The biggest risk in any industry is the death of an employee. Equally devastating is the death of another as a result of an employee’s actions. In the security industry you have a direct impact on the safety of a location. Clients hire security providers to protect revenue and as a means of making their locations as safe as possible. Protecting revenue ranges from loss prevention to the actual protection of cash. Location security often means meeting or exceeding legal expectation set forth in premises liability law. Personal protection can be seen as revenue protection but not always. It is a third reason clients higher security providers. No matter the reason, make no mistake you are assuming some of the responsibility for mitigating risk for clients. For many who hire security services, hiring you is their risk management strategy. As a result attorneys have been successful in their efforts to include security providers in lawsuits especially where there is a duty to provide a safe environment to those that enter upon a premises.
After years of owning and operating a security company I found that a balance approach is the best. If you focus on being the cheapest service provider you will suffer a great deal of hardship when you are named in a lawsuit. You will find it difficult to hire quality officers which will lead to other problems. Granted you probably will win a number of contracts based on price but you will eventually lose them do to the poor quality of service. On the other extreme you can build a risk mitigation strategy that prices you out of the market. Clients are used to processing volumes of data and they are increasingly expecting service providers to have client portals that provide instant access however, they don’t want the data to show where they are not doing their job. You can build a risk mitigation strategy that literally prevents your officers from delivering a quality service to your client. Not only will you be the most expensive service but you will be known as the company that highlights every mistake made by the client and that you are to rigid to work with.
To form a balanced approach to risk management for your company and your clients I recommend following the below program.
- Select insurance that provides you with a competitive advantage. This means adding value add endorsements that are important to your client base. Advertise these extra touches to justify your price and to prove to the client that you care about their well being as much as your own. See the Value Through Endorsements Table below.
- Consider an umbrella policy that has a per occurrence coverage. You do not need the maximum here. Just having it will set you apart. It will show that you are not a fly-by-night company. In fact some clients require it.
- Ensure that your insurance carrier is A+ rated. When an insurance market gets tight to where only a few carriers compete for all of the business you tend to find exclusions. In addition a low price leader will emerge to service the space. The problem here is the low cost leader is untested and they may not have the wherewithal to withstand the volume of lawsuits. They may also deny many of the claims you send their way because of “hidden” language in your policy.
- Your next focus is to determine what services you will offer. This is not a simple question. For instance, if you have an apartment complex as a client and they demand that you pass out flyers, you must make the decision to do so or not. On the one hand you need the revenue but on the other hand, there is a lot of precedent where security companies have lost lawsuits with large settlement amounts because they were passing out flyers instead of providing security services. After all, how can you be watching for crime if you have a predictable distribution pattern where you are attaching notices to doors. See Services to Avoid below.
- Spend money on a good contract attorney. When I created the contract we used I sought out a firm that litigated against security companies. Who better to write a contract that is tough for a plaintiffs attorney to know the tricks and strategies to ensnare security service providers. We have an entire article coming up on this topic alone.
- Spend money on a non-compete agreement if your state permits this for employees. We restricted the non-compete agreement to cover only clients the employee worked for. Even if your state does not allow for such an agreement consider placing a non-solicitation agreement in your client contract preventing your client from firing your company and hiring your employees.
- Determine what the key performance metrics are for your client and for what you expect from your officers. Again this seems simple. Write post orders and send them on their way right? To limit your risk you should consider things such as patrol coverage percentage and how much data and what type of data should be recorded on reports. If you are responsible for locking up a building how will you know it was done? More importantly how will you prove months later that it was done on the day in question? To handle all of this with ease, I recommend spending time finding an affordable guard tour / workforce management software. You cannot accomplish all that is needed and achieve the level of risk mitigation you need with a pen and paper system. The old security operations center is not sufficient anymore. It is costly and obsolete. Modernize your SOC with a quality software which will allow you to accomplish more with far less labor hours.
- The final step is analyze your clients needs and establish minimum hiring requirements and education levels for each post. The traditional scheduler knows best model combined with
Value Through Endorsements
Between the general liability (GL) insurance and the umbrella policy you want to ensure you consider asking for several endorsements that are not normally included with GL policies.
Consider including the following endorsements (most companies will not have these endorsements):
- Abuse and Molestation
- Assault and Battery
- Mental Anguish
- Incidental Medical Malpractice
- Property Damage
- Damage to Premise’s
- Employee Indemnification up to $15,000 per officer
- Blanket Additional Insured
- Errors and Omission
Services to Avoid
- Do not agreed to pass out information. In the courts this is viewed as a non security duty. You will open yourself up to more risk by completing such “value add” services. If you take the time to explain to your client the risks involved they generally will acquiesce. If they do not you should reconsider bringing on a client who has a risk tolerance that is much higher than yours.
- Pool monitoring is another non-security duty. If you are watching the pool how can you be patrolling the rest of the property?
- Avoid any language where you are responsible for protecting the personal assets of visitors and employees to a location. Go out of your way to exclude this in writing.
- Avoid any contract whereby your officers must leave post to use the restroom. Anytime your officer leaves a post you open yourself up to risk.