How Insurance Can Cover PR Crisis Communications

Business managers will likely be relieved to learn that the typical corporate insurance policy can cover costs for PR crisis management. The costs for crisis communications may be relatively small compared to the potential reputational damage, loss of customers and drop in stock value. But the insurance payments bring much-appreciated cash infusions that pay for a PR crisis specialist who can contain the crisis and restore the company’s image.

Two-thirds of groups that hire Axia Public Relations for crisis PR get payments from their insurance to finance the PR firm’s services, says Jacob McKimm at Axia PR.

“By having insurance help pay for your crisis PR, you can focus your budget on other parts of crisis management, alleviating a notable burden during a stressful time,” McKimm says.

Your regular insurance coverage should include crisis communications. If it doesn’t, ask your insurer to provide it, he urges. Crisis communications coverage also benefits the insurer since it adds an important reason for businesses to remain customers, McKimm adds.

Pitfalls of PR Crisis Insurance

While insurance policies that cover crisis communications are common, obtaining insurance payments that finance a quality PR crisis response is far from straightforward. Although many policies cover crisis communications and related work a PR firm performs for a client, policies typically require a specific type event to spark the PR crisis, explains insurance coverage lawyer Scott Hecht.

Some examples include:

Cyber policies often cover a crisis caused by a data breach or systems security incident;

Product contamination and recall policies can cover a crisis caused by a food contamination incident;

Pollution legal liability policies sometimes cover pollution incidents;

Directors and officers (D&O) liability insurance policies often provide coverage associated with a stock drop.

Finding a PR Agency the Company Wants

Another potential pitfall: Insurance policies vary when it comes to what PR firm the company can select. Some policies require the insurer to approve the PR firm. Others require the business to pick a PR agency from a limited group of pre-approved firms; others leave the choice to the insurer.

Those limits can severely hamper a PR crisis response if the company must switch PR firms in the middle of crisis when swift action is essential. In addition, a company could be forced to work with a subpar agency that’s poorly matched to its needs.

Advance planning can avoid that calamity. Legal experts urge business executives to review their insurance policies, select a PR firm that meets the insurance policy requirements, and work with the firm to develop a PR crisis communications plan before an incident occurs. Companies have basic options, Hecht says. They can:

• Work with a pre-approved PR agency to develop a plan that meets insurance policy limitations,
• Ask the insurance company to renegotiate the policy to meet its crisis response needs,
• Ask the insurer to issue an endorsement to the policy that approves its current firm PR firm, a possibility if the company has leverage with their insurer.

Whatever option selected, it’s essential to create a comprehensive PR crisis management plan before a disaster strikes.

Getting the Best PR Firm for the Job

Some legal experts urge companies to fight for a PR firm they prefer. Working with the wrong PR team could be “downright counterproductive,” warn insurance experts at Pillsbury’s Insurance Recovery & Advisory practice.

“Insurers often attempt to limit policyholders to pre-selected service providers who offer volume discounts or other consideration to the insurers,” they say. They also recommend that companies:

Be ready for insurers to dispute claims, especially for large cases, and plan accordingly, they warn.

Make timely insurance notifications to ensure insurance coverage. Insurers will use any lack of notice or untimely notice to limit or eliminate coverage. Routinely refresh key employees on the notice requirements of each insurance policy. Put in place clear, pre-written crisis management protocols that include specific instructions and timelines for notifying insurers.

Notification should be thoughtful, not perfunctory. “How an event is communicated to carriers can make a difference in whether the claim is accepted and affect the potential or magnitude of any coverage dispute,” they explain. “It is not the mechanism of the communication so much as the messaging that is critical.”

Bottom Line: Standard corporate insurance policies often cover costs of PR crisis response. But actually obtaining the funds to pay a PR agency requires advanced planning and possibly extensive wrangling with the insurance company. It’s crucial for PR agencies to work with clients and insurers and advocate for polices that protect the client’s reputation when a crisis strikes.

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