Special Knowledge, Special Duties?

April 2005

Is a physician held to a higher ethical standard than a risk manager? If so, why? Doesn't a risk manager's knowledge of identifying and managing risk create a special duty to take some appropriate action whenever and wherever risk of harm is seen?

by George L. Head, Ph.D.
American Institute for CPCU

As a society, we often place special responsibilities on those who we perceive to have special knowledge or abilities, as illustrated by the following examples.

• We expect physicians to step forward in emergencies to try to save the gravely ill or injured, even if doctor and patient have never previously met.

• We anticipate that a clergyperson will respond positively to a dying person's need for comforting words, regardless of his or her denomination.

• We expect a criminal lawyer who has agreed to defend an accused to do so with the greatest energy and ingenuity the attorney ethically can muster, even though it may seem that everyone else is convinced of the defendant's guilt. And we believe that a defendant who receives only a negligent or half-hearted defense is entitled to a new, more fair, trial.

• We hope that individual firemen and police officers will respond to the kinds of emergencies for which they have trained, even if they are off duty, out of uniform, or outside the boundaries of their regular jurisdiction. We call them heroes when they so bravely respond, and we would be shocked if they just stood passively by during such emergencies.

Medical doctors, clergy, lawyers, firemen, and police officers—these and others are among the professionals who pledge their special knowledge and skills to the benefit of others. We expect, and typically they expect of themselves, that they will step forward when needed as professionals to serve others in ways that go beyond their routine daily work.

Risk Management Responsibilities

Many of us reading these words possess, and as professionals are paid to apply, special knowledge about managing risk and about preventing or financing recovery from accidental losses. Whether we use this knowledge to earn a living as risk managers, as insurance agents, brokers or underwriters, as safety engineers, or as inspectors or regulators creating or enforcing safety standards, we all work to manage others' risks. As professional managers of risk, are we ethically bound to safeguard those endangered by hazards they do not understand or threats of accidents with which they cannot cope, even if we have not been specifically asked or hired to do so?

Most of us, prudent managers of our own personal risks, especially our professional liability exposures, hope we can answer "No" to this question. We want to say that we meet our professional obligations when we manage our employer's, clients', or insureds' exposures to accidental losses. The same applies if we do risk management for the members of an association or the citizens some political entity. It is enough for us to safeguard these associates because they are the ones whose risks we are paid as professionals to manage. Beyond this, many of us already do more by volunteering our professional talents to help manage the loss exposures of our family's religious institution, of our children's Scout troop or summer camp, or of our homeowners or neighborhood association. Enough is enough, surely!

I contend that, ethically, this is not enough. I believe our special knowledge of how to manage risks of accidental loss is like a physician's special knowledge of how to treat illness. Our special knowledge creates for us a special duty to take some appropriate action to treat any extreme, uncontrolled hazard—provided our action neither violates our duties to others nor creates greater dangers than it seeks to manage.

The Importance of Sharing the Knowledge

Volunteering our expertise in rather placid, structured, professionally non-threatening, settings such as religious institutions or Scout camps certainly is very commendable, but it is ethically not on a par with stepping forward when our expertise enables us to see hazards, even potential crises, looming that others do not see or cannot handle. When we have the courage to step forward to help others who do not practice adequate risk management, we make our particular "corner of the world" a less dangerous, more productive place.

Moreover, when we step forward for others' benefit in better managing their risks, we need not shirk our fundamental duties toward the employers, clients, insureds, and others whose risks we are paid to manage. Quite the contrary: by enabling others to achieve greater certainty and safety in their world, we generally make our world a less risky, friendlier setting for even better risk management. With few exceptions, the best management of any one organization's exposures to accidental loss is a cooperative, rather than a competitive, effort shared among organizations exposed to these accidents.

An Ethical Dilemma

Consider just one case, a fire safety case that I find ethically straightforward—what our children might call a "no-brainer." There could be other cases involving more abstract threats like environmental pollution, employment discrimination, or contingent business interruption that, for me, would be ethically just as clear. But let's start with ordinary fire, just to see if, ethically, we are "on the same page" about the duties that our special risk management expertise imposes on us.

This case centers on a risk manager who is responsible for overall safety, including fire safety, for a garment wholesaler located in a suburban industrial park. This wholesaler's safety record is very good, but the paint manufacturer that operates on the adjoining property has experienced many small fires. Guided by its risk manager, the wholesaler has complained to the industrial park's management about the fire threat the paint manufacturer poses to all the other occupants of the park, but with no positive results. According to the park's management, the paint company has broken no fire code provisions, and the company's owner-president is correct is saying that it is not legally required to have any fire safety officer. Therefore, the management of the industrial park is reluctant to "interfere" with the paint manufacturer's "freedom to operate as it wishes within the law," even though, as someone from the lower levels of the industrial park's management has privately conceded, it operations may be less than ideally safe.

If the risk manager for clothing wholesaler thinks his only duty here is to protect his employer from fire hazards that may originate from the paint manufacturer, then he is likely to try some of the following.

• Erect a firewall between the wholesaler and the paint manufacturer, perhaps with sprinklers pointing toward the manufacturer.

• Complain to the local fire department about the fire hazards the paint manufacturer is creating or failing to control.

• Document the paint manufacturer's fire safety failures in case it wishes sue after a future fire spreads from the paint manufacturer to the clothing wholesaler.

• Threaten to withhold part of the clothing wholesaler's lease payments from the industrial park unless it forces the paint manufacturer to take appropriate fire precautions.

• Make sure the clothing wholesaler's property insurance is adequate.

These and other traditional protective risk management measures are fine for the clothing wholesaler's risk manager to take but, ethically, I believe this risk manager has further ethical duties to both the other occupants of the industrial park and the park's management. These ethical duties are fully consistent with, and may well be an essential element of, this risk manager's job duties to his or her employer, the clothing wholesaler.

This risk manager has these ethical duties because he or she has special knowledge—in this case knowledge of fire hazards and controls—that neither the paint manufacturer nor the industrial park seems to have. (Remember, the paint manufacturer has no fire safety officer, and the industrial park seems to believe that a tenant's right to "operate as it wishes within the law" is more important than other tenant's right to reasonable safety from fire.) Moreover, the industrial park's management may not recognize the fact that the paint manufacturer's fires threaten the industrial park's rental income from all its tenants, not just this manufacturer, once a fire spreads.

Therefore, for me, the clothing wholesaler's risk manager—because of his or her special risk management knowledge—has a special ethical duty to:

• Develop personal relationships with the managers and other employees of both the paint manufacturer and the industrial park, building credibility with them as an individual more than as a risk management expert.

• Slowly, very slowly, and as occasions naturally arise over a year or more, explain to them the essentials of fire safety, its techniques, and its rewards. (It is important here that "risk management" or "fire safety" not be perceived as being every other word or phrase out of one's mouth.)

• As the management and staff of the paint manufacturer or the industrial park progress toward improved fire safety, guide them in finding opportunities to be recognized for their achievements. (When the moment is right, just suggest that perhaps their insurer or even the local newspaper would like to learn about the improvements that they have been making.)

Is this clothing wholesaler risk manager's work on neighboring organizations' fire loss exposures good risk management for the wholesaler? I say "Yes," because what this risk manager can do, patiently and with genuine concern for his or her neighbors, will strengthen this clothing wholesaler's fire safety much more than could any outward-spraying sprinkler the wholesaler could have aimed at the paint manufacturer. In general, when a person with special risk management recognizes and acts on his or her special duty to spread the knowledge effectively to safeguard others, he or she:

• Reduces today's threats to many, within and beyond any given organization.

• Builds positive relationships for combating tomorrow's threats.

• Begins teaching the future's risk management professionals.

These are some new ideas for me, ethically comparing a risk management expert with a physician or a member of the clergy. I'm comfortable with these ideas—are you? Please let me know.

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