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Flash mob store robberies raise security, risk management issues

boarded-up store

Retailers worried about the recent spate of flash mobs invading high-end stores and stealing thousands of dollars of merchandise can take practical measures to minimize the risk, experts say.

Merchandise stolen in the raids is likely to be covered by policyholders’ property insurance, but the losses may fall within companies’ self-insured retentions.

Recent “smash and grab” robberies have been reported in northern and southern California, Chicago and Minneapolis, among other locations.

In a Nov. 20 incident in Walnut Creek, California, some 80 people arrived in about 25 cars, many without license plates, and ransacked a Nordstrom department store.

Two employees were assaulted and another was pepper sprayed, according to news reports. Three people were later arrested and charged with robbery and conspiracy.

Bryan Paarmann, chief of intelligence and operations at Brosnan Risk Consultants, a New York-based security services company, said most of the merchandise stolen in such raids is posted on the internet for resale at reduced prices.

While organized retail crime has a long history, the latest incidents are “a new wrinkle,” said Rachel Michelin, president and CEO of the Sacramento-based California Retailers Association. “That’s something we have not seen before.”

Rich Rossman, a sergeant with the Broward County Sheriff’s office, who is vice president of the Coalition of Law Enforcement and Retailers in Fort Lauderdale, Florida, said criminals are “using fear and intimidation to take property.” 

“These flash mobs have happened in the past but not to the degree they’ve just become emboldened,” and they are becoming more violent, he said.

“The best plan is prevention,” said Mike Bugielski, Glendale, California-based senior risk control consultant and area vice president for Arthur J. Gallagher & Co. Retailers should have “a well thought out, proactive emergency procedure plan they review often,” he said.

Establishing close working relationships with local police departments is important, experts say. “It’s really going to take a public-private partnership in order to deter this,” Mr. Paarmann said.

In addition, retailers with both risk managers and loss prevention directors “need to collaborate closely,” Mr. Bugielski said. And companies should develop or revisit emergency controls or procedures, including reviewing emergency lockdown procedures, he said.

“Most importantly, review security plans and procedures” with retailers’ security guard companies, Mr. Bugielski said.

Integrated security systems and controls on doors also help. Brittain Ladd, a Dallas-based consultant, suggested retailers install padlocked security doors that can be remotely locked.

Criminals rely on getting in and out quickly, so “anything that can slow down that process, even by seconds, will discourage them from trying to enter an establishment,” said Thomas Franzoni, Las Vegas-based loss controls specialist for Alliant Insurance Services Inc.

He suggested a two-door system, where people first enter a small lobby before entering a second, interior door.

Other possibilities include installing special films that prevent windows from being smashed, placing bollards in front of doors and windows, which will prevent cars from entering, and installing reinforced locks and grates on doors for after hours, Mr. Franzoni said.

He also suggested putting high-ticket items away, displaying empty boxes instead and having salespeople fetch the items when needed, or scattering such merchandise around the store.

Experts also recommend perimeter controls including, where feasible, not allowing cars to park close to doors to thwart criminals’ quick getaway.

However, retailers’ curbside pickups must also be taken into consideration, Mr. Bugielski said. “You want to make sure your parking or loading zone or curbside pickup is done safely.” 

Retailers must also ensure there is adequate lighting and surveillance cameras that are placed in key areas.

Mr. Bugielski recommends against arming security guards with guns, though, which he described as a “PR nightmare for any retailer. … It’s just not safe.” Any retailer considering arming guards “should check with their broker to make sure there’s not an armed exclusion in the policy,” he said.

Retailers have property coverage for the robberies, but in a hardening market underwriters are looking at coverages much more closely, he said.

Brett Borelli, New York-based senior vice president with Alliant’s real estate group, said the value of goods stolen, which in some cases totals about $100,000, likely falls within or just above retailers’ self-insured retentions.

Self-insured retentions can be a problem for retailers that are not major stock exchange-listed corporations, said policyholder attorney Peter S. Selvin, a partner with Ervin Cohen & Jessup LLP in Los Angeles.

“It’s an unreimbursed expense that will have its own effect” on these retail operations’ sustainability, he said.