July 2021: Topics include transportation risks, wildfires, mental health, & COVID-19.
June 2021: Topics include COVID-19 vaccine, embezzlement claims & employment practices liability.
January 2021: Topics include planning safer events during COVID-19, COVID-19 employment and vaccine questions and more.
Use the Chapter House Self-Inspection checklist to review your property and life-safety risk management.
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?
One of the more challenging exposures of writing a women’s fraternity or sorority is keeping the insurance and risk management recommendations “contemporary” to the changing dynamics of a campus women’s organization. As the size of the chapter increase in membership numbers, more and more sorority sisters are gravitating to alternate housing where several of them may live together. On those campuses where sorority chapter houses are not as common and/or a sorority does not physically have a chapter house, it has been common for some of the sorority sisters to secure housing together.
Irrespective of the reason, the number of “living arrangements” outside of a traditional chapter house is increasing and are being referred to and/or being considered by the campus community as the “X Sorority” chapter house. We refer to these locations as unofficial houses.
These unofficial houses pose a number of problems to the national organizations and, ultimately, to the insurance coverage. The concerns include the following:
- Unofficial houses are not owned by the women’s fraternity/sorority and are typically less safe
- Residents do not believe that the rules of the organization extend to the housing arrangement, as they would argue that the situation is just a few sorority sisters securing housing on their own
- In the absence of having an actual chapter house and with the majority of the residents being affiliated with one specific sorority, it is not too big of a leap of logic for the campus to construe this residence as the legitimate sorority chapter house
We have seen a significant increase in claims that are coming from those locations that are not the actual chapter house, but instead from these unofficial houses.
We have identified this concern to your national leadership. We also know that, as a volunteer, you are more apt to be aware of the existence of these types of housing arrangements. Should you have one of these types of arrangements on your campus, we would ask that you bring it to the attention of your leadership. Upon their review, we have encouraged them to involve us, if needed, in addressing the housing situation specifically.
Scenario
Members of a sorority loaned their house to a men’s fraternity for a party. The men’s fraternity house was being painted, and they were unable to have a party at their own house. The sorority members did attend the party, but did not provide the alcohol. An underage member of the men’s fraternity was leaving the house when he fell down the front steps, which resulted in him losing his vision in one eye. The young man was intoxicated when he fell.
A lawsuit was filed in the matter against the fraternity and sorority, as well as some of their members. The allegations against the sorority included allegations of failure to supervise their patrons which resulted in the plaintiff being served alcoholic beverages until he was visibly intoxicated. Allegations against the sorority members included failure to supervise and control the fraternity members.
Result
The lawsuit settled for $190,000. The insurance carrier for the sorority paid $154,500. The remaining amount was paid by the member’s personal homeowner’s policy. We do know that the men’s fraternity contributed towards the settlement. However, we do not know the settlement amount.
The defense costs for this claim totaled $329,223. This was a very expensive claim to defend due to individual members being named and additional coverage investigations into whether or not the members were acting on behalf of the sorority.
Issues to discuss
- When loaning or leasing the property to other individuals/organizations, we recommend that you refer to MJ’s Position Paper on the topic and contact your Client Executive to discuss further.
- How do your policies address social events at the chapter property? What policies were broken in the above described claim? What policies would have prevented this claim from happening?
- What are some potential risks of renting the chapter property out to a third-party?
Scenario
A member was injured while climbing onto the sorority’s homecoming float. The member was walking along side the float with other members. The float was towards the back of the parade and was starting to fall behind. The walkers were instructed to board the float to speed up the procession. While the member was boarding the float, the driver accelerated. The member was wearing a toga that became entangled in the axle. The member’s body became locked in the axle of the trailer. It is alleged that the member was dragged for 110 feet. The member suffered severe and permanent injuries due to the accident.
A lawsuit was filed naming the University, the City, the driver of the float and the Sorority. The young man who drove and owned the truck and the trailer in which the float was built on had liability limits of $100,000. The City was dismissed from the lawsuit and the University was on the verge of being dismissed based on sovereign immunity. The driver of the truck argued that he was acting as an agent of sorority and the sorority should be vicariously liable for his actions which were allowing individuals to sit in the truck and block the view of the trailer and accelerating before accounting for the whereabouts of the participants. Defense Counsel felt that there was a good chance the sorority would be found to be vicariously liable for the driver’s actions.
The lawsuit settled during mediation for $1,500,000.
Issues to discuss
- How do your policies address events such as the one described above? What policies were broken in the above described claim? What policies would have prevented this claim from happening?
- What additional risk management policies should have been in place to minimize the likelihood of a claim like this happening again?
Scenario
A member was injured at a chapter event when she stepped on a piece of glass that was on the dance floor and sustained a laceration to her foot. There was a sign posted at the bar stating that no glass bottles were to be taken onto the dance floor. It was discovered that the chapter did not have a chaperone at the event even though their manual stated that a chaperone should be present at all events. It was argued that had the chapter followed its own policy and had a chaperone at the event, the chaperone would have been there to enforce the rule of no glass bottles on the dance floor.
Result
While there were other factors involved, the argument regarding the chapter not following their policy factored into the decision, and the insurance company settled the claim on the organization’s behalf for $187,500.
Issues to discuss
- What are your policies regarding chaperones?
- Are your policies reviewed on a regular basis to make sure they are up to date?
- When policies are not followed, they can be used against you.
Scenario
The chapter hired two buses to take their members and guests to and from an event. One bus had security, but the senior bus did not. On the senior bus, a fight broke out between two members’ boyfriends. One of the young men sustained a broken nose, as well as other facial fractures during the fight. It was confirmed by using Facebook that alcohol was being consumed on the bus.
Result
The claimant’s attorney alleged that the chapter did not provide the property security. He argued that if one bus had security, the other one should also and if it did that his client would not have been injured in a fight. The claim settled for $37,500.
Issues to discuss
- What are your policies regarding security?
- What are your policies regarding transportation to and from events?
- What policies would have prevented this incident from occurring in the first place?
Claims 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 Headquarters 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 more commonly known. 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
Scenario
After going through the organization’s appeal process in an attempt to have her membership reinstated, a former member filed a lawsuit alleging fraud and breach of contract. The lawsuit alleged that the organization failed to follow their own internal rules and procedures in terminating the plaintiff’s membership. Throughout the appeal process and the lawsuit, the organization stood by their decision to terminate the plaintiff’s membership. The organization did agree to pay $5,000 to the plaintiff for a settlement, but did not agree to reinstate the plaintiff’s membership. The defense costs in the matter totaled $66,207.
Issues to discuss
- The above claim example demonstrates the importance of following all proper procedures and policies when it comes to disciplinary issues. Even though the organization in this situation felt that they were on solid footing in how they handled the plaintiff’s membership termination, the insurance company still paid nearly $70,000 to defend the claim on the organization’s behalf. What are your organization’s policies and procedures regarding membership termination?
- What additional risk management policies might minimize the likelihood of a claim like this happening again?