The Legal Implications of Risk Management

The Legal Implications of Risk Management

Steven A. Adelman

One of the questions people most frequently ask lawyers is, “If I do this, can I be sued?” Of course you can! Just as you cannot completely eliminate the risks inherent in operating a public assembly facility, nothing you do can eliminate your risk of being sued.

So if you cannot completely eliminate risk, how can you “manage” risk in a legally significant way? This section explains risk management analysis from a legal perspective. Specifically, we will discuss (1) the strong legal incentives for preparing in advance so your venue is in the best position to minimize injuries and deaths, and (2) the issues the lawyers will want to address (both yours and the victims’) when the inevitable does occur.

The Natural Laws of Risk

Anyone who thinks a disaster cannot happen to their facility will make some lawyers very happy, because they will refuse to prepare and then have to pay a big judgment to get out from under their mistakes. Basic scientific principles show that sooner or later, something bad will happen in every facility. Total prevention of risk is impossible, and even hoping for it is unrealistic and dangerous. This is why risk management is so important, and why the law insists that public assembly facilities take adequate precautions to protect patrons. Put another way, it is not a question of If, but When.

Bernoulli’s Principle

This is the sometimes known as the Law of Large Numbers. Basically, the average number of random events tends towards the theoretical average for that quantity. So if you invite thousands of people to your venue several times a week all year long, where they will leave behind many of their daily cares and inhibitions, Bernoulli’s Principle indicates that some of them will get hurt. And most of those people will sue.

As well, the threat of terrorist activity is greatest at soft targets such as loosely protected public assembly facilities. And some type of natural disaster is a realistic possibility just about everywhere. The only way to entirely prevent safety-related lawsuits would be to close your building. Of course, you would not be attending the Academy for Venue Safety and Security if that were an option.

The Second Law of Thermodynamics

This is the universal law of increasing entropy. In scientific terms, it means that over time, differences in temperature, pressure, and density tend to even out within a physical system. In facility management terms, if other venues have experienced disasters and yours has not, get ready. Your number is probably coming up.

The Law of Averages

This is the folk wisdom embodying the two actual scientific principles cited above. Nearly everyone believes that probability will influence all occurrences in the long term. Nonetheless, only exceedingly careful people tend to act this way. In fact, the long history of public disasters suggests that the absence of adequate precautions is common in the wake of prolonged success. This is because success promotes a sense of invulnerability, which in turn makes people think they can get away with lower margins of safety. Failures, and the resulting expensive lawsuits and bad publicity, promote greater safety margins, and therefore new periods of safe operation.

This section, and the entire AVSS program, is designed to force you out of the usual success-borne complacency. Rather than wait for disaster to strike before taking action, it is the express goal of this program, as well as of the legal system itself, to get you to proactively address risks before they turn into catastrophes. Failure to do so would be an expensive and tragic lesson.

Here is how the laws of man will analyze the respect you show for the laws of nature.

The Essential Legal Terms and How to Use Them

As you have read in the preceding Risk Management chapters, the basic definition of risk management is “the process of selecting and implementing countermeasures to achieve an acceptable level of risk at an acceptable cost.” That is the language of insurers, not lawyers. When insurers speak of what is “acceptable,” they are referring to a financial determination done by accountants and actuaries. Going one step further, military strategists even talk openly about what might constitute an “acceptable” number of casualties and deaths in a given scenario. The analysis your lawyer will undertake in the hours immediately following a disaster will be different. Your lawyer might put it this way:

In the case of any catastrophic accident, legal liability will turn on whether a jury is convinced, by a preponderance of the evidence (more than 50 percent), that the venue (1) conducted a reasonable analysis of (2) the foreseeability of the threat that occurred in this instance, (3) whether it had reasonable safeguards to prevent the harm these victims suffered, and (4) whether those safeguards were put to reasonable use during the injury-producing event.

That sentence contains every significant element of the legal analysis of a venue’s actions following an accident.

In order to conduct this analysis, lawyers (and juries) will argue over the four elements of negligence: duty, breach, causation, and harm. Here is a discussion of each element in the context of public assembly facilities.

1. The Duty of Care for Patron Safety

The threshold question in any negligence claim brought by an injured person is whether the party they are suing owed them a duty of care. In the context of public assembly facilities, this is generally an easy question. Ensuring patron safety is almost always part of a venue’s legal duty.

But the law helps those who help themselves, and penalizes people who do not take reasonable care for their own safety. For example, there is a long line of cases arising from people struck by foul balls at baseball games. In nearly every instance, the stadium was found to have a duty to warn people of the danger of foul balls and to provide seating where even inattentive people could not get hit. (This is the reason for the netting behind home plate.) But the law has recognized that an unavoidable risk of sitting near the baselines is the possibility of getting hit by a foul ball. Rather than screening all of the stands, the law imposes a duty of care on fans sitting in those areas.

The stadium still has many other duties of care, such as providing adequate security to prevent a brawl as fans fight over the ball. But for the patron who takes a foul ball off his forehead because he’s checking his scorecard, a judge may throw his claim out of court as a matter of law.

2. Breach of the Duty of Care

Once the legal issue of the existence of a duty of care has been resolved by the judge, the rest of the negligence analysis is a factual determination for a jury. Assuming that the venue did owe the injured person a duty of care, it is virtually certain that someone involved with making the venue safe for patrons breached that duty. After all, if there had been no breach, then no one would have been hurt.

The question then becomes, who breached their duty? Lawyers address this issue by looking at each defendant’s reasonableness, and at the foreseeability of the risk that caused these particular injuries.

Reasonableness. A venue need not take every possible safety precaution, only those that are reasonable. This is because one need not be ready to handle the absolute worst case scenario, only the most probable scenarios. Whether someone met their duty of care is measured by comparing their conduct with that of a hypothetical “reasonable person under the same or similar circumstances.” In a lawsuit, the plaintiff and defendants almost always hire experts to offer their respective opinions what that reasonable person would do under the circumstances of the accident at issue.

Foreseeability. The key to understanding whether a venue acted reasonably is to understand what risks were reasonably foreseeable, and whether the venue took reasonable steps to prevent the reasonably foreseeable harm that could result from those risks.

First, a venue must reasonably evaluate the possible risks. The most fundamental risk assessment is the equation R = V x T x C (Risk = Vulnerability x Threat x Consequences). Although the AVSS program teaches that this equation is the most effective way to look at risk, in the eyes of the law it is clear that any risk assessment is better than none at all. A ViSAT analysis (discussed elsewhere in these materials) would satisfy this requirement.

Second, the law requires that once a venue has done a reasonable risk assessment, it bears the further duty to take reasonable steps to minimize the reasonably foreseeable consequences. If the “R” of your equation is a big number, then the law imposes a duty to do something to reduce it. You must not only think through the possible risks to patron safety, you must then use that information reasonably. Because “reasonableness” is a function of the time and place a jury is asked to determine it, this can be a complicated analysis, which can have important social implications. Here are a few examples.

Generally, threats can be divided into “acts of man” and “acts of nature.” Acts of man such as terrorism are random by definition. The terrorist attacks of September 11, 2001, the subsequent rail attacks in Madrid and London, and even the shootings at Virginia Tech in April, 2007 make it far less reasonable to do nothing to protect against even relatively unlikely events if the venue knows, or reasonably should know, that there would be catastrophic consequences if such an attack were carried out.

Acts of nature can be charted from past events, and are therefore reasonably foreseeable. But Hurricane Katrina may have changed the duty to foresee and address the possible the consequences of natural disasters. People now realize that there were options that could have either strengthened the dams in the years before 2005, and/or improved the emergency response mechanisms to respond to a flood disaster, which almost anyone could have foreseen in a city that is mostly below sea level. Media coverage of the multi-system failures has likely made the public much less receptive to claims that disastrous consequences were unforeseeable.

Proximate Cause. The venue’s liability will largely turn on whether its actions, or inactions, were a proximate cause of some percentage of the injured parties’ damages. While the venue is doing this analysis, so should be the event promoter, producer, security provider, and even the talent. For performances in any public assembly facility, everyone is a deep pocket with plenty of insurance. With so much money available, everyone gets sued, and the victim sorts out liability over the course of the lawsuit.

There is no magic formula for determining when someone’s actions are a proximate cause of an injury. Jurors evaluate every case on its own facts. This makes it almost impossible for lawyers to definitively say whose fault caused the injuries. On the other hand, the absence of a bright line rule encourages all parties to compromise.

Most lawsuits settle precisely because people tend to be risk-averse, and everyone has some risk of losing. (Despite periodic complaints in the media about “frivolous lawsuits,” the longstanding trend is that more than 90% of all cases settle before a trial begins, and many of the remaining cases settle before the jury returns a verdict. Trials get headlines, but few civil lawsuits actually go to trial anymore.)

It is no exaggeration to say that everyone involved in injury cases has some risk of losing. This even includes the victim. In many instances, an inviting defense strategy may include alleging that the victim caused his own harm. (The legal terms are that the victim “assumed the risk” or was “comparatively at fault,” depending on the law of the state in which the harm occurred.)

Sometimes this works, but blaming the victim can backfire. For example, if an underage drinker gets hurt at an event, it is tempting to blame him for drinking. Even a modestly competent plaintiff’s lawyer, however, will follow the money from alcohol sales back to the venue, promoter, or producer, showing the profit motive in selling to even underage drinkers. The proliferation of beer and liquor advertising at concerts and sporting events, and the obvious risk of intoxication at many public events, makes it almost malpractice for plaintiffs’ lawyers not to show that drunken patrons were reasonably foreseeable to the venue. Moreover, the victim may be more sympathetic than a defendant whose last name is Incorporated.

The trick is to accurately predict how a jury will sort out the liability of all the parties involved in putting on an event. Having a lawyer who knows the roles of the respective litigants, and who understands who does what at your venue, is an essential step in identifying the proximate cause of the harm.

Harm. In a legal sense, harm is the damage the plaintiff suffered at the venue. Without someone having gotten hurt, or some property getting damaged, there would be no lawsuit. So this element of a negligence claim can be assumed (although the amount of harm and its dollar value is often hotly contested).

From the venue’s internal standpoint, there will be other costs, primarily arising from the need to address the problem so it does not recur. Also, any claim on an insurance policy is likely to have a ripple effect for years after the other damages have long been paid. Except in truly catastrophic incidents, these latter two costs for the venue may exceed the actual payout to the victim.

When Lawyers Darken Your Door

Hopefully, you are doing your R = V x T x C analysis before you have experienced a catastrophic loss. The process of assessing and reducing your venue’s vulnerabilities is not only good risk management, it also will tend to reduce the likelihood of a tragedy in the first place.

Nonetheless, even the best prepared facilities will have problems sooner or later. At that time, lawyers will demand all kinds of paper, from official documents to informal correspondence, and they will ask questions you may prefer not to answer under penalties of perjury.

For these reasons, thorough risk management planning should include your own lawyer. Ideally, this person will be knowledgeable enough about your venue and its exposure to help with disaster response planning. Also, your key operational people should have your lawyer’s phone number on speed dial so that in an emergency, the lawyer can mobilize their own legal rapid response team to get ahead of problems before they cascade out of control. At the very least, having a lawyer involved in bringing order from chaos can establish the attorney-client privilege, a potentially important protection for your emergency decision-making process.

Whatever you think of lawyers in general or your venue’s lawyer in particular, the odds are strongly in favor of you needing one at some point in your career. You simply cannot eliminate risk – you can only hope to manage it.