What Risks to Consider Should an
Elf Enter Your Life
Lockton’s Own Risk Elves Uncover Potential Pitfalls
December 2016 • Lockton Companies
There are many movies that have made the short list for all-time
holiday classics. Some that come to mind are Rudolph the Red Nosed
CONTRIBUTING ELVES
Reindeer, How the Grinch Stole Christmas, or Frosty the Snowman, just to
Emmy Allen
Bobby Bardin
Alex Barth
Neal Callahan
Cheyenne Carson
Cameron Crawford
Brent Kiger
John Reichmeier
Branden Schoofs
Chris Tuso
name a few.
However, one movie that deserves to be
on the “nice list” of holiday classics, is the
movie Elf.
While most can enjoy this movie for what it is worth, insurance
With acknowledgements
to Elf (2003)
professionals often find themselves analyzing risk exposures and
determining if coverage applies to a given scenario. This movie
incorporates laughter, holiday spirit, and a long list of risk exposures
to get you thinking about appropriate insurance coverage during the
holiday season.
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Au to C l ai m Sc en ar i o
“Watch out!
The yellow ones don’t stop.”
As you may recall from the movie Elf, Buddy was struck by a vehicle while crossing a busy street full of holiday
shoppers. While it remains unknown if the taxi driver who struck Buddy was distracted, it is clear that texting and
other technology in vehicles is an ever-present threat that can increase accident frequency.
The holiday season brings together family, friends, and fun getaways. The holiday season also brings throngs of
holiday shoppers, both on the road and on sidewalks, rushing to buy the latest and greatest toys while checking their
holiday shopping lists on their phones. And don’t forget about those pretty holiday lights with sparkly decorations
lining the streets—look at that, they have multicolored glittery balls hanging from that tree! Do you see them? Quick,
take a picture with your phone!
Coverage Applicable: Auto Liability
As we all know, a far too common correlation between auto liability exposure and losses is distracted driving.
These ongoing distractions make auto liability coverage extremely important. If there are any questions about your
program’s coverages or limits, feel free to discuss this with your agent.
However, as is the case with most risk, prevention is critical. The first line of defense for organizations with an auto
liability exposure is a company policy that recognizes the potential for distractions on the road, but minimizes the risk
through training and safety programs.
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December 2016 • Lockton Companies
Wor ker s ’ C o m p en s ati o n C l a i m S c e n a r i o
‘Tis the season for overworked Santa’s
elves and busy Lockton Associates.
On Christmas Eve, Santa’s Elves were in their workshop rushing to get
toys completed before Santa’s departure. It was urgent, and there was
no time to waste! They were busy producing Etch A Sketches® for the
children on Santa’s Nice List, but were behind quota due to Buddy’s subpar
craftsmanship. The other Elves had to pick up Buddy’s slack by working
overtime to produce his share of Etch A Sketches. With all of the Elves
working around the clock to hit the quota, the potential for a workers’
compensation claim dramatically increased!
Coverage Applicable: Workers’ Compensation
The end of the year means things get crazy for home and work life.
Christmas time is not only busy for the Elves, but it is also busy for
insurance professionals all around the world preparing for January 1st
renewals. With employees from many industries working longer hours and
experiencing increased workloads, there is a higher potential for workers’
compensation claims.
We have clients that could be
placed on the “Naughty” or
During the holidays, our clients have a greater exposure for employees being
injured on the job trying to meet deadlines. For instance, a manufacturing
plant might hire seasonal employees, and if they are not trained correctly on
“Nice” list by looking at their
loss history, rate and premium
safety, there could be losses for the employer if something happens. If your
increase or decrease. By
client hires seasonal employees, it is a good idea to provide sufficient safety
focusing on safety, hopefully we
training to help protect the other employees and employer. At Lockton, we
provide Loss Control specialists who can help create a safety training manual
or safety class for seasonal workers.
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can help more clients transition
to the “Nice” list.
Gen er al Li abi l i ty —P r o du c t R e c a l l C l a i m S c e n a r i o
To ensure that Santa avoids any liability stemming from
the toys he gives to children, Santa puts all of his toys
through extensive testing for quality assurance.
Since Buddy has been deemed the least productive toy maker in the North
Pole, he is demoted to product testing. While testing the jack-in-the-box toys,
Buddy isn’t able to focus due to his fear of clowns. This leads to many of the
jack-in-the-boxes going largely untested, which causes thousands of jackOUT-of-the-boxes to harm children on Christmas morning, thus resulting in
many product liability suits being filed against Santa’s workshop.
Coverage Applicable: Products and Completed Operations
Any client that is in the business of manufacturing products (especially toys)
has a large exposure for products and completed operations liability.
Santa’s workshop has a large exposure to products and completed operations
liability, specifically product recall. Since we all know that Santa provides
toys for all of the children in the world on Christmas night, it could be very
expensive for Santa’s Workshop to incur all of the costs of withdrawing
Santa’s toys from the toy market. In order to reduce this exposure, he could
endorse his general liability policy to include “Limited Product Withdrawal
Expense,” which provides coverage for expenses associated with recalling
products. If triggered, Santa’s insurer would reimburse him for costs that
include: notification, announcements, overtime to non-salaried employees,
warehousing, hiring of consultants, and disposal. While it is important to
have coverage for product recall expenses, it is critical for Santa to have
a product recall program in place for situations like this. Having detailed
instructions and procedures in place ahead of time makes conducting a
successful recall all the more likely.
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December 2016 • Lockton Companies
Emp loym en t P r ac ti c es C l a i m S c e n a r i o
Buddy starts off working at the North Pole
North Pole Industries
with all of the elves helping to make toys.
Clearly, he is different from the elves and
seems to be the only one to not know that he is
different. There are times when he falls behind
in his work and his coworkers are forced to pick
up the slack. Angered by constantly having to
pick up Buddy’s slack, his coworkers begin to
create a hostile work environment by pointing
out his inabilities.
Buddy could have a claim
against North Pole Industries
due to the constant
harassment by his fellow elves.
Coverage Applicable: Employment Practices Liability
Today’s Employers’ Liability policies can provide coverage for such atrocities. The standard Employment Practices
Liability Policy provides coverage for wrongful acts that includes “harassment and hostile work environment.” To be
safe, the policy should be endorsed to specifically state that “bullying” is included in the definition of “harassment.”
In addition to bullying, Employers’ Liability policies typically protect a company from claims relating to discrimination
that might be brought due to Buddy’s obvious physical differences and capabilities.
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Aviat i o n C l ai m S c en a r i o
‘Cause there is no Christmas spirit, Santa’s
sleigh won’t fly, enter the fleet of drones to
take to the sky. Drone Dasher, Drone Dancer,
Drone Prancer, take flight, to deliver the
presents all through the night . . .
With the Cringle 3000 out of commission, Santa had to utilize his fleet of drones to fulfill his deliveries. Although
drone delivery is a viable backup plan, it presents Santa and his elves with a unique set of risks. Unfortunately, the
Dasher drone flew straight into a power line, knocking out power for numerous businesses. The drone was severely
damaged and the businesses were without power for an entire week.
Coverage Applicable: Drone and Business Income
Drone coverage has become a frequent topic for Lockton clients as commercial drones are being utilized more in our
clients’ operations. It is important to ensure that this exposure is adequately covered, and, luckily, Santa had purchased
a Drone policy earlier in the year. This policy covers the physical damage to the rogue drone, but the consequential
business income loss is excluded on Drone policies.
Therefore, the businesses had to call upon their property policies to cover the business income loss. Business Income
is designed to insure the loss of income while a business cannot operate. That said, most property policies exclude the
loss of off-site utility services and endorsements are needed to expand coverage for this exposure.
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December 2016 • Lockton Companies
Con clu s io n
The holidays are a special time of year. As the year
comes to a close, we can be thankful for the good
and learn from the bad.
Businesses cannot always rely on a character like Buddy the Elf to save the day,
as he did in the movie with his children’s book. Lockton will be sure to enable
our clients with coverage options that are applicable and affordable to protect
our clients’ risk, even if an elf enters your life this holiday season.
With acknowledgements to Elf (2003)
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