PJM Municipal Law Newsletter

Feature Article:

Customer-Proofing Retail Facilities

The least expensive customer claim in a retail facility is the claim that never occurs. Think about that for a moment. Typically the first thing a risk manager, facility operator or asset protection officer does when the ambulance drives away with an injured customer--and now future plaintiff-- is make a call to fix the pothole, asphalt crack, broken step, electric door, etc., at the heart of the incident. Then begins the inevitable expenses of claims administration, defense costs and indemnification payments.

Imagine if that call took place the day before the customer incident instead of immediately after; the day before the elderly customer trips and falls because of a depression in the asphalt ($196K in defense and indemnity - actual case); the day before a frail customer with MS falls off an electric cart because of a broken latch on the seat ($36K in defense and indemnity - actual case); or the day before a customer blows out his knee trying to step over a pile of snow store employees put in the crosswalk for the plow driver to remove but never did ($73K in defense and indemnity - again, actual case).

Such examples are commonplace and the injuries incurred result in costly claims to pay and/or defend.

There are several ways guaranteed to reduce the amount of pending customer claims at any given facility. One is to simply open up the checkbook and pay the claims. Although this option may result in the claim numbers going down in the short-term, the root cause of the claims is not addressed and the plaintiffs’ bar is incentivized to bring more and more suits. The second option is to become pro-active in prevention as opposed to re-active. Remember the old adage “an ounce of prevention is worth a pound of cure?" This philosophy is particularly applicable in retail situations, as prevention can be significantly more cost-effective than simply paying claims.

In the world of premises liability - just like the movie “Groundhog Day” - the same types of claims happen over and over again, and each time the ambulance leaves with an injured potential plaintiff the maintenance crew is dispatched to fix the problem. Whether that call is made the day before or the day after the incident, the fixed cost to repair the problem remains the same. However, if that call is made after an incident occurs, costs of claim administration, defense costs and indemnity increase with each additional claim. To avoid the extra costs that come with claims administration, nothing is more effective then implementing a risk management plan that “customer-proofs” the facility and identifies all potential issues before an incident can occur.

Generally speaking, a retail facility can be “customer proofed” for less than the amount it costs to defend one customer claim filed in civil court. Let's take the simplest slip and fall that results in minimal injuries with questionable liability that's put into suit but settles before trial. For the amount a facility can be expected to pay in defense costs for that matter, a typical retail facility can undergo a thorough risk management analysis. The result? If one customer claim that would have gone to suit is prevented, the prevention plan pays for itself. Every claim prevented after that is an added bonus resulting in added savings.

Too good to be true? It might be to those who argue the number of prevented claims cannot be quantified. This is where claim metrics become important. It’s a retail reality that some locations have more claims than identical stores in different locations. Skeptical of risk management in terms of prevention? Apply a plan to a problem store and see the claim numbers fall. Viewed from a different perspective, if you had 30 toddlers coming into your home to visit, the prudent homeowner “toddler-proofs” the home to prevent foreseeable accidents. Some large retail facilities can have 45,000 customers in the front doors per week, sometimes more. Why wouldn’t you want to “customer-proof” the retail facility in much the same way as the prudent homeowner?

The simplicity of customer-proofing a retail space is one reason it's so effective. Putting experienced defense attorney's eyes on the outside parking areas, entranceways, vestibules, and customer areas within the retail facility can identify areas of wear and tear and structural defects that are often causative of most customer claims and overlooked in the day-to-day operations of the store. Similarly, inspecting employee-only and vendor access points can reduce worker’s compensation claims and vendor issues.

There are additional collateral benefits of risk management to prevent claims. No one is claiming all customer claims can be prevented; on the contrary, there will always be some customer claims, just like the best effort at “toddler-proofing” a home can still lead to stitches in the ER.

But while no preventative risk management plan can eliminate every claim, a good plan can provide stronger defenses for the claims that do occur. Liability typically attaches when a facility does not take steps when it was reasonably foreseeable that an incident would occur, e.g. defects in parking lots, raised sidewalks, defective mats or no mats in inclement weather, etc., etc. Eliminate the reasonably foreseeable and the claim numbers fall. What’s left are the unforeseeable incidents that are more defensible because the facility had taken reasonable steps at prevention and overall customer safety by implementing a plan that addressed the entire facility.

In the end, all customer claims have value, even those with no liability. Outright dismissals and nuisance value settlements still have administrative and indemnity payments and, if assigned to outside counsel, will result in additional defense fees and litigation costs. However, early resolution of customer claims can be cost-effective in terms of managing litigation expenses. Administrative costs, defense fees and indemnity payments are always going to be more expensive than the relatively small expenditures of claim prevention.

Again, risk management via prevention is about being pro-active versus re-active; preventing versus defending; lowering costs versus incurring the costs of claims administration, defense fees and indemnity payments. If you own a retail facility, insure such a facility or simply administer its customer claims, look to prevention as a common sense way of reducing customer claims and associated costs. The sheer timing of when an issue is identified and repaired within the facility will ultimately determine the cost of any customer claim associated therewith. Either way, you are going to pay to fix the premises defect; the question is how much more you are going to pay if an issue is not identified and resolved before your customer becomes the aggrieved plaintiff.

Eliminate the ambulance and dramatically reduce the costs of customer incidents. Fix, repair and replace before the customer incident occurs.

For more information on a retail risk management plan suitable for your retail facility, contact attorney Clayton Riddle.