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Captive owners urged to draw up response plans for flu outbreak

Captive owners urged to draw up response plans for flu outbreak

GRAND CAYMAN, Cayman Islands--Captive owners need to prepare for the eventuality of an influenza pandemic, carefully examining the scope of their insurance coverage, developing a pandemic response plan and briefing their boards and employees on their risk management efforts.

Risk managers should not view the possibility of a pandemic as a Y2K-type of event that cost a lot of money to prepare for and had virtually no impact on their operations, several speakers cautioned during a panel discussion on preparing businesses for an influenza pandemic at the 2006 Cayman Captive Forum in Grand Cayman Nov. 28-30.

Health care organizations, in particular, have had to prepare for several possible health-related events such as an anthrax attack, the outbreak of severe acute respiratory syndrome, and a smallpox outbreak, and their staffers may be suffering from "crisis fatigue," said Barbara McCarthy, associate vp for risk management for Northeast Health Systems in Beverly, Mass.

"With all the things we've prepared for, (a pandemic) is probably the most likely to happen and we do need to pay attention," she said.

A flu pandemic could instigate a host of professional liability and other tort-related exposures, the panelists said. For example, a pandemic could lead to class action lawsuits by hospital staff claiming the government or their employers failed to adequately prepare, said Edward Christiansen, vp and general counsel for Boston Medical Center.

In addition, plaintiff lawyers already have begun querying avian flu sufferers for a possible class action lawsuit, he said. "Although the pandemic is only an idea at the moment, the battle lines are being drawn and the plaintiff lawyers are thinking long and hard about how to benefit from the situation," Mr. Christiansen said.

One theory of liability could be the allegation that the employer or organization negligently failed to prepare for the pandemic, which would be a difficult allegation to defend against because of the onslaught of media coverage of the avian flu outbreak, Mr. Christiansen said. "We certainly can't say we didn't have notice of this issue," he said. "If you don't have a plan or haven't taken reasonable steps to prepare for this, you could be liable for negligent failure to prepare."

Captive owners have to consider several major coverage issues that could arise due to a pandemic. If their captive insures workers compensation risks, for example, the owners need to consider increasing their reserves because there will be more claims arising from a pandemic, Mr. Christiansen said. Captive owners also need to anticipate reinsurance exclusions for a pandemic, he said.

Risk managers with captives need to be able to answer specific questions from their board members--who have fiduciary responsibilities--such as whether their workers comp policies exclude influenza and what the scope of their business interruption coverage is if their facilities are closed, said Bill McDonough, managing partner of Integro's health care practice in Boston and moderator of the discussion.

If there is an influenza pandemic, risk managers should notify their carriers immediately and preserve evidence of the cause of and the losses related to the incident, Mr. McDonough said.

In terms of risk management, health care companies need to develop a flexible response plan because they will be on the front lines in combating a pandemic, the panelists noted.

For example, risk managers working for health care organizations need to ensure that their health care facilities have the proper equipment to protect their employees and patients and have sufficient food, medicines and other supplies necessary to sustain themselves for long periods of time due to possible supply chain disruptions, Northeast Health Systems' Ms. McCarthy said.

Risk managers also need to ensure that their employees are aware of the possibility of a pandemic and can quickly diagnose influenza, Ms. McCarthy said, noting that the potential for a delayed or missed diagnosis is a key area of potential liability for health care professionals and organizations.

Having a plan to deal with the staffing issues that will likely arise during a pandemic event is a key risk management step for health care organizations, according to Susan Wood O'Leary, associate vp of risk management and associate general counsel for Rush University Medical Center in Chicago. For example, if a flu pandemic occurs, schools will likely be closed, so employers should have plans to help provide child care for health care professionals who will be required to report to work.