Federal emergency preparedness
programs may reduce insurance premiums and potential liability,
and give everyone greater peace of mind.
Scott Sinder, Stephen R. Heifetz and Marc E. Frey
As any risk manager will attest, the Christmas Day airline
bombing attempt, the attempted car bombing in Times Square and
the environmental disaster in the Gulf of Mexico provide stark
reminders of the importance of emergency preparedness.
Most companies can and should do more. For example,
undertaking vulnerability assessments, creating physical or
electronic defenses and monitoring and mitigation systems,
adding redundant protective systems, and having written
emergency plans can help a company prepare for or recover from
Two private-sector programs administered by the Department
of Homeland Security may help your clients fortify their
policies and procedures for managing risks and preparing for an
emergency. At the same time, these programs may limit your
clients’ potential liability and cut insurance costs.
One program applies to any company and any emergency. The
other is a terrorism-specific program that can apply to a range
The broader program, the Voluntary Private Sector
Preparedness Accreditation and Certification Program (PS-Prep),
is administered by the Federal Emergency Management Agency.
PS-Prep identifies widely accepted preparedness standards
(basically guidelines for drafting company emergency
procedures). It encourages incorporating standards into company
policies. Companies that use any of the approved standards can
get certified on those standards, which could lower insurance
costs and may help with any potential litigation.
The standards in PS-Prep include:
- Business Continuity
- Standard on Disaster/Emergency
Management and Business Continuity Programs.
Each can be applied to a broad range of private sector
entities. Virtually any business can incorporate standards into
its policies and procedures. Participation in the PS-Prep
program is voluntary, but Homeland Security has encouraged all
businesses to consider certification using one or more
A company that incorporates a preparedness standard into its
policies and procedures will be better equipped to safeguard
employee, customer and community welfare and possibly mitigate
damage in an emergency.
It’s common for insurers’ policy premiums to
take into account preparedness measures. It is no different
than a reduced premium on a homeowners policy if the structure
has a burglar alarm.
The second program is focused on terrorism preparation and
prevention and is explicitly designed to help companies defend
against lawsuits. The Homeland Security-administered Safety Act
(Support Anti-terrorism by Fostering Effective Technologies)
provides liability protection for developers and users of
Safety Act-approved products, services and intellectual
property (collectively called technologies) in the event of a
After a terrorist attack, companies could face lawsuits
alleging deficient security. The risk is mitigated
substantially for developers or users of approved technologies.
The Safety Act provides two levels of liability protection,
depending on whether the technology has received
“designation” or “certification” by
The benefits of designation are: