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TRAGEDY HIKES WORK COMP COSTS

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HOBART, Australia-A shooting spree at an historic site in Australia demonstrates why employers should plan for worst-case workers compensation scenarios.

As a result of the tragedy last year, which left 35 people dead, the Port Arthur Historic Site Management Authority is facing large workers comp claims from the estates of workers killed and from employees who suffered physical or psychological injuries.

The Tasmanian government recently agreed to pay at least part of the Port Arthur Authority's workers comp insurance premiums for the next three years.

Port Arthur, on the Tasman Peninsula, is home to the state's most popular tourist attraction, the ruins of a former prison. Every year, 216,000 tourists and Tasmanian residents visit the site. The authority is the area's major employer.

On April 28, 1996, a 30-year-old Tasmanian, Martin Bryant, shot dead the two owners of a Port Arthur guest house near the historical site before killing 20 tourists and residents and wounding 12 in the nearby Broad Arrow Cafe. He then killed 11 more outside the cafe, before driving a few hundred meters down the Arthur Highway, shooting dead a Sydney woman, and taking her boyfriend hostage. Mr. Bryant then returned to the guest house, where he wounded four passing motorists and killed his hostage before setting fire to the guest house.

After his arrest, Mr. Bryant pleaded guilty to 35 murder charges and was imprisoned for the remainder of his natural life.

The authority is insured with a pool for government-owned enterprises, with premiums based on claims experience. Instead of its usual premiums of about $15,000 ($11,120) a year, the authority's premiums for the next three years total $800,000 Australian ($593,040). The government has told the authority it will pay all or part of the premiums.

The pool, the Tasmanian State Services Workers' Compensation Committee, covers up to $1 million Australian ($741,300). Sydney-based property/casualty insurer MMI Ltd., which manages the pool, also has purchased excess-of-loss reinsurance layers, with no upper limit.

Brian Phillips, MMI's Tasmanian manager, would not say how many claims the insurer had received from the Port Arthur Authority, the Tasmanian police force or the State Emergency Service, which also are insured through the pool. Police and the Emergency Service were involved in chasing the gunman and getting victims to the nearest hospital, which is about 60 miles away.

The spokesman for Tasmania Tourism Minister Ray Groom said the government would not release details on what portion of the premiums it would pay.

Mr. Groom said in a statement that the authority would not be required to "bear any extraordinary costs which flow directly from the Port Arthur tragedy and which are clearly over and above the normal business costs of operating the site."

Mr. Groom also said the authority will not be required to pay back the contribution.

Philip Mussared, chairman of the Tasmanian State Services Workers' Compensation Committee, also would not say how many claims had been received, nor what current payments totaled. But he said claims could reach "many millions of dollars."

"This has caused a financial shock to the authority," Mr. Mussared said.

He confirmed the claims experience meant the Port Arthur Authority's premium had escalated

to about $266,670 Australian ($197,682) a year for the next three years, instead of its usual annual premium of about $15,000 Australian.

Mr. Mussared said the Tasmanian government agreed to help pay the authority's premiums over the next three years to ensure that the premiums will not burden Port Arthur residents who rely on the historical site as the area's major employer.

Mike Geeves, Port Arthur Authority employee services manager, said the authority was unable to pay the premium hike because "we never imagined that sort of cost could evolve."

"We have probably never had much more than a turned ankle or a cut hand (from site employees)," he said. The site has 150 employees.

Mr. Phillips would neither confirm nor deny media reports that claims would reach at least $30 million Australian ($22.2 million), nor would he name the pool's reinsurers.

Pool members have varying deductibles. The Port Arthur Authority's deductible is the first five days an employee is off work with a compensable injury, Mr. Geeves said.

For employees killed on the job, their families or others receive lump-sum payments that vary according to the number of dependents the deceased had.

Mr. Mussared said the Port Arthur case illustrates the need for risk managers to think beyond traditional workers comp injuries to worst-case scenarios.

Most organizations consider a flood, cyclone or fire as the worst thing that could happen to their business but must think about protecting against catastrophic events, he said.

"A lot of public bodies only see a catastrophe in terms of the west wing burning down, or workers comp in terms of someone slipping over.

"The question is, are people looking at the worst-case outcome as part of their cover?" Mr. Mussared asked.