Risk Management has been around since insurance was invented. The basic process of risk management is determine what the exposure is, how much risk the insured can assume, and how much to transfer through a vehicle such as insurance. Good risk management will also try to determine if there are ways that the risk can be mitigated and loss avoided. Every insured goes through this process, whether they realize it or not. Risk management isn’t always easy.
To use an example from personal lines, we all make choices on what level of coverage we need and what sort of deductible we want. If my 17 year-old son just started driving, I would probably bump up the liability limits on my automobile insurance and lower the deductible on the comprehensive and collision coverage. As a matter of fact, adding an umbrella policy would probably be a good idea, too. To help mitigate my risk, he might not be allowed to drive later than 10 p.m., can’t have more than two friends in the car and would only be allowed to drive the car with the most airbags. All of this is risk management.
For commercial lines, risk management is a much more complicated set of decisions. It is more of a blend of art and science. Now, while I don’t know how New York City, as an enterprise, manages its risk, I would assume that the prospect of Anthony Weiner being elected mayor must be giving NYC’s risk managers nightmares (not to mention their brokers, and their carriers). With the latest news and admissions of his “sexting” and other online hijinks coming to the fore, it’s guaranteed that if he becomes mayor, there will be at least one lawsuit that NYC will need to respond to because of some shenanigans. I would bet that there may be up to three or four of these lawsuits, probably within the first year of his term.
Why? He’s made himself an easy target. Even if he cleans up his act and doesn’t participate in anything considered unsavory, it’s apparent that he has a real weak spot and someone will take advantage of it. Whether real or imagined, someone will most likely claim that Mayor Weiner leveraged his position as mayor to force his attentions on the aggrieved party. Even if the harassment claim is baseless or fraudulent, Mayor Weiner will be very hard to defend since he has shown a repeated and consistent behavior pattern that would support the allegation. Whoever makes a claim that has a shred of plausibility is probably going to go home with a bag of money.
So, where is the coverage? I’m sure that the city carries Employment Practices Liability Insurance (EPLI). The core coverage would respond to any claims of harassment by a city employee. This coverage can be extended to cover third parties outside of city government (journalists, vendors, taxpayers, the ice cream vendor outside city hall – all external third parties that might come in contact with the Mayor’s Office).
If I were New York City’s risk manager and broker and if it looks like Mr. Weiner might win the office of Mayor, I would:
- Bump up the limits on my EPLI coverage;
- Make sure there is a third party extension endorsement on the policy;
- Make sure that the limit is per occurrence and not aggregate.
If I was the insurer covering New York City for EPLI under Mayor Weiner, I would really consider:
- Bumping up the premium;
- Exclude Mayor Weiner, as a pre-existing hazard;
- Make sure that Carlos Danger is not a covered insured;
- Get a huge deductible.
It’s going to be an interesting race. But one thing’s for certain: If Anthony Weiner wins, there are going to be a lot of sleepless nights for his risk manager and extended team.