What Commercial Property Owners Need to Know About Terrorism

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Monday, October 10th, 2016
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For many Australians, the reality that terrorism is having a real impact on our home soil hit home in 2014 when Tori Johnson and Katrina Dawson were killed after gunman Man Haron Monis stormed Sydney’s Lindt Café.

Such fears have again been brought to life through recent events overseas, particularly attacks in France.

With this in mind, commercial property owners must learn of the risks associated with the possibility of being impacted by a terrorism event.

At the outset, it must of course be acknowledged that the first and foremost concern with regard to any form of terrorism event by far and away revolves around the human impact in terms of injury or loss of life.

That said, it is important for commercial landlords and tenants to be aware about how they can minimise the probability of a successful terrorism event occurring on their property and how they can prepare themselves from a commercial perspective to manage the consequences of any attack which does occur.

According to Luke Percy-Dove, a director at security consulting firm Matryx Consulting, the nature of the threat has expanded beyond more straightforward risks associated with matters such as trips and falls or anti-social behaviour and now includes the prospect of firearms, knives, bombs and vehicles ploughing into buildings and/or pedestrians in public places.

He says a common theme surrounding the location of attacks is that these have been happening at places of mass gatherings and where large numbers of people congregate. Overseas, attacks have taken place in shopping centres, cinemas, restaurant districts, outdoor events and transport hubs. Percy-Dove says the weapons used are largely ones which do not require a great deal of knowledge in order to operate. These include attacks with vehicles, firearms (where available) and knives.

“What we are learning from overseas and seeing here in Australia too is that the risks to property managers are now very different,” Percy-Dove said.

“They do need to understand and appreciate that we have moved on from having to worry about kids on skateboards and anti-social behaviour and to focus in on things like ‘what is the risk of active shooter incidents?’ and ‘what if this happened in our building, are we prepared, would we know how to deal with it and would we know what to do?’”

In terms of strategies to reduce risk, Percy-Dove stresses that the nature of the risks involved will vary from property to property and advises landlords to undertake assessments of the property in order to ascertain what the risks are. He says options can vary from measures to restrict vehicular access to the entry of the building such as bollards, street furniture or plants; better training so that security personal understand what to look for; and CCTV (which can now pick up parcels or packages that are left unattended and alert operators). In areas such as loading bays, where goods move in and out of the building, procedural measures to check and validate what is going in and out can be crucial, he said.

Also important are strategies to manage any event which does take place. In such cases, many are likely to be gripped by fear and panic. Staff could potentially be trained to assist security personnel to direct people away from the area of risk and toward exit points, he suggests.

From a commercial perspective, Michael Pennell, chief underwriter at federal government owned terrorism reinsurance operator Australian Reinsurance Pool Corporation (APAC), says commercial property owners and tenants should think about how their business operations could be impacted by a terrorism event and strategies which could be put in place to minimise disruption. This could mean having tasks performed at different sites or potentially performed from home in the case of smaller businesses.

In terms of insurance, whilst terrorism events are generally excluded from most policies, cover is actually available under a special $13.4 billion terrorism insurance scheme set up by the federal government and run by APAC under the Terrorism Insurance Act 2003. From a commercial landlord or tenant’s perspective, this scheme is activated immediately once the Federal Treasurer declares that a terrorism event has occurred.

When this happens, Pennell says any terrorism exclusion clause within commercial insurance policies is automatically rendered to be ineffective and the policy holder can lodge a claim with their insurer as per what would normally be the case for a normal type of claim. The insurer will then handle the claim as per normal but subsequently claim reinsurance from the ARPC. From a commercial landlord or tenant perspective, the process involved is no different to that involved for a standard type of insurance claim.

The scheme covers physical damage to the building or structure, contents within the structure, any business interruption associated with that property and the public liability as either an owner or occupier of the property as the case may be.

A critical point to note, however, is that the scheme only covers owners and tenants for matters which would have ordinarily been covered under an insurance policy which they in fact hold but which would otherwise have been excluded by virtue of the terrorism exemption. Thus any business who did not hold a public liability insurance policy with an insurer would not be covered for public liability under the ARPC scheme. Likewise, those without business interruption insurance would not be able to access claims for business interruption under the APRC scheme.

Insurance for business interruption is a particularly sticky point here. Many smaller businesses, Pennell said, do not have adequate levels of insurance for this. When terrorism events have struck, many have subsequently found themselves in trouble. One interesting option in this regard is for small business owners to consider an extension of cover to cover restriction of access, which applies where their building might not suffer damage but might see access restricted. Indeed, a number of businesses were actually able to claim under this extension when access to their premises was denied during the Lindt Café siege.

In terms of overall safety, Pennell says property owners in Australia should learn from some of the approaches taken by their counterparts overseas. In the US and UK, he says, a requirement to produce photo identification prior to entering a high rise building is the standard.

A further concept being deployed in some places overseas is that of alternative emergency evacuation assembly points. Under that scenario, you might have one point which is well advertised and is used in the event of a fire or other traditional form of emergency and a second point which is not publicly displayed but is known to staff and would then be used in a terrorism incident. This is to prevent a situation where those planning attacks could anticipate where people would gather following that attack and subsequently plan to attack that particular point in question.

Speaking of property owner’s duty of care, meanwhile, Percy-Dove says landlords would need to make reasonable efforts in order to prevent attacks. When a number of victims of the Aurora Theatre attacks in the US – which saw 70 people injured and 12 killed in a mass shooting – tried unsuccessfully to sue the cinema chain on the basis that the chain should have foreseen the risk and should have employed armed guards, he said the judge’s ruling represented common sense.

“I think the message it (the US case) to property managers is to do what is fair and reasonable,” Percy-Dove said.

“Evaluate the risk, understand the threats that the building or property in question may be exposed to and take reasonable steps to mitigate these risks.”

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