I am submitting this comment as a Registered Private Investigator who owns a Licensed Private Security Service Business (to provide Private Investigation Services).  I am a “one man operation”, set up as an LLC, and have been in business for 5 years.

It should first be noted that the Department of Criminal Justice Services (DCJS) has no idea whether it is necessary to raise the required insurance coverage for private security service businesses (PSSBs) in Virginia.  It admits that it "is not in a position to know whether any of its licensees have been sued or whether insurance claims have been filed and paid…” (p. 1406).  Forging ahead in ignorance, DCJS has nevertheless issued this proposed regulation.

As one justification for raising the required insurance amounts for PSSBs, DCJS claims that current insurance “amounts do not reflect current industry standards” (p. 1402).  However, DCJS does not then reference any “industry standards” to justify the claim.  Indeed, DCJS could not point to any such standards because the PSSBs that it regulates are divided into several different sectors (incl. security officer (armed and unarmed), private investigation, personal protection, armored car, security canine handling, electronic security, locksmith).  It would be nonsensical to claim that a locksmith and an armed security officer would have the same “industry standards”, or even close to the same level of anticipated liabilities.

DCJS then claims that the current insurance requirements do not “reflect” the “needs of private security  businesses” (p. 1402).  Whether the insurance requirements reflect the “needs” of a PSSB in Virginia, whatever “needs” means in this context, is not for DCJS to decide – it is at the most fundamental level a business issue, not a governmental one.  A business owner must decide what the business “needs”, not DCJS, and that includes what level of insurance coverage the business should maintain beyond the existing minimum.

The only sound basis for deciding whether the minimum insurance requirements for PSSBs should be raised is whether the current requirements adequately protects the public.  DCJS claims the current amounts “do not adequately protect the public”, and in support points to a court case with a judgement of $8 million that involved a use of force and wrongful arrest by a security officer.  The referenced case can in no way be held out as representative of the anticipated liabilities of the other PSSB sectors, such as locksmiths, PIs, or electronic security.  That there is such diversity among PSSB sectors would instead seem to justify setting low minimum insurance requirements to accommodate sectors that have lower anticipated liabilities than other sectors (contrast, e.g., armed security with locksmith).  If anything, the $8 million case should be seen as outlier, and not as a justification for a rulemaking.

Despite DCJS’s claim to the contrary, its Research Center’s survey results do not provide the basis for an “informed, educated conclusion regarding the appropriate amount of insurance necessary for independent contractors and private security businesses” (p. 1406), nor should the survey results be considered as evidence of some sort of "industry standard"..  The survey DCJS conducted is a red herring and is misused by DCJS in this rulemaking. 

DCJS claims that “During this research process, it became clear to DCJS that a $100,000 general liability insurance policy is woefully inadequate to meet and protect the needs of private security businesses and the public at large.  It is insufficient for covering bodily injury, personal injury, property damage, advertising injury, and legal defense and judgements” (p. 1406).  The survey in no way supports such dramatic claims as “woefully inadequate” and “insufficient”.  Rather, the survey results simply reflect business decisions made by business owners as to what coverage they believe is necessary to protect their businesses.  As noted above, that is exactly the type of decision a business owner should be making, not the government. 

What DCJS does not mention anywhere in this rulemaking is that “as part of its due diligence in determining an amount of liability insurance for independent contractors”, it set up conference calls with two insurance industry representatives who were familiar with PSSBs.  I listened in on both calls.  One industry expert told us that the current insurance amounts were “very adequate”, and the other said they were “fine” (specifically observing that while the “standard coverage” in the industry was $1 million, $100,000 was “fine” because the actual claims made on the policies were much lower).  These insurance representatives’ comments specifically repudiate DCJS’s claims that the current requirements are inadequate or insufficient, and it is absolutely disingenuous of DCJS to fail to mention such contrary evidence that it developed as part of its “due diligence” in preparation for this rulemaking.

It is the job of DCJS to protect “the public at large”, but DCJS points to no evidence to support its claims that the $100,000 is both “woefully inadequate” and “insufficient” to do so -- it has no evidence because, as is noted above, it is "not in a position to know" anything about insurance claims, and strikingly, it references not a single complaint from a cititzen about issues with insurance.  DCJS simply points instead to the results of its business survey, which in and of itself does not demonstrate anything as to the adequacy or sufficiency of the $100,000 amount to protect the public.  Indeed, as noted above, at least one industry representatives in a position to be familiar with such claims told DCJS that the $100,000 coverage amount was “fine”, in light of actual claims.

It is a mistake to assert, as DCJS does, that because 93% of businesses, according to its survey, already carry $1 million in insurance coverage they would not be “impacted” by the proposed raising of the insurance requirement to $1 million.  Any regulation that a business is subject to “impacts” it.  A lower required threshold would permit a business flexibility in the amount of insurance it carries, for example. 

Similarly, DCJS claims that businesses will not be impacted because the cost to obtain the higher levels of insurance will be the same, yet it relies on anecdotal “evidence” and discounts an actual case of a bond holder whose costs would increase by hundreds of dollars and “spurious”. Confusingly, even though DCJS claims “the cost to purchase a general liability insurance policy is the same regardless of whether the policy provides $100,000 or $1,000,000 in coverage” (p. 1408), it also acknowledges that the “primary disadvantage [of the proposed regulation] to a small percentage of private security businesses will be an increase in the cost of insurance” (p. 1403).  As is noted in the Economic Impact Analysis, “Higher insurance costs may affect whether marginally profitable private security services businesses choose to remain licensed.”  I believe that a business that is unable hold onto its license because of higher insurance costs can be said to have been “impacted”.

DCJS claims that the rulemaking was undertaken in accordance with the “Governor’s initiative to use evidence-based decision making in determining public policy that impacts public safety and the citizens of the Commonwealth” (p. 1408), but it also acknowledges it has no information about actual claims or complaints against PSSBs for lack of insurance, which would seem to be the logical starting point for deciding whether existing coverage requirements are adequate.  DCJS therefore cannot point to a single piece of actual evidence of benefits to the public that would justify raising the required insurance amounts to $1 million.  Its reference to the survey it conducted is simply a demonstration that business owners have largely decided to carry more insurance than is required, for whatever reasons, and does not reflect an “industry standard”.  

DCJS should be required to independently justify raising the existing insurance requirement by something more substantial than simply claiming it is “woefully inadequate” and “insufficient”.  Just because most businesses carry $1 million in insurance, is not adequate or sufficient reason to justify a public policy change that would impact 1,804 private security service businesses.  Nor is the fact that the required insurance amounts have not changed for a number of years an adequate or sufficient reason to raise the amounts.  Lastly, DCJS heard from two insurance representatives who told them the current insurance amounts did not need to be raised, and not only ignored them, but failed to mention their comments in this proposed regulation.

In this rulemaking, DCJS should maintain the existing insurance coverage requirements for businesses, and not require registered PIs and PPSs to maintain insurance coverage any higher than that of businesses.