomesPractice at 212 915 8330 [email protected].

This article was reprinted from the November2012 issue of Views.


Flood exposure and coverage combine to formone of the biggest challenges in the propertyinsurance world. Risk identification isdaunting to start with due to the shifting floodzones as identified by FEMA. Then, arrangingproper coverage that is seamless can be thenext hurdle.

TOOLS FOR FLOOD RISKIDENTIFICATION

Many of our underwriters assert that Willis isdoing more than most when it comes to theflood risk identification process. Here are thetools we have available:

RISKMETERNot only do we have this tool but we also havethe parcel geo-coding feature turned on andavailable to identify which flood zone thelocation is in, plus – if it is not in a high hazardzone – it can tell how close the location is tothe nearest high hazard zone.

PICTOMETRYWhere RiskMeter has not determined the floodzone, this tool can use satellite feeds to drilldown further to determine the flood zone.

ENSURING THAT YOUR PROPERTY POLICYDOVETAILS WITH UNDERLYING NFIPCOVERAGE

MAIN ISSUES The Master Property Policy is typically written to provide “broad”coverage as follows:

n Replacement Cost valuationn Property Damage included and most Time Element coverages

including Business Interruption and Extra Expensen The Property Excluded section is usually minimized so that most

property exposures are insured

However, the NFIP policy is not intended to provide broad coverage,evidenced as follows:

n ACV valuationn Property Damage included, but Time Element coverages, such as

Business Interruption and Extra Expense are excluded n The Property Excluded section can be onerous, with numerous

property exposures excluded (see Property Excluded sectionunder NFIP)

THE PROBLEM How do you ensure that there are no gaps in coverage between twovery different policy wordings?

FLOOD RISK: CHALLENGES, TOOLS &SOLUTIONS


THE SOLUTIONNegotiate wording to dovetail NFIP andMaster Property Policy to add the followingwording to the Master Property Policy:

In the event that the Insured maintainsunderlying insurance through theNational Flood Insurance Program, it isagreed that this policy excludes the perilof Flood to the extent of recovery undersuch National Flood InsurancePolicy(ies). Should the amount of losspayable under such National FloodInsurance Policy(ies) exceed theapplicable Flood deductible under thispolicy, then no deductible shall applyhereunder. However, if the amount to bepaid under such National FloodInsurance Policy(ies) is less than theapplicable Flood deductible under thispolicy, then the amount to be deductedhereunder shall not exceed the differencebetween the amount to be paid under theInsured’s National Flood InsurancePolicy(ies) and the applicable Flooddeductible under this policy. Insurancemaintained through the National FloodInsurance Program shall be consideredUnderlying Insurance.

THE NATIONAL FLOODINSURANCE PROGRAM (NFIP)

When purchasing NFIP coverage andstructuring excess coverage, you need to beaware of many issues to ensure there are nosurprises in how coverage will respond when aloss occurs. There are seven sections of theNFIP Standard Insurance Policy Form. Below are just a few potential surprises you may encounter.

SECTION III. PROPERTY COVERED The policy insures buildings and personalproperty, and the main coverage section isbroken down into A, B, C & D.

A Buildings (maximum $500,000 perbuilding)

B Personal Property (maximum $500,000per building)

C Other Coverages 1. Debris Removal 2. Loss Avoidance Measures – Preservation of Property ($1,000) 3. Pollution ($10,000)

D Increased Cost of Compliance, i.e., elevation, flood proofing,relocation or demolition (up to $30,000)

SECTION IV. PROPERTY NOT COVERED There are 17 items in this section, and it is necessary to review themcarefully to make sure the property you are trying to protect is not onthis list. Some of the more noteworthy items are:

n Personal property not inside the buildingn Open structures n Recreational vehicles n Self-propelled vehiclesn Land, land values, lawns, trees, shrubs, plants, growing crops or

animalsn Accounts, bills, coins, currency, moneyn Underground structures and equipmentn Walkways, decks, driveways, patiosn Containersn Fences, retaining walls, sea walls, bulkheads, wharves, piers,

bridges, docksn Aircraft, watercraftn Hot tubs, spas

SECTION V. EXCLUSIONS Much like Section IV, Property Not Covered, the list of items in SectionV. Exclusions must be reviewed very carefully. The list is subdivided inA, B, C, D & E and some of the more noteworthy exclusions are:

n Loss of revenue or profits n Loss of use n Loss from interruption of business or productionn Any additional living expenses n Cost of complying with any ordinance or lawn Any other economic loss

NFIP is not intended to address Business Interruption or ExtraExpense losses.

SECTION VII. GENERAL CONDITIONSLOSS SETTLEMENTNFIP will pay the least of the following:1 Amount of insurance under the policy2 Actual cash value 3 Amount to repair or replace the property with material of like

kind and quality

The policy defaults to ACV in most situations.


NEXT STEPS?

Ok, you have:

1 Identified which locations are in high hazard zones 2 Purchased NFIP where necessary3 Used proposed policy wording to ensure that NFIP wording and

Master policy wording dovetail

Now what?

THE FINAL STEP 4 Schedule the list of high hazard flood locations and endorse the

list of locations to the Master Property Policy to ensure there iscontract certainty as respects which locations will have the highhazard flood deductible and limit. (If the location is not on thelist, then it defaults to the main flood deductible and limit.)

Additional information on this subject can be found by clicking herefor the November 2010 edition of “Property Perspectives titledEnsuring Your Flood Coverage Will Respond When You Need It.”

For more information, contact David Finnis,Executive VicePresident, National Property Practice Leader [email protected] or 404 302 3848.

This article was reprinted from the November 2011 issue of Views.

THE SAFETY ACT ANDREAL ESTATE RISKSThe SAFETY ACT or Support Anti-Terrorism by Fostering EffectiveTechnologies Act of 2002 was passed in an effort to encourage thedevelopment of Anti-Terrorism Products, services and technologies.The SAFETY Act provides very broad liability protections, caps andother incentives for qualified companies which develop deploy or useanti-terrorism technologies. These protections apply to any claimresulting from an act of terrorism where a “qualified technology” wasdeployed. The Act can apply to products, services and facilities with adistinctive, comprehensive security platform.

The Act’s purpose is to ensure that the threat of a potential liabilitysuits does not limit or deter the private sector’s commercialization orutilization of products, technologies and services that could save lives.

ELIGIBILITY AND QUALIFIEDTECHNOLOGIES

As the Act can apply to any product, technology or service that is usedfor deterring, preventing, detecting, identifying, responding to, or

recovering from acts of terrorism, any entitywhich sells or provides anti-terrorismtechnology, products or services is eligible.Additionally, designers, suppliers anddistributors, or those involved in thedeployment of the involved product orservices can also apply. You do not have to bethe manufacturer. The application of the lawto the broader scope of property risks is arelatively new development and requiresevidencing a comprehensive security platformwhich demonstrates a uniform approach tosecurity across a portfolio of properties.

This has been demonstrated in the recentcertification of the security platform of amajor real estate portfolio, as well as that ofYankee Stadium and the National FootballLeague. Awards can potentially apply tophysical building design, construction,integrated and third-party security systems,cyber networks, and emergency responsepolicies which can all be controlled, initiatedor managed by the owner of the property. Atminimum, it is advisable to purchase orcontract with SAFETY Act contractors orservice providers to potentially gain access totheir protections.

To qualify for the liability protections of theAct, applicants must purchase the maximumamount of “reasonably available” liabilityinsurance sufficient to cover them for third-party claims relating to the deployment of thetechnologies designed to prevent or respond toan act of terrorism. The scope of this insurancemust cover the potential liabilities of thecontractors, subcontractors, suppliers, vendors,and customers of both the seller and itscustomers.

However, this mandated coverage must not beso expensive that its cost significantly drives upthe price of the seller’s anti-terrorismtechnologies or services. The SAFETY Actprovides: “the Seller is not required to obtainliability insurance of more than the maximumamount of liability insurance reasonablyavailable from private sources on the worldmarket at prices and terms that will notunreasonably distort the sales price of Seller’santi-terrorism technologies.”

http://www.willis.com/What_We_Think/Publications/Property/


The Secretary of Homeland Security must certify that the coveragepurchased in fact meets the Act’s criteria. In addition, the seller mustreciprocally waive claims with its contractors, subcontractors,suppliers, vendors and customers who manufacture, sell or operatesuch qualified anti-terrorism technologies.

BENEFITS

n A maximum cap on your liability EQUAL to the amount ofterrorism liability insurance required for the qualified productsor services involved. There is no pre-determined limit required –this is subject to negotiation with the Department of HomelandSecurity (DHS)

n Exclusive jurisdiction in federal court for all related suitsn Punitive damage claims are barredn Non-compensatory damages are barredn Pre-judgment interest is barredn Non-economic damages are barred unless the plaintiff was

physically harmed. “Noneconomic damages” are defined under

the Act and include things such as painand suffering, mental anguish, etc.

n Prohibition on joint and several liabilitiesfor non-economic damages. In otherwords, only that percentage of theultimate claim amount that is directlyattributed to a defendant’s negligence isrecoverable

n As respects other plaintiff recoveries, theSAFETY Act provides that a defendant’sliability will be reduced for othercompensation available to the claimantfrom other collateral sources such asinsurance recoveries, other defendants etc.

For more comprehensive information, contact Wendy Peters, Willis SECURENET, or click here.

VAPOR INTRUSION: DON’T LET THIS RISKSLIP THROUGH THE CRACKSVapor intrusion refers to the migration of volatile chemicals (alsoknown as VOCs - Volatile Organic Compounds) from the subsurfaceinto overlying buildings or structures. A vapor intrusion conditionoccurs when rapidly evaporating chemicals from polluted soil orgroundwater migrate and impact the indoor air quality of areabuildings. It is quickly emerging as one of the top environmentalconcerns as it brings with it several liability and health issues formany regulators, attorneys and building/property owners tocontemplate.

EXPOSURES, POTENTIALLIABILITIES AND OTHERCONCERNS

n REGULATORY “REOPENERS” –Thegovernment has been and continues toreopen sites that had previously receivedregulatory closure in order to examinepotential vapor intrusion issues (literally

https://www.safetyact.gov/


hundreds of those scenarios in Massachusetts, California and New York). The EPA andstate agencies are also starting to reopen sites where no vapor intrusion analysis wasconsidered in earlier remedial decisions (e.g., United States v. Intel Corp. and RaytheonCo., 91-CV-20275).

n THIRD PARTY LAWSUITS –Asserting bodily injury, diminution in property value or othertypes of damages (e.g., third-party claims based on alleged exposure to vapors under thecitizen suit provision of the Resource Conservation and Recovery Act (RCRA) ortraditional common law theories, including nuisance and trespass)

n CLEANUP COSTS/REMEDIATION EXPENSES – Potential for hefty cleanup costs or remediationexpenses to mitigate a vapor intrusion condition.

n NEW DUE DILIGENCE STANDARDS AND REGULATIONS –Revised ASTM E 2600 vaporencroachment screening standards in place; a majority of the states have publishedvapor intrusion guidelines dictating that vapor intrusion issues be incorporated andaddressed. New guidance for vapor intrusion at Superfund and RCRA sites is expectedand many legal professionals now recognize vapor encroachment as a ComprehensiveEnvironmental Response, Compensation, and Liability Act (CERCLA, also known asSuperfund) risk, rather than an issue that is beyond the basic scope of anEnvironmental Site Assessment.

n INCREASED NOTIFICATION REQUIREMENTS – Landlords and property owners will need toproperly notify tenants and building occupants of any vapor intrusion related issues(e.g., NY Landlord Notification Requirements).

n SOURCE IDENTIFICATION ISSUES – Identification of the source and causation of the IndoorAir Quality condition can be daunting (an indoor air quality issue stemming from asubsurface vapor intrusion issue, off-gassing from new building materials that wereintroduced after building construction or some other unrelated Sick BuildingSyndrome issue). Vapor intrusion can also come from off-site sources (a release on adifferent property from the one affected) as vapors migrate not only from contaminatedgroundwater but independently through soil and other conduits as well.

INSURANCE SOLUTIONS

Insurance coverage for these exposures and liabilities can easily slip through the cracks ifnot properly addressed with an environmental insurance policy since traditional GeneralLiability and Property policies are not intended or designed to respond. Among othercoverage grants being provided, these environmental policies can cover third-party bodilyinjury and property damage claims, cleanup cost/remediation expenses (includingregulatory reopeners) and legal defense associated with vapor intrusion.

Most carriers have vapor intrusion coverage built directly into their form via theirdefinition of pollutants (e.g., “…any solid, liquid, gaseous or thermal pollutant, irritant orcontaminant including but not limited to… smoke, vapors, toxic chemicals, hazardoussubstances…”). Fortunately, environmental insurance can effectively seal the coverage“cracks” to help manage and transfer the risk.

For more information please contact Anthony Wagar in our Environmental Practice at212.915.7768 or [email protected].

This article was reprinted from the November 2012 issue of Views.


BUSINESS CONTINUITYMANAGEMENT

Disasters can occur from natural causes, human error or criminalactivity; virtually every organization has a genuine exposure tocatastrophe. Whatever the threat to your assets, a current, detailedand flexible plan will allow your organization to survive.

Although there are many approaches an organization can take tocreate and implement a business continuity management program,several common elements will ensure that your plans will work;specifically, a risk assessment, a business impact analysis (BIA) anddeveloping procedures for emergency response and operations.

RISK ASSESSMENT

Your first step should be a risk assessment. This will identify the typesof hazards you believe have the greatest potential (probability) ofoccurring which will, in turn, impact your ability to perform criticalbusiness functions – often resulting in a significant loss of businessand income. Furthermore, a risk assessment will identify threats thatrequire specific emergency response procedures or uniquemitigation/risk transfer strategies. At a minimum, your risk analysis isdesigned to include exposure identification and evaluation for:

n Natural Hazards (e.g., hurricane, flood, freezing/ice, earthquake)n Fires and Explosions (e.g., fixed and transient combustibles,

housekeeping)n Utility Failure (e.g., gas, steam, electric, voice/data, water, sewer)n Transportation Accident (e.g., motor vehicles, aircraft, rail,

pipeline)n Intentional Hazards (e.g., fraud, strike or labor dispute, criminal

activity, product defect or contamination)

BUSINESS IMPACT ANALYSIS

The business impact analysis (BIA) determines the impact a disasteror long-term service interruption will have should it occur.

This component involves development of long-term actions designedto bring operations back to pre-disaster levels as quickly andeffectively as possible. Your focus is to restore the critical businessfunctions rather than individual buildings or facilities, although insome cases, the two may be the same. The actions captured as part ofthe BIA process will point toward the agreed upon alternative recoverystrategy that could include, for example, using any remaining sisterlocations as recovery sites, or developing alternate alliances.


Criteria you should consider to determine the criticality of aparticular function within each business unit include:

n Financial impactsn Operational impactsn Customer impactsn Employee morale

We suggest you use/develop a BIA questionnaire to ascertain businessrequirements for recovery. The questionnaire will use corporaterecovery objectives as a basis for evaluating time and resource recoveryrequirements. The questionnaire is designed to capture:

n Recovery time framesn Critical activitiesn Recovery resources (staffing, equipment, technology, etc.)n Recovery strategies for business relocations and transfer (may

involve shifting of business and operational activities as well ascurtailment of activities)

n Vital records (paper and electronic)n Interdependencies (internal, external) to ensure end-to-end

process recovery times

The recovery time objective (RTO) is the measure of time in whichyou need to return a specific critical business function in order tomeet internal and external customer demands before substantial lossoccurs. You should establish an RTO for each of your critical businessfunctions that support the delivery of goods and services to yourinternal and external clients.

Once you have completed the risk assessment and the BIA, these twoelements will essentially determine your current ability to meet yourcustomers’ service demands.

EMERGENCY RESPONSE AND OPERATIONS

Emergency response is typically the component most oftenaddressed in disaster planning. It involves immediate first-hourreaction to events, such as injury, fire, flood, chemical spill and thelike. If not already developed, most organizations need to develop acorporate crisis management team including an emergency responsestrategy, a chain of command, and assigned roles and responsibilitiesof personnel (including back-up personnel).

We suggest the creation of an emergencyoperation center (EOC), which is a physical(or in some cases a virtual) facility capable ofsupporting continuity, response and recoveryoperations. The EOC is a facility where themajor decisions affecting continuity,response and recovery are made and a placefor leaders of the emergency response andbusiness continuity teams to assemble.

When developing your crisis managementteam, we suggest using an incident commandsystem designed to integrate a combinationof facilities, equipment, personnel,procedures and communications operatingwithin a common organizational structure.

CONCLUSIONA business continuity management programis a strategic plan designed to be an integralcomponent of an organization’s corporateculture. It has to be demonstrated that itenhances the bottom line by protecting sharevalue and an organization’s competitiveness.A business continuity management programcan do this by looking at such important aspectsas process availability, integrity, quality, andthe strength and depth of the particularprocesses. It should look at the impact theseprocesses will have if a catastrophe were tooccur and just how things are going tooperate. The key is reviewing and improvingthe design and development of the process sothat minor mistakes, and possibly even majorones, can be mitigated or eliminated.

For more information, contact David H.Gluckman,ARM, CBCP, CFPS, Senior VicePresident, Strategic Outcomes Practice at 973 829 2920 or [email protected].

This article was reprinted from the March2012 issue of Views.


WILLIS CERTIFICATETRACKING SERVICES FORREAL ESTATE

REAL ESTATE FIRMS HAVE COMPLEX NEEDS

Real estate companies with large-scale operations routinely wrestlewith trying to accurately assess risk exposures generated by theircore business activities and contractual obligations. These contrac-tual obligations are often complex and necessitate being able to:

n Quickly and accurately provide and verify evidence of insurancefromtenants, property management vendors and suppliers

n Demonstrate expertise in the area of contractual compliance;verifying coverage types, limits, effective dates; and additionalinsured status, including endorsement review

n Secure compliance fromtenants and third-party vendors orimplement alternatives to force place coverage or deny paymentfor services

n Communicate status to all interested parties (e.g.,riskmanagement, propertymanager, legal)

WILLIS CERTIFICATE TRACKINGOFFERS A SOLUTION…

Real estate clients that contract withWillis for assistance with theircompliance needs can rely upon a full service certificate of insurancetracking solution, leveraging state-of-the-art webbased software andcomprehensive business services, to:

n Automate and centralize the administration of the third-partyinsurance compliance for our clients bymanaging their COIs

n Evaluate certificates based on contract requirementsn Review additional insured endorsements where required

n Monitor compliance, including follow-upfor non-compliant vendors

n Request renewal certificates prior toexpiration

n Generate compliancy status reportsn Document history of certificate status

and review processn Store insurance documents

electronically for easy retrieval by client

FAST AND ACCURATEASSESSMENTS

TheWillis Certificate Tracking Center pro-vides an efficient way for companies toman-age riskfromsub-contractors, vendors and suppliers.Willismaintains quality control and servicestandards that can improve operational per-formance in the following areas:

n Accounts payable/receivable functionsn Accuracy in the verification of sub-

contractors’, vendors’ and suppliers’required insurance protection

n Compliance to internal quality controlstandards with documented certificatestatus, review process andcorrespondence

REDUCED COSTS AND RISKS

Willis reduces corporate risk exposure byconsulting on contractual compliancestandards and by verifying which sub-contractors, vendors or suppliers are currentand compliant with respect to the insurance


requirements generated by a given contract. Willis can examine the following aspects of athird-party’s evidence of insurance:

n Type, scope, limits and expiration of insurance coveragen AM Best financial ratings of carriersn Additional insured language and endorsementsn Project-specific language

COMPLIANCE REPORTING

Willis generates custom reports tailored to the client’s needs and accessible via the client’sportal on a secure website configured to a client’s specific tracking requirements. Reportscan track evidence of insurance by multiple categories, including:

n Contract type (vendors, sub-contractors, etc.)n Specific projects or propertiesn Expiration datesn Coverage lines

Willis’ fast process delivers:

n 72-hour turnaround for transcription and compliance reviewsn On-demand reports with a myriad of data formatsn Protected, customer-owned data on a secure, exclusive website

REDUCED WORKLOAD

Willis efficiently delivers extensive administrative support that saves our clients time andmoney. The Willis automated system combined with our expert insurance staff willgenerate all technical and administrative communications uniquely suited to our client’sneeds. Examples of such communication types include:

n Initial requests for evidence of insurancen Renewal notifications for evidence of insurance prior to policy expiration and after

expirationn Notifying non-compliant parties, clearly communicating insurance deficiencies and

setting compliance deadlines

WHY WILLIS?

n Insurance expertise – leading global insurance brokern Experience with trackingn Accuracyn Consistent deliveryn Highest level of customer servicen Extended business hours

For more information, contact a member of your Willis Client Service Team.



Willis North America’s Real Estate and Hotel Practice has joined theStrategic Outcomes Practice to create the Willis Online (WOL)Shopping Center and Retail Real Estate Portal.This new tooloffers a customized, secure website for our shopping center andretail clients, delivering loss control tools that focus on their realestate industry sector and which provides a high level ofcommunication between our clients and Willis account staff.

FEATURES

24/7 access to the Business and Legal Resources (BLR) safetywebsite at http://safety.blr.com.BLR® is the leading provider ofemployment, safety, and environmental compliance solutions.

Briefly, the BLR subscription offers:

n TRAINING LIBRARY (TRAINING RESOURCES) – BLR’s carefullyresearched training solutions that access more than 200 trainingcustomizable toolkits, including slides, speaker notes, quizzes,handouts, certificates, and activities, many of which are availablein Spanish.

n COMPLIANCE ANALYSIS AND ASSISTANCE – “Plain-English” safety andhealth regulatory analysis, interpretations, and regulatoryactivity notices of changes to federal and your state’s OSHAregulations.

n BEST SAFETY PRACTICES AND WHITE PAPERS –

Do it right the first time with bestpractices, OSHA case studies, and whitepapers from leading safety experts.

n NEWSLETTER WIZARD –Create employeenewsletters that can be emailed, printedor linked on your company intranet. Withthe Newsletter Wizard, you can edit anexisting article, select another from anextensive article library or create yourown with the built-in text editor.

n SAFETY NEWS WEEKLY EZINE –BLR’s safetyprofessionals save you time and troublewith valuable insight into new regulatorydevelopments – updated daily.

n ANSWERS FROM THE EXPERTS –Getpersonalized answers to your safetyquestions in one business day from BLR’sOSHA experts.

WILLIS ONLINE EXPANDS: NEW REAL ESTATEPORTAL FOR SHOPPING CENTER & RETAILCLIENTS

http://safety.blr.com/


RETAIL SHOPPING CLIENT TOOLKIT

The Retail Shopping Client Toolkit contains employee safety andoperational risk management content focusing on shopping centerand retail real estate issues. As new content is added to this module,users can be automatically alerted if they choose this option.The tableof contents for this module is outlined below.

n Acquisitionsn ADA Compliancen Bed Bugsn CAT Modelingn Claim Issuesn Contract Review Guidelinesn Crime Preventionn Emergency Preparednessn Employee Safety and Training

l Driver Safetyl Employee Injury Preventionl Hazard Communicationsl OSHA Recordkeepingl Safety Management

n Environmentall Asbestosl Carbon Monoxidel Legionellal Noro-Virusl Pesticidesl Water Intrusion - Mold

n Fire Safetyn Insurance Certificatesn Operational Newslettersn Site Surveysn Walking Surfaces

For example, the Retail Shopping ClientToolkit provides draft exposure, loss controland self-assessment site surveys that can beused as a starting point by property managersto measure their loss exposures in order tomeet operational standards.

ADDING VALUE AND IMPACT

This new tool delivers industry leading valueto our clients that will positively impact theirlong-term cost of risk. For example, an annualsubscription to BLR for three users costsalmost $3,000 if placed directly. Thissubscription is just one of the modulesthat make up the WOL Shopping Centerand Retail Real Estate Portal available atno additional cost to Willis clients.

Contact your Willis Real Estate or StrategicOutcomes Practice Professional if you wouldlike to participate in an online demonstrationof this product.


CONTACTSFor additional information on the topics discussed in this issue, or any others for which our Real Estate & Hotel Practice might provide assistance, please visit our website atwillis.com or contact:

Brian RuaneDirector+1 212 915 [email protected]

Steve SachsDirector+1 410 964 [email protected]

DISCLAIMERWillis is an insurance consulting and brokerage firm. We are not attorneys and this publicationis not to be considered legal advice. Please consult with your attorneys prior to incorporatingany of our suggestions into an actual contract or agreement.

1 http://www.insurancenetworking.com/news/sandy-related-insured-losses-likely-exceed-20-billion-31639-1.html

2 http://www.insurancenetworking.com/news/Us-disasters-account-majority-global-catastrophe-losses-31721-1.html

3 http://www.advisorone.com/2012/03/28/swiss-re-says-2011-was-second-costliest-year-to-in

4 http://www.insurancejournal.com/news/national/2013/01/22/278132.htm

5 http://www.marketscout.com/frontend/barometer_mar.asp

6 http://www.propertycasualty360.com/2012/12/12/reports-agree-modest-rate-increases-continue-into?t=commercial

7 http://www.businessweek.com/news/2012-09-19/insurers-will-struggle-to-post-10-percent-return-on-equity-walsh-says

8 http://www.propertycasualty360.com/2012/11/30/conning-once-positive-liability-insurance-trends-r

http://www.insurancenetworking.com/news/sandy-related-insured-losses-likely-exceed-20-billion-31639-1.html

http://www.willis.com/Client_Solutions/Industries/Real_Estate/

willis.com

http://www.insurancenetworking.com/news/Us-disasters-account-majority-global-catastrophe-losses-31721-1.html

http://www.advisorone.com/2012/03/28/swiss-re-says-2011-was-second-costliest-year-to-in

http://www.insurancejournal.com/news/national/2013/01/22/278132.htm

http://www.marketscout.com/frontend/barometer_mar.asp

http://www.propertycasualty360.com/2012/12/12/reports-agree-modest-rate-increases-continue-into?t=commercial

http://www.businessweek.com/news/2012-09-19/insurers-will-struggle-to-post-10-percent-return-on-equity-walsh-says

http://www.propertycasualty360.com/2012/11/30/conning-once-positive-liability-insurance-trends-r

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Documents

IE S FOR THE SHOPPING CENTER & RETAIL INDUSTRY...The courts have also ruled that foreseeability may be established by “all facts and circumstances,” not just prior violent acts;