Reading the local newspaper can be very hazardous to the mental and financial health of a business owner. Frequently, the newspapers carry headline stories about individuals who have received large financial settlements for an injury or loss suffered at a local business or residential complex. Recently, a shopping center was sued by a store manager who was raped in her store at the shopping center (Doe v McArthur and Glen Realty Corp, Wisconsin, 1996). The litigation settled out of court with a negotiated agreement for $1.13 million.A settlement of this magnitude can be financially devastating to the vast majority of businesses and individuals. This is not an unusual settlement amount. The average settlement costs are increasing annually. The settlement costs of an adverse jury verdict can easily exceed the negotiated settlement average by several multipliers.
According to the results of a study of 549 inadequate security and premises liability cases in 1993 to 1995 from various jurisdictions across the United States released by Liability Consultants, Inc., Sudbury, MA, in January, 1997, almost 52 percent of the verdicts were in favor of the defense. The average award for verdicts and settlements was in excess of $1.2 million, however in the majority of awards, the amount was under $500,000. Norman D. Bates, J.D. and Jon D. Groussman, J.D. attributed the large number of defense verdicts to an increase in more businesses allocating additional resources to identify areas of risk and develop appropriate countermeasures.
Alan Kaminsky, a well known premises security defense attorney, in his book, A Complete Guide to Premises Security Litigation (American Bar Association, 1995) states:
“Today, premises security lawsuits are among the fastest growing segment of personal injury lawsuits. Some estimate that by the turn of the century claims alleging inadequate security will be second only to the general negligence/slip-and-fall cases as the most common lawsuit brought against residential landlords. Moreover, owners of residential property are not alone in being targeted as defendants in premises security cases. Claims against hospitals, colleges, day care centers, and especially shopping malls are also increasing dramatically.”
Premises security claims represent a significant financial peril to business owners and managers. Premises security claims are increasing at an alarming rate and the litigation costs can force a defendant into financial difficulty and possible bankruptcy regardless of the outcome of the litigation. While the alleged defendant may be exonerated at trial, the mental and physical stress of such an action can only be one of many devastating factors. Bad public relations, reduced occupancy levels, and low employee morale are other unquantifiable costs that can be incurred. These costs are very difficult to recoup.
The legal cost of defending against such a claim can easily exceed $100,000. Recovery of legal fees from a plaintiff for failed claims or frivolous prosecution is frequently unsuccessful. The plaintiff may not have the assets against which to assert a claim or they opt for bankruptcy protection.
Premises security claims arise when someone suffers an injury or loss in violation of the theory that an individual should be reasonably safe in their business, residential, or recreational environment. An owner or occupier of property cannot guarantee that injury or loss will not occur, but ignoring evidence of potential injury or loss can result in a claim of negligence. Compensation for such loss due to negligence can only be assessed when there is appropriate warning to the owner or occupier of property of the probable danger and the owner fails to take reasonable measures to contain or reduce the danger.
In cases of possible negligence, there must be a delicate balance between the rights of an individual to be safe and secure and the rights of a business owner to make a profit. The balance is created by the theory that an owner or occupier of property is not an insurer of the safety of others. The apparent tilt of the balance in favor of the business owner is offset by a requirement that the owner know the probability for injury or loss to occur. He must then take reasonable measures to reduce the potential for harm.
The legal questions arising from an injury or loss are the domain of the attorneys for the plaintiff and defendant, as well as the responsible owner or manager:
- Did the property owner or occupier owe a legal duty to the customer?
- Did the property owner or occupier violate this duty, and
- Did the customer suffer injury or loss as a direct result of the failure to take reasonable measures to protect the customer?
The interpretation of these disputes as they apply to a specific set of circumstances is frequently in dispute. The determination of injury or loss is normally not a difficult issue. The more complex issues involve:
- Did the business owner know, or should he have known, there was a probability that a specific type would occur,
- Were the measures taken to protect individuals on the property, if any, reasonable in nature and sufficient and quantity to counter the probability of a specific incident occurring, and
- Did the injury or loss occur as a direct result of the business owner’s failure to take reasonable and appropriate measure to safeguard the injured party?
How to reduce the potential for this type of loss is not an exact science but a problem area which can be critically analyzed by owners and managers to identify reasonable and appropriate countermeasures. The analysis process for identifying appropriate safety and security measures is also used by the plaintiff’s legal staff to develop information to prosecute their litigation. An understanding of the analysis is as much a tool for loss prevention as it is for prosecution or defense of litigation.
The definition of “probability” and “reasonableness” are not difficult concepts. A problem arises when the plaintiff in the litigation alleges a business owner unreasonably placed the pursuit of profit ahead of providing a safe and secure environment in which to work, live, shop, and engage in recreation.
While there are numerous factors impacting on the definition of a duty to protect business customers, the analysis strategy is relatively simple and frequently can be accomplished without large expenditures. The development of relevant information can be easily accomplished by the business owner. The legal implications must be interpreted by an attorney.
An understanding of the methods for evaluating risks and identifying reasonable security measures for reducing of premises liability can be a significant loss prevention tool. The costs of liability prevention are significantly less than the average settlement costs.
The business question to be answered by the property owner or manager is–Do I spend money now to identify problem areas and appropriate countermeasures, or do I take my chances if litigation is initiated? This cannot be a strict financial decision. Losses due to moral problems, reduced sales and poor public relations because of the fear of injury or loss may be substantial but cannot be quantified in financial terms.
As crime rates continue to increase, the number of premises security litigation actions will continue to rise. The legal profession has developed a competent core of inadequate or negligence security specialists to pursue this lucrative specialty. Not only can the attorney or security specialist be successful in the prosecution or defense of litigation, but they are a vital art of the business owner’s loss prevention team. The security specialist will identify risks and appropriate countermeasures while the attorney determines their adequacy in law.
An understanding of the legal concepts involved and the identification of appropriate measures to provide adequate safety and security will contribute to profit levels.
Loss prevention measures and techniques should be an important management tool. Concentrating on increasing sales, occupancy rates, or other income tools, and underestimating the value of cost control measures will require a greater increase in gross income to achieve an acceptable net income level. The cost of potential litigation prevention is one of the intangible balancing factors between income and expenses.
Whether a review of safety and security measures are undertaken for purposes of loss prevention or litigation, it is important to know the laws pertaining to premises security, the various safety and security issues to be identified and evaluated, and how an appropriate expert in safety and security can contribute to your objectives. A professional security expert who is knowledgeable of the pertinent laws and viable cost-effective security countermeasures should be one of the central figures in premises security prevention and litigation.
Owners and managers of property should consider the ramifications of a landmark premises security case, Berry Property Management, Inc., v Julie Bliskey, 850 SW 2nd 644, Court of Appeals of Texas–Corpus Christi (1993), when evaluating reasonable security measures for their property. Bliskey was awarded $17 million, later reduced to $16 million, for negligence and violation of the Texas Deceptive Trade Practices Act. An intruder, after going through tenant files in the management office, took a key identifying Bliskey’s apartment number from where it was hanging on a pegboard in the manager’s office. He used the key to enter Bliskey’s apartment and raped her. Bliskey alleged that Berry was negligent in handling it’s residents’ keys and violated the Deceptive Trade Practices Act by failing to provide door locks as required by the statute and warranted by the lease.
Court testimony revealed that Berry opted for the pegboard method instead of purchasing a locking metal key box, priced at $30.00. The Deceptive Trade Practices Act required that the owner of the property, upon request of the tenant, install one deadbolt lock and one night latch on each exterior door other than a sliding door, screen door, or garage door. Assuming the cost of installing locks on two exterior doors of $100.00 each and $30.00 for the locking key box, the reasonable loss prevention measures would have cost $230.00. For failing to spend $230.00, the litigation cost Berry $16 million in judgment costs and unidentified legal expenses–more than 69,500 times the cost of prevention!