We fairly regularly receive questions from members and alumnae regarding the use of individual’s personal homes for chapter events. From a risk management standpoint, we have a few different opinions based on the type of event being held. However, regardless of the type of event being held (whether it be a philanthropic fundraising event, an alumnae chapter meeting, or a recruitment event), the important thing to remember is that the homeowner would be responsible for any bodily injury or property damage that might occur from the actions or inactions of an attendee at the function. The homeowner, by hosting the event in their home, takes responsibility for any injury or damage that occurs during the event. Presumably, their homeowner’s policy would serve as the appropriate way to handle the incident.

We highly recommend that the event organizers advise the homeowner of this information prior to the event, so the proper expectations have been set beforehand. Obviously, this might convince some volunteers to rescind the use of their home, but this alternative is far better than having them upset when we decline a claim that developed out of their event in their home.

If the homeowner would not wish to be exposed in this liability but still would like to hold the event in their home, we encourage them to draft a contract between the homeowner and the chapter, in which the organization agrees to add this homeowner on as an additional insured and, therefore, receive coverage under the national liability policy. This type of arrangement must be approved by the Fraternity/Sorority Headquarters.

If a function is planned at an individual’s home that rises to the level of a significant event with many attendees, such as a fundraiser, we would highly recommend that there be a specific contract in place between the group and the owner of the home listing the terms and responsibilities of each party to the contract, such as provisions that clarify which party is responsible for any bodily injury or property damage that comes from the event. If you are contemplating this type of event, please contact us as early in the planning process as possible, so that we can address the necessary insurance verbiage and requirements upfront. If we deem that the exposure is outside of the normal level of risk, the insurance company may require some additional premium.
The other potential exposure that must be properly addressed is the matter of catering and the serving of alcohol at these events. In these cases, both the organization and the homeowner would need to take the appropriate measures to ensure that both the caterer and who ever serves the alcohol has their own insurance coverage in place to cover their actions.

Should you have any questions or concerns, please do not hesitate to contact us.

There are many points on which the legal profession and the insurance profession disagree; the definitions of personal injury and bodily injury are two. The insurance profession rightly assigns these terms two separate meanings while the legal profession lumps all injuries into one definition – “Personal Injury.”

Legal dictionaries define “personal injury” to mean an injury to a person’s body, mind or emotions. Included within this definition are injuries resulting from negligence or intentional acts. The term is often inappropriately used in contracts such as leases and subcontract agreements relating to insurance requirements, terms and conditions. Such use can cause confusion as the unknowing lawyer draws up the contract intending one type of coverage when the insurance professional reads this as a different breadth of coverage.

Liquor Liability Coverage is designed to protect a seller/provider of alcohol, such as a restaurant or a bar, from the financial consequences of their legal liability when a patron or a third-party is injured as a result of the negligent serving of the alcohol or negligence in not preventing an individual from injuring a third-party.

The legal liability comes from each state enacting legislation, which defends the extent to which a provider is liable in that state. The definition of legal liability varies by state because each state applies its own codified and judicially interpreted laws to the businesses in that state.

These laws have evolved over the years since their inception in the mid-nineteenth century in the United States. Originally there were no laws that would impose any responsibility upon sellers/providers of alcohol for the consequences of the consumption of beverages under the theory that the person consuming the alcohol bore the primary responsibility.

Over time there were many influences to the emergence of liquor liability legislation, which attempts to place some liability upon the business serving the alcohol. In recent times, public concern over problems associated with drunk driving became a major factor in increasing the liability of alcohol providers and social hosts for the dispensing of alcoholic beverages, the most notable influence being Mothers Against Drunk Driving (MADD).

These laws are often times referred to as “dram shop” laws. The term “dram” dates back to eighteenth century England where businesses sold gin by the spoonful called a dram.

The legal liability or tort laws passed in each state do vary; however, there are two basic tenets:

Each state’s legal liability laws are unique, and the elements of each provide the extent to the degree of liability placed on the establishment serving the alcohol.

There are a few states that have not established legal or tort law defining the provider’s liability should an injury or property damage occur by one of its patrons consuming alcohol. Therefore, many courts have modified the rule of non-liability (no tort law) based on new “standards of care” imposed by modern negligence principles or regulatory statutes. The states will either recognize tort law, common law principle or both in the course of legal liability of a provider of alcohol.

Regardless of what state a provider is operating in, there will be some type of liability imposed by the courts for the serving of alcohol. This responsibility is ultimately insured under what is referred to as a Liquor Liability Policy, which is separate from their General Liability or Business Liability Policy. The premium charges that the insurance company makes for the exposure of serving alcohol is state-specific and takes into consideration that particular state’s laws on liability for providers of alcoholic beverages.

Good risk management should be used in determining the providers that you wish to use for your functions. As such, you should only engage an establishment that has comprehensive and adequate liability insurance, including liquor liability when the function includes the serving of alcoholic beverages.

We have run into a procedure that some of our clients have implemented that we believe has unintentionally created some confusion, which we would like to draw to your attention. The procedure is that when a chapter rents a venue for a function and the venue is serving alcohol, the chapter is required to check for the liquor license and occasionally are being asked to secure a copy of the liquor license.

The confusion arises with the risk management recommendation that the venue have both General Liability coverage as well as Liquor Liability coverage. What happens has been that once this chapter secures a copy of the liquor license, they think they have also satisfied the requirement of the Liquor Liability coverage.

Not only does it cause confusion, but we believe that the requirement of getting a copy of this liquor license is unnecessary for two reasons:

Should you have any additional questions or concerns, please do not hesitate to contact us.

Use CTRL+F to search for a specific term on this webpage.

Aggregate Limit: A limit in an insurance policy stipulating the most it will pay for all covered losses sustained during a specified period of time, usually one year. Aggregate limits are commonly included in liability policies and apply per chapter location.

Bodily Injury: Injury to the body, sickness or disease sustained by a person, including death resulting from any of these at any time.

Certificate of Liability Insurance: This is a certificate issued by the insurance company detailing the particulars of the insurance coverage in place for all chapters and regions under the general liability policy. This certificate may be used to document the existence of coverages for chapters and regions. This document is not sufficient when a third-party requests a certificate where they are named as an additional insured.

Certificate of Liability Insurance for an Additional Insured: This is a certificate issued by the insurance company detailing the particulars of the insurance coverage in place for all chapters and regions under the general liability policy. This document specifically identifies a third party as being expressly covered under the general liability policy for a specified period of time (i.e. an additional insured). This form of insurance certificate is often requested by facilities where chapters or regions are planning to hold events.

Claim: An incident where the injured party is making a demand for compensation under the terms of an insurance contract.

Director’s & Officer’s Liability Insurance: Offers directors and officers protection from personal liability and financial loss arising out of wrongful acts committed or allegedly committed in their capacity as officers and/or directors.

Exposure: The measure of your vulnerability to loss.

General Liability insurance: Coverage that pertains, for the most part, to claims arising out of the insured’s liability for injuries or damage caused by ownership of or responsibility for property, sale or distribution of products, and liability for the insured’s operations.

Incident: An occurrence involving bodily injury to a member or guest that does not result in a formal claim. All incidents must be reported when discovered due to possibility of them becoming a claim.

Intentional Act: Deliberately fraudulent acts or omissions, wanton, willful, reckless or intentional disregard of any law or laws. An accident, including continuous or repeated exposure to substantially the same general, harmful conditions.

Property Damage: Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the “occurrence” that caused it.

Underwriting: The process of selecting risks for insurance and classifying them according to their degree of insurability, so that the appropriate rates and premiums may be assigned. The process also includes rejection of those risks that do not qualify.

Have we missed a term that you would like to see explained? Contact Sara Sterley with your suggestion. Thank you!

Introduction

Understanding contracts can be complicated. Full of legal jargon and insurance terminology, sometimes reading a vendor contract can feel impossible and overwhelming. This document is meant to help you break down the components of a contract and identify insurance related language that may be problematic for your organization. We hope that this article helps empower you to think critically about whether signing a contract is in the best interest of your organization.

Contracts and the Transfer of Liability

One of the most consequential insurance issues found in contracts is the transfer of liability from one party to another. Such a transfer can be explicit – “while in your use, you are responsible for any property damage to the rented facility,” or less explicit – “if you agree to this term and there is a bodily injury incident, then you have forfeited the opportunity to sue the venue for an unsafe physical condition in the property because you are holding them harmless.”

Often these less explicit transfers of liability aren’t caught before a contract is signed and a member has unknowingly bound an organization to more liability than is preferable or intended.

Look out for the following verbiage in a contract that can indicate a transfer of liability:

While MJ does not review contracts for hold harmless or indemnification language, they are still cause for concern and you should consult your organization’s policies for guidance. Under an MJ contract review for insurance language, contracts that include only hold harmless and/or indemnification clauses will be considered satisfactory and there is no need to submit them to MJ for review.

If your contract contains other insurance related language such as additional insured or a third party is requesting a certificate of insurance, please fill out this form to have your contract reviewed for insurance requirements.

Addressing Additional Insured Language

An additional insured extends liability insurance coverage beyond the named insured or your organization and its members and staff to include other individuals or groups. Often, contracts require that the third-party vendor be listed as an additional insured. This extends them coverage under your policy, meaning that you forfeit the right to sue them if they were negligent in their responsibilities under the signed agreement. Potentially, your policy would have to pay for a claim and associated costs where an additional insured was grossly negligent, even if you had little to no responsibility.

This is clearly very unfavorable for your organization. If you see additional insured language in a contract, please first refer to your organization’s policies and procedures. Then, attempt to get the contract amended to exclude the additional insured language. If you have additional questions or are unable to amend the contract, please contact MJ Sorority to review the contract and, in consultation with your organization’s headquarters, provide recommendations.

Determining a Third Party’s Existing Insurance: Certificates of Insurance

When hiring a contractor, renting a venue, or working with other third-party vendors, it is essential to determine whether they have adequate insurance. Before signing a contract, be sure to ask for copies of the third party’s certificate of insurance, which will provide you with this important information.

MJ recommends that third parties hold the following minimum limits of liability insurance:

If a third-party does not hold these minimum requirements, please contact your headquarters to determine whether you need to identify an alternative option.

Liquor Liability: Deep Dive

We often hear that a state does not require a venue or bar to carry liquor liability at all. This does not change our recommendation. If you are contracting for a service where alcohol will be served, the party administering the alcohol service should carry at least $1,000,000 of coverage per occurrence in liquor liability. The requirements or lack thereof in state law are immaterial.

 Helpful Tips and Tricks

Always do your homework before signing a contract. If you’re considering a facility for rental, do a walk through and refer in the contract to any visible property defects or damage that was present before your function was held. This eliminates the possibility of the venue alleging that you damaged their property during your event.

Plan ahead! If organizing an event, be sure to give yourself plenty of time to find alternative venue or bartending service if necessary. It’s important whenever you enter into a contract to do your due diligence and be confident that you’ve selected the vendor that is the best fit. If a vendor can’t or won’t provide a certificate of insurance at your request, this is a red flag and often a sign of a poorly run business.

It’s always a good idea to have more than one set of eyes review a contract. Check with another chapter officer, advisor, or staff members to review a contract, especially if there is language you feel is unclear or don’t understand. Your organization’s policies are a huge help when determining whether a risk is tolerable! If there is insurance language such as additional insured or a certificate of your insurance is requested, MJ Sorority is here to help! Here is a handy link to our contract review forms.

Examples of Contract Language

Here are some examples of the more common transfers of liability:

Signed, Sealed, Delivered!

Our goal is always to help you manage risk and achieve the task at hand—whether that’s contracting with a service provider to mow your lawn or renting a venue for a spring formal. By asking questions up front, you can save yourself and your organization from regretful contracts and succeed in achieving your goals!

A contract could be an Agreement, a Waiver of Liability, a Facility Use Agreement or Rules and Regulations. These documents often obligate the insured to legal ramifications, so if there are any insurance requirements in the contract that the chapter is required to agree to or sign, attach any supporting documents to the Certificate of Insurance Request Form.

Insurance verbiage includes any mention of the following: additional insured, liability limits, insurance or insured, Certificate of Insurance, proof of insurance, coverage.

*We are using this as a generic sorority name as an example. Substitute in your sorority’s name.

We are finding an increasing number of chapters using event planning companies/individuals to organize their social and philanthropic functions. While we do understand that planning for large events is often complicated and time-consuming, we are finding that many of the event planners that we have dealt with are not taking the time to review the contracts with the venues, often leaving our clients obligated to much more expansive and concerning liability and negligence verbiage than we are comfortable with in these contracts. In addition, because the event planner/s does not know your organization’s specific policies, we are finding that chapters that outsource their events to event planner/s are often not abiding by their fraternity’s or sorority’s policies regarding event planning.

Therefore, we are often finding that the chapters that engage the use of event planners believe that the event planner is handling all of the details of the event, when in fact, the event planners are not. When we are finally made aware of the situation (most often when a Certificate of Insurance is requested), it is often very late in the planning process, which makes it difficult to modify the contract or plan a different event, depending on the severity of the contract language.

If your chapters are using event planners, we would encourage you to make sure the event planners are aware of your organization’s event planning policies, as well as communicating to your chapter officers that they still need to verify that they are meeting your organization’s risk management policies even when they engage the use of an event planner. In addition, we recommend that when Certificates of Insurance are requested, that you provide both the contract from the event planner and the venue to us at MJ Sorority.

Should you have any questions or concerns, please contact Ruth Akers.

For example
An Event Planner signs a contract on your behalf with additional insured language, which obligated the Sorority to extend coverage to the hotel holding the event. The hotel used glass bottles to serve drinks, some of which were broken on and around the dance floor. A chapter member’s guest sliced his foot open on the glass and severed a tendon in his foot. Because the contract obligated the Sorority to add the hotel onto their policy as an additional insured, the Sorority’s insurance policy was triggered even though the hotel’s employee broke the glass that caused the injury.

November 2020: Topics include security claims and challenges, embezzlement claims, COVID-19 & event planning.

November 2019: Topics include flu season, electrical devices, electric blankets, & podcast.

October 2018: Topics include winter driving, space heaters, employee safety & hail damage.

March 2018: Topics include hurricanes, mold & smoke detectors.

May 2018: Topics include Habitat for Humanity, campus crime, embezzlement claims, frozen pipes, mental health & employment law.