Claim Involving a House Director
The House Director purchased personal items on the Chapter’s account. The Chapter became aware of unusual purchases such as gift cards and began to investigate further. During the investigation, the Chapter discovered that when they would issue a check to Costco, the House Director would purchase gift cards for her personal use instead of food for the Chapter. The insurance carrier paid $7,326.90. The total amount of the loss was $9826.90 A $2,500 retention was applied.
The House Director would alter/increase Sam’s Club invoices when she submitted them to the House Corporation for reimbursement. The insurance carrier paid $134,036.87. The total loss was $234,036.87. A $100,000 retention applied.
The House Director opened a second Costco account membership without the knowledge of the House Corporation. The House Director used the card to purchase Costco Cash Cards, gift certificates and other personal items. The insurance carrier paid $53,066.94.The total amount of the loss was $58,066.94. A $5,000 retention was applied.
Claims Involving the House Corporation
The House Corporation Treasurer embezzled approximately $37,000. The majority of the funds were taken by the Treasurer writing checks for cash. The embezzlement was discovered when the new House Corporation Board took over and realized that payroll withholding tax had not been paid, which lead to an audit. At the time the money was embezzled, the checks did not require two signatures. The insurance carrier paid $32,000. A $5,000 retention was applied.
The House Corporation Treasurer embezzled money from the House Corporation funds. The House Corporation Treasurer wrote checks for cash and for personal items. The checks only required one signature. The claim was discovered when a new House Corporation Treasurer took over. The insurance carrier made a payment of $146,859. The total amount of the loss was $149,359. A $2,500 retention was applied.
The House Corporation Treasurer wrote checks to pay for the remodeling of her house. Only one signature was required on the checks. The loss was discovered by another member of the House Corporation during an annual review. The insurance carrier made a payment of $16,856.96. The total amount of the loss was $19,358. A $2,500 retention was applied.
The House Corporation Treasurer issued checks to herself and made ATM withdrawals using the House Corporation’s bank card for personal purchases. The loss was gradually discovered when the Treasurer became difficult to reach, checks started bouncing and bills started to go unpaid. At the time, the House Corporation only required one signature to be on checks. The insurance carrier paid $33,143. The total amount of the loss was $35,643. A $2,500 retention was applied.
A House Corporation President stole over a million dollars over a seven year period. The House Corporation President would use House Corporation funds to pay several of her personal credit cards every month. Most of the payments were coded under food, house supplies, and repairs. The House Corporation President was the only board member. Therefore, no one else was reviewing payments issued out of the House Corporation’s account. The loss was discovered when another volunteer assumed the role of the House Corporation President. The volunteer immediately questioned payments issued to credit cards companies as the House Corporation did not have a credit card in their name. The insurance carrier paid the policy limit of $500,000. The total amount of the loss was $1,600,000.
A House Corporation President stole $106,348. The loss was discovered as the House Corporation President failed to respond to a new House Corporation member. The new House Corporation member was able to follow a paper trail to find out the bank the House Corporation used. It was discovered that the account had been depleted. The funds were used for the House Corporation President’s personal use. Only once signature was required to be on the checks and the House Corporation President was the only person with access to the House Corporations account. The insurance carrier paid $101,348. A $5,000 retention was applied to the loss.
A House Corporation President colluded with a third party and stole approximately $3,000,000. The House Corporation President set up a separate account without the knowledge of the other members of the House Corporation. The House Corporation used dual controls for legitimate business purchases. The insured carrier paid the policy limit of $500,000.
Claims Involving Chapter Officers
The Chapter Treasurer wrote checks to herself by signing the previous Chapter Treasurer’s name to the checks. The loss was discovered when the Chapter discovered unpaid bills. After learning of the unpaid bills, the Chapter ordered bank statements and discovered the embezzlement. The insurance carrier paid $4,674.11. The total amount of the loss was $7,174.11. A $2,500 retention was applied.
The Chapter Treasurer stole Chapter funds by issuing reimbursement checks to herself. The Treasurer falsified a spreadsheet and made up expenses that she allegedly incurred. When questioned about this, the Treasurer could not provide any documentation or receipts. The loss was discovered when bills were not being paid. The insurance carrier paid $10,782.73. The total amount of the loss was $13,282.73. A $2,500 retention was applied.
Claims Involving Headquarter Staff
The Finance Director wrote checks to herself and other entities. The loss was discovered after the Finance Director was terminated. While cleaning out her desk, checks with forged signatures were discovered. This prompted the organization to review their bank accounts. It was discovered that the Finance Director had been making payments to her mortgage and credit card companies for a few years. The insurance carrier paid out $80,043.59. The total amount of the loss was $85,043.59. A $5,000 retention was applied.
An employee and her husband colluded to steal badges that had been returned to the organization and stored at Headquarters. Additionally, the employee was also misdirecting the shipments of new member badges to her home address and selling for scrap value. Both the former employee and her husband were arrested. The insurance carrier paid the policy limit of $500,000. The total amount of the loss was $696,803.
Retentions are used by Chubb Insurance and they are also called deductibles, which is a more commonly known term. You will find varying retentions depending upon:
- When the claim occurred (insurance company keeps increasing the deductibles as the claims experience trends in the negative
- When the claim occurred and whether there was evidence of dual controls
January 2021: Topics include planning safer events during COVID-19, COVID-19 employment and vaccine questions and more.
May 2021: Topics include mental health, Covid-19 vaccine, and housing agreements.
We recommend that you complete a House Inventory Checklist and review it once a year (note about this resource: we have made this resource available in Excel because it has built-in formulas for easy manipulation and calculation. Once you click on the link, you can click on the download link in the upper righthand corner to edit your own version). For more information about the property coverage, please click here.
March 2021: Topics include COVID-19 vaccine questions, new OSHA guidelines for the workplace, medical marijuana, and discrimination legislation.
Use the Chapter House Self-Inspection checklist to review your property and life-safety risk management.
Background
A sorority chapter was having a co-sponsored event with a fraternity chapter on campus in hopes of raising funds for the fraternity’s philanthropy. The event was held at the fraternity chapter house. Some of the fraternity members setup a make-shift slip-and-slide using tarps and spikes. The individuals that setup the slip-and-slide did not push the spikes all the way into the ground. The sorority chapter women had nothing to do with the design of the slip-and-slide.
Scenario
About twenty minutes after the event started, a non-member guest went down the slip-and-slide and severely injured her leg on one of the spikes that was sticking up from the ground. The claimant’s estimated medical expenses are nearly $40,000. The claimant’s attorney has requested a settlement of $300,000 from the fraternity and sorority in question and has threatened further legal action if that amount is not paid to the claimant within 30 days.
Result
The fraternity’s insurance company plans to offer the claimant a settlement of $100,000, and the sorority’s insurance company has offered to contribute twenty percent of the proposed settlement amount (equal to $20,000) to the fraternity’s insurance company.
Risk management lessons
This claim demonstrates that your chapters, volunteers and members can still be named in lawsuits even when they had little to do with an injury occurring other than co-sponsoring said event. In this case, if the sorority had inspected the slip-and-slide and realized the danger that the metal spikes posed (as well as the risks associated with a makeshift slip-and-slide, in general), the injury may have been prevented. This claim demonstrates that your chapters, volunteers and members can still be named in lawsuits even when they had little to do with an injury occurring other than co-sponsoring said event. In this case, if the sorority had inspected the slip-and-slide and realized the danger that the metal spikes posed (as well as the risks associated with a makeshift slip-and-slide, in general), the injury may have been prevented.
Issues to discuss
- What safer alternatives are there to a slip-and-slide activity?
- What measures should the sorority chapter have put in place to ensure the safety of events that they are co-sponsoring with another fraternity chapter, especially when the event is being held at the fraternity chapter house?
- What other takeaways can you glean from this example to improve risk management at your location?
Scenario
Two members attended a semi-formal event in which alcohol was served by a third-party vendor. Both members were over 21 and reportedly had been drinking at the event. It is believed that they were walking home from the party and became disoriented and lost. One member tripped and fell as she walked into the street. The other member tried to help her up, when they were both struck by a car. One member was killed and the other member sustained serious injuries.
At this point, no charges have been filed against the sorority; however, the statute of limitations in the state in question has yet to expire.
Issues to discuss
- Do your policies address transportation to and from official events?
- Fortunately, in this situation, the alcohol was served by a licensed, insured third-party vendor. Discuss how using licensed, insured third-party vendors is so important to managing your risk.
- What additional risk management policies should have been in place to minimize the likelihood of a claim like this happening again?
Scenario
A member attended a party at an “unofficial” chapter house. The “unofficial” chapter house was actually an apartment, in which four chapter members lived together. The apartment came to be known on campus as your organization’s chapter house. The member was very intoxicated, and some other chapter members arranged for a fraternity chapter member to drive her home. The fraternity chapter member accidentally ran over her as he was backing out of her driveway.
In the discovery process of the claim, it was revealed that a traveling consultant from the national organization had visited with this specific chapter the week before. The plaintiff’s attorney found evidence that the traveling consultant had participated in drinking games with the chapter members.
The insurance company settled the claim on behalf of the plaintiff for just under $1M.
Issues to discuss
- Do you have locations that are not official chapter houses that might appear to be chapter houses? If so, what can you do to minimize “unofficial” chapter houses from appearing as chapter houses on your campus?
- How does the traveling consultant’s actions and behavior contribute to the negligence and liability of the sorority?
- What risk management policies should have been in place to minimize the likelihood of a claim like this happening again?
Introduction
One of the most challenging exposures in insuring a women’s fraternity or sorority is keeping insurance and risk management guidance aligned with the realities of campus life. As chapter membership grows and housing needs evolve, more members are living together off campus.
On campuses where official sorority chapter houses are not present or where a specific sorority does not have a designated house, it has become increasingly common for members to secure off-campus housing together.
Understanding the Three Types of Off Campus Houses
Not all off-campus housing presents the same level of exposure. We have identified three distinct scenarios:
- Sorority-Sanctioned Auxiliary Housing – Lower Risk
This type of housing is found on campuses with traditional chapter houses, supplemented by additional residences arranged by the house corporation or national housing corporation. They may colloquially referred to as annexes.
These properties are generally sanctioned, monitored, and aligned with sorority chapter house policies. This paper does not focus on these arrangements. - Unofficial Houses Near Official Chapter Housing – High Risk
Despite the lack of oversight, these houses are often informally viewed on campus as an extension of the chapter. They are often known as the junior/senior house and leases are passed down among chapter members.
On many campuses, the chapter house is not large enough to accommodate all members and the house corporation/national housing corporation has not offered other housing. In these cases, groups of members independently rent a house together that is not owned, leased, or sanctioned by the sorority and residents are not contractually bound by sorority housing rules. - Unofficial Houses on Campuses without Housing – Severe Risk
On a campus where there are no traditional chapter houses, members often make independent arrangements to live in a house together, which functions much like a chapter house. This house is not owned, leased or formally recognized by the sorority, but members may hold meetings there, display their letters on the exterior of the home, and refer to the house as the chapter house.
This third type of unofficial house has become the most problematic to the Sorority Program because of the perception of oversight where there is actually little to no control of activities on the property.
One such property was the site of the largest sorority chapter claim in the history of the department. An unofficial house hosted a party where a student perished due to alcohol consumption. The total cost of the claim will be more than $8,000,000.
Risky Unofficial Houses
For purposes of this paper, we will only focus on the latter two exposures. These types of residences are not sanctioned by the sorority, not leased by the sorority, and operate separately from the sorority. We have dubbed these types of residences “unofficial houses”.
These unofficial houses are increasing in number, and many are becoming known as the sorority’s house on campus. Without traditional oversight and adherence to sorority policy, these residences are the sites of sorority-wide parties and events that would not otherwise be allowed by the organization.
Why Unofficial Houses Pose a Significant Concern
These unofficial houses present serious challenges to both the national organization and to the integrity of the insurance program. The most common issues include:
- Lack of Ownership and Oversight: Unofficial houses are not managed by the sorority or a housing corporation and are not subject to the same safety standards, inspections, or maintenance expectations as official facilities.
- Misunderstanding of Affiliation: While residents may see the house as a private rental, the campus community, including guests, neighbors, and university officials, often perceives it as “the sorority house.” This perception creates a direct association with the organization if and when an incident occurs, exposing the organization to liability not contemplated by your coverage.
- Public Perception and Liability Exposure: When most residents belong to the same sorority, the assumption of affiliation is easily made. Should a serious incident occur, especially one involving alcohol or guests, both the residents and the organization could be named in a lawsuit, regardless of who holds the lease or owns the property.
- Increased Claims Frequency: Claims originating from unofficial houses are increasing, confirming these residences are a growing and very real source of risk.
- Lack of Advisor Oversight: On campuses without formal housing, advisors often have a reduced role, limiting opportunities to reinforce policies, expectations, and safe practices.
- University Acknowledgement: Fraternity and Sorority Life staff frequently refer to these unofficial houses as the sorority’s house, further reinforcing perceived affiliation.
Risk Management Expectations
If an unofficial house exists, it must be managed with heightened awareness, even though it is privately rented and not subject to sorority housing policies.
To reduce risk and minimize exposure, we strongly recommend the following:
Clear Separation from the Sorority
- No exterior identification of any kind (letters, symbols, banners, signs, painted sidewalks, etc.)
- Do not refer to the residence as the chapter or sorority house on campus
- Do not use the address as the chapter’s mailing or official address
Lease and Legal Independence
- The lease must be in the names of individual residents, not the sorority
Events and Gatherings
- Do not host recruitment or social events that could be interpreted as sorority functions
- Do not position gatherings as pre‑game or post‑game events for sanctioned sorority activities
- Do not announce or promote events at the house during chapter meetings or in chapter group chats
Alcohol Awareness
- Be especially cautious with alcohol use and party activity
- Even legal-age drinking can create severe liability if the residence is viewed as affiliated with the sorority
Communication and Oversight
- Notify chapter advisors and/or housing volunteers if there is an unofficial
- Promptly inform national leadership if: the property becomes informally recognized on campus as the sorority’s house or other concerns arise
- MJ Sorority can assist in reviewing and advising on risk mitigation
Next Steps
National leadership has been made aware of this issue due to its increasing significance across the women’s fraternity/sorority community. Local volunteers and advisors are often the first to become aware of these arrangements and serve as a first line of defense to mitigate this exposure. If you learn of an unofficial house associated with your chapter, notify your leadership team promptly.
Leadership may choose to engage MJ Sorority to evaluate and address the specific risks involved at a location. In some cases, it may be necessary to have members living at an unofficial house acknowledge risk management expectations in writing.
Final Thoughts
Private housing does not eliminate public perception. When a residence becomes known as “the sorority house,” the legal, financial, and reputational exposure can be substantial, even without formal affiliation.
MJ’s goal is to ensure members understand these risks and take proactive steps to protect themselves, their chapter, and the national organization.
- Lack of Ownership and Oversight: Unofficial houses are not owned or managed by the sorority or its housing corporation, which often means they do not meet the same safety and maintenance standards as official facilities.
- Misunderstanding of Affiliation: While residents may view the arrangement as a private lease among friends, the broader campus community often perceives the property as connected to the sorority. This perception can create a direct association with the organization if and when an incident occurs.
- Public Perception and Liability Exposure: When a majority of residents are members of the same sorority, it is easy for others to assume the residence is a sanctioned chapter house. Should a serious incident—especially one involving alcohol or guests—occur, both the residents and the organization could be named in a lawsuit, regardless of who holds the lease or owns the property.
- Significant claims activity: We have seen a notable increase in claims arising from these unofficial residences rather than official chapter houses.
- Higher claim severity: In addition to increased frequency, we have also seen a substantial increase in the ultimate cost of claims stemming from unofficial houses. This is often due to the combination of (1) no ownership or oversight by the organization, (2) safety and behavior standards that fall short of what is expected in an official chapter house, and (3) the ease with which plaintiffs can argue affiliation when the house is known locally as the sorority’s residence.
Risk Management Expectations
If such living arrangements exist, they should be handled with a similar level of awareness and caution as an official chapter facility—even though they are privately rented and not subject to sorority policies.
To reduce risk and confusion, we strongly recommend the following:
- No exterior identification of the residence as affiliated with the sorority—this includes letters, symbols, banners, or signage of any kind.
- Avoid hosting gatherings that could be even remotely interpreted as sorority events, such as recruitment functions, celebrations, or social events organized primarily for members or guests of the sorority. Do not announce functions hosted at the unofficial house at chapter meetings or on chapter group chats.
- Be mindful of alcohol use and party activity. Even if residents are of legal drinking age, incidents involving alcohol can quickly lead to liability if the house is viewed by others as “the [sorority name] house.”
- Communicate early with chapter advisors or housing volunteers if this type of housing arrangement exists, so leadership is aware of any potential reputational or liability risks.
- Promptly notify national leadership if concerns arise or if the property has become informally recognized on campus as the organization’s house. We at MJ Sorority can assist in reviewing and advising on the situation.
Next Steps
We have identified this issue to your national leadership, as it represents a growing exposure within the women’s fraternity/sorority community. As a local volunteer or advisor, you may be more aware of these housing situations than headquarters.
If you become aware of an unofficial house affiliated with your chapter, please bring it to the attention of your leadership team. Upon review, they may engage MJ Sorority to assist in evaluating and addressing the specific risks associated with that housing arrangement.
Our goal is to ensure that members understand the potential consequences of allowing a privately rented property to become publicly known as a chapter house. Even without formal affiliation, the perception of connection can create legal and financial exposure for both the residents and the organization.
Scenario
The employee fell on the ramp outside the house and injured his leg. The insured disputed the employee’s injury because he was working the next day and was not limping. The injured employee then told the insured he would be off work because the doctor did not know the full extent of his injury without an MRI. Despite the concerns of the insured, the claim was accepted. The employee was released to work, but with restrictions with which the insured could not comply. The doctor requested surgery on the employee’s knee, which the employee wants to do; however due to the employee being overweight, he could not find a surgeon who would operate. The issue is whether the carrier is liable for the injured employee’s gastric bypass surgery, which the employee looked into before the injury. The carrier submitted their opinion to panel doctors, and they found the carrier is liable for the bariatric surgery. The injured worker’s knee surgery is on hold until the bariatric surgery is completed, and the employee is a better candidate for knee surgery.
Result
In summarization, there was an admitted knee injury but due to non-industrial health issues (obesity), the employee’s attorney and adjuster agreed to an Accredited Medical Exam specifically on need for bariatric surgery on industrial basis. The report confirmed the liability on the carrier to provide surgery, which is scheduled soon. The workers’ compensation carrier has paid $59,757 thus far and has set aside an additional $78,884 in reserves (what the carrier expects to pay additionally).
Issues to Discuss
- What procedures do you have in place to prevent slips and falls?
- What policies could have been in place to prevent a claim like this from happening in the first place?
Scenario
According to a report completed by the Chapter Advisor, there were three chapter members conversing about the fire escape outside the window of the second floor. One member, who admitted she had previously been out on the escape, showed the other two new members that it was possible to go out onto the fire escape from the window of the room. The older member successfully got out on the escape. One of the freshman women attempted to do the same and slipped and fell one story to the ground. The women fractured her jaw in 8 places requiring surgery, lost 7-8 teeth and received various soft tissue injuries related to the fall from 15 feet.
Results
Parents of member have retained an attorney and a reserve of $350,000 has been placed on the claim by the insurance company.
Liability Concerns
The fire escapes were used by the house residents as “balconies.”
- Risk Management solution: Written rules, by laws, contracts, handbooks or other correspondence methods should address inappropriate use of roofs, bodies of water, fire escapes, basements, attics, etc.
The prior House Director knew that the residents were using the fire escape as balconies.
- Risk Management solution: A specific person or persons should be responsible for making sure that rules are adhered to. This person or persons must have authority and make sure all persons conform to these rules. Persons living in the house must be held accountable to these rules.
The access ways to the fire escape had no signs posted.
- Risk Management solution: Signage is very important for instructions and awareness purposes. Post signs in access ways that clearly indicate that the fire escape is to only be used for emergency purposes.
A light which was affixed to the wall just above the fire escape was not working.
- Risk Management solution: The appropriate employee should be conducting comprehensive house inspections and giving the property manager written items that need correction. This should also include a follow-up procedure to make sure that corrections are made in a timely fashion.
The witnesses all stated that they have never been advised of any prohibitions against using the fire escape.
- Risk Management solution: House Corporation should have a meeting with the Chapter members once every semester to educate the members on the House Rules and the minutes of the meeting should reflect said instructions. Signs should be posted near the escapes that state “for emergency use only.”
A chair was present on the third-floor fire escape which had been present for three years according to one witness.
- Risk Management solution: An assumption could be made that the members were using the chair to sit in while using the fire escape in an improper manner. Clearly communicate to employees the procedures for reporting to the House Corporation any House Rule violations.
One witness stated that the house members regularly used the fire escapes as balconies and were never told not to.
- Risk Management solution: House Corporation should have a meeting with the Chapter members once every semester to educate the members on the House Rules.