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Federal emergency preparedness programs may reduce insurance premiums and potential liability, and give everyone greater peace of mind.

By  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 a disaster.

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 of companies.

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:

  • Organizational Resilience
  • Business Continuity Management
  • 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 preparedness standards.

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 terrorist attack.

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 Homeland Security.

The benefits of designation are:

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