Tips on Insurance Coverage for Crisis Communications
In the event of a disaster, effective crisis communications can be essential to maintain or rehabilitate a business’s reputation. Sometimes crisis communications also can be critical to ensure safety and mitigate the risk of liability or the amount of damages. Some (but far from all) business insurance policies provide coverage for crisis communications and related services provided by public relations (PR) firms. For example,
- Cyber policies often provide coverage necessitated by a data breach or systems security incident;
- Product Contamination and Recall policies often provide coverage necessitated by a food contamination or adulteration incident;
- Pollution legal liability policies sometimes provide coverage necessitated by a pollution incident;
- D&O liability insurance policies often provide coverage associated with a stock drop.
Crisis communications coverage is typically only available to the extent that there is an underlying incident that triggers, or is likely to trigger, the substantive policy coverage (e.g., a pollution incident may be required for pollution-related crisis communications). When available, this coverage is usually subject to a sublimit but sometimes does not require satisfaction of a retention or deductible.
Crisis communications coverage usually also comes with limitations on the business policyholder’s choice of PR firm. Some business insurance policies merely require the insurer to consent in advance to a particular PR firm. Other policies require the business to pick from a limited group of approved PR firms. Still other policies leave the choice of PR firm entirely to the insurer.
Public relations professionals emphasize the importance of advance preparation for crisis communications. Advance preparation minimizes response time and maximizes effectiveness. Working with a PR firm, a business may formulate various templates for crisis communications in advance, including press releases, FAQs, and messages to employees, customers, suppliers, and regulators. Those templates may be modified, finalized and deployed at a moment’s notice. But issuing press releases or calling press conferences requires advance preparation in identifying appropriate press outlets and secure contact information. Publication by website requires advance creation and post-crisis activation. Distribution by text, email, and voice mail platforms may also involves advance preparation.
Insurance policy limitations on the business’s choice of PR firms can impair the effectiveness of crisis communications, particularly if the coverage forces a business to change PR firms after the disaster hits. With advance planning, a business policyholder should be able to avoid this forced change. Before the disaster, and ideally in connection with an initial policy placement or subsequent renewal, the business should identify all policies providing crisis communications coverage and review those policies for the purpose of determining the limitations on choice of PR firm. Armed with the knowledge of the coverage limitations, the business should then either (a) come up with a plan for crisis communications that may be reconciled with the insurance policy limitations, or (b) negotiate a change of the insurance policy to accommodate the business’s crisis communications plan.
Coming up with a plan that may be reconciled with the insurance policy may require a business to choose and use a PR firm that the insurer has pre-approved for crisis communications coverage. Oftentimes, pre-approved PR firms are identified on a schedule attached to the policy or a website identified in the policy. If the insurer has not identified pre-approved PR firms (perhaps because the policy merely requires the insurer’s advance consent), the business should ask its insurance broker to have the insurer to identify pre-approved firms. Once such PR firms are identified, the business should then be able to engage a specific acceptable PR firm both to assist with advance preparations and in executing the crisis communications plan when it becomes necessary.
Alternatively, depending on the insurer and the amount of premium paid by the business, working with its broker, the business might ask its insurer to issue an endorsement to the policy approving a particular firm PR firm that the business already uses (or would be inclined to use). Then the business could engage that approved PR firm both to assist with advance preparations and in executing the crisis communications plan when it becomes necessary.
Any business’s insurance broker is a good and necessary resource for addressing these issues. And we can give you guidance and advice too.
Contact Scott Hecht for more information.