We have created an entire resource titled “What To Consider Before Re-Opening.”
Most importantly, Chapter Advisors need to be in communication with the national organization Headquarters and their contacts at their university. The university will have to lay out explicit instructions for reopening any residential spaces, so it is important that you are continually in contact with them to determine what your facilities and chapters need to be doing to prepare.
Chapter Advisors will also want to open communication channels with their House Corporations regarding any changes that they see to how the house will need to operate in the fall (regarding food, sleeping arrangements, etc.) and how they will handle lease payments if significant numbers of members do not return in the fall. In addition, Chapter Advisors/Chapter Advisory Boards will need to communicate openly with their associated House Corporations to ensure that chapter members are following social distancing guidelines, from both the university and the CDC. There will likely need to be significant communication with the members (and their parents) about what steps the chapters and House Corporations are taking to adhere to CDC guidelines, as well as what consequences will be in place for those who refuse to follow the guidelines set out by the university and the CDC.
Legal liability exists when:
- The wrongdoer (chapter house or corporation) is
found guilty of “negligent conduct” meaning they breached a duty owed to the
- The injured party suffers actual damages such as
getting ill with the virus
- The wrongdoer’s negligent conduct is the proximate
cause of the injury or damage
What actions during the COVID-19 crisis could possibly lead to the insured (chapter and/or house corporation) being found legally liable for an injury from the virus? Before we lay out some examples it is always important to remember that society and the courts generally only require that a person or entity act “as a reasonable and prudent person” and using their best, and most informed, judgement act accordingly.
Examples might be:
- Allowing an employee who is known to be
infected with the virus to continue working
- Forcing an employee to continue to work in a
chapter house where there are resident members who are ill and isolated at the
- Failure to adhere to required health and
- No efforts to educate your employees and/or
members on the health and prevention guidelines
- Remaining open following an order by a civil
authority to close
- Indiscriminate application of rules and
guidelines for the members of how to safely live in the chapter house to not
expose your sisters to the virus
There are numerous other scenarios; however, the major point is that there will be advice from experts like the CDC on how to follow health and prevention guidelines to keep your chapter house safe from spreading COVID-19. The key is to follow the health and prevention guidelines, educate your employees and members on these guidelines, and put measures in place to ensure their compliance of these guidelines. Should someone get injured or ill and allege they did so on your property, you will be able to confidently defend your position by having followed these best practices.
We actually did almost an entire webinar on decontamination and COVID-19. But what we know about the virus is changing almost daily, so it is imperative that you rely on the experts from the CDC. Bookmark this page for the CDC’s decontamination and disinfecting guidelines. We also created this resource, which uses the CDC guidelines, but is specific to sorority chapter houses. In addition, this weekly email addresses some other recommendations and questions.
From the news reporting (here and here for a few articles if you want some light reading), it sounds like the Canadians have tested better from the beginning, so they might have a leg-up on opening things back up before the US. It is our opinion that the wisest thing our clients can do is encourage their Canadian members to rely on direction from the province governments and University officials.
Here are two resources that we have found helpful:
We are not providing any refund language at this time, since there are so many directions it could go from both financial and contractual standpoints. Here is our rationale as of today:
Sorority housing is positioned in an interesting lane, being more connected to the university than a private apartment, but more private than a university dorm. As you said, everything is being handled on a case-by-case basis. Our recommendation (in general) has shifted to advising that sorority houses close (when they can) to limit liability at this point, whether or not the university has mandated it. This is due to the extent of social distancing measures coming from the CDC, along with state and federal guidelines, and with a big purpose of sorority housing (proximity to physical university classes) being diminished.
Unlike a private apartment, which would presumably stay open and leave it up to the tenants to stay or go, if the sorority house does close it might not have as much leverage to withhold refunds. Therefore, there is some risk that house corporations could be opening up breach of contract allegations. Breach of contract claims could include where a parent alleges “unjust enrichment” for a sorority house closing, more likely if no fee adjustment is eventually offered. It could be argued that unless the housing agreement specifically states tenants have to pay for housing regardless of unforeseen circumstances, tenants have a right to demand a refund for the time the facility was closed, or else risk breaching the contract.
We realize how this can be situational, and we will support you either way on refunds. This is ultimately your business decision, to be weighed with financial and legal obligations. Keep in mind the Sorority’s Directors & Officers policy offers $100,000 for defense cost only, so it may be able to handle some pushback, but perhaps not across the board.
Important questions to consider to prevent fraud during the chaos:
- Where are your assets and who has access to them?
- Where are the bank accounts?
- Who is spending money?
- Daily review of all items
- A time for early and hard measures
COVID-19 has put pressure on absolutely every element of running a chapter and/or running a house corporation. We have generally looked at fraternal operations in the three risk management areas of:
- Property management
- Financial management
- Employment management
We have seen a lot of attention to the property and employment areas and wanted to highlight the financial management. The chaos of the time could draw your attention away from the practice of good management of your financial assets. Now more than ever, the use of dual controls must be used, and extra precautions should be engaged to reduce your risk to fraud and embezzlement.
Unfortunately, there is an exclusion under the business interruption coverage for viruses, which is where we would typically go to seek out protection for refunds.
We are exploring all other options available to our clients. Stay tuned to our COVID-19 Response page for further updates.
Please review this article in yesterday’s Wall Street Journal for more information (non-paywall version here), and bear in mind that most, if not all, including the policies in the MJ Sorority program, contain similar verbiage regarding business interruption and civil authority. The Property policy includes Loss of Income coverage, which provides coverage for your ongoing and extra expenses, but only following a covered property loss. For example, if you would have a pipe burst that would cause you to have to remove several women from their assigned rooms. If they were required to find alternate housing on their own, the policy would provide that lost income. More commonly, especially for a short term, the House Corporation would find alternative housing, such as at a local hotel, and the policy would pay the difference between what the women are already paying for and the cost of the hotel.
However, the policies require that property loss trigger before they provide payment. Unfortunately, there isn’t any coverage in the policy for the situation in which we now find ourselves because there has not been a defined property loss. This is a good time to review your housing and employment contracts to see if/how unexpected house or university closings are to be addressed.
Read this bulletin for further information or watch our recorded webinar.
It appears that most universities will close for the remainder of the semester, and we are recommending that our clients follow suit. Some things to keep in mind:
- This is such an overwhelming and stressful time for all of those involved: House Corporation volunteers, employees, and members. It is important that House Corporations and property managers clearly communicate to their employees and member residents about procedures and expectations.
- We are encouraging House Corporations to schedule move-outs in a staggered way, so as to minimize the number of people in the house at any time.
- As always, the insurance program does not cover member’s personal property. If member’s personal property is damaged, they will need to rely on their parent’s homeowners’ insurance or a rental policy.
- We typically recommend that House Corporations do not store member’s personal property, but these are extraordinary circumstances. If you do allow members to leave their personal property, do your best to make sure the property is secure, just as you would for summer break.
- We recommend a thorough cleaning of the property before reopening based on CDC guidance.