Contracts are complicated
In the “good old days,” making arrangements for functions of the organization were far simpler; over time, it has become more complex. In addition, many third-parties are now requiring that a contract be signed before a venue or a service can be utilized, and we typically find that every contract is different.
The essence of any contract is the agreement that for certain compensation, certain services will be provided. For example, a facility is being rented (the service) and your organization is expected to pay a specific fee as set forth in the contract (the compensation).
If you have reviewed these contracts, you will agree that it is not simply setting these terms, but addressing the numerous other conditions also being required. It is in this review of the contract that you need to be aware of some of the common issues, as you consider obligating your organization under the contract.
One of the more subtle, but far reaching issues of the contract is the transfer of liability from one party to another. This can be done explicitly in the contract with wording, such as, “while in your use, you are responsible for any property damage to the rented facility” or the less explicit requirements referred to as indemnification (being put back whole) or hold harmless clauses. Ideally the contract would make a specific mention of this point under a titled section, but that is not always the case. Therefore, it is critical that the entire contract is thoroughly read to detect for any and all contractual obligations which you are being asked to comply.
We are seeing a dramatic increase in the number of event contracts. Be concerned with any of the following verbiage in your contracts:
- Hold harmless
- Additional insured
- Primary and non-contributory
Here are some examples of the more common transfers of liability, though it bears mentioning that you cannot transfer all liability, but can certainly minimize your liability to claims:
- The hotel contract requires your organization to hold them harmless for any bodily injury of your attendees while on their property.
- 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.
- Logically, the entity that has the greater “control” of the conditions of the physical property should be the one bearing the greatest liability, so holding them harmless is not preferable.
- Your agreement may be for exposures that are not covered by your insurance policy, though a remote possibility, it could occur.
- The sorority chapter is hosting an event at the local park where you have contracted with a caterer to provide the food and alcohol for the event. The caterer is requiring evidence of your insurance coverage and wants to be added to your insurance policy as an Additional Insured.
- The most alarming trend is the request for a non-insured to be added to your policy and given the full rights under the policy. In doing so, you forfeit the opportunity to sue this “Additional Insured” for their actions, which may have well been the only reason why a claim occurred. The classic example here would be the caterer not practicing good risk management and over-serving someone who becomes intoxicated and then assaults another attendee at the function. Your insurance policy would be obligated to defend this caterer and potentially pay for any judgment against them. We prefer to have each party to a contract rely on their own insurance coverage and then rely on the “courts” to determine where negligence lies and ultimately where the liability rests for paying for injury or damages.
If renting a facility, points to consider:
Do a walk-through of the facility and make reference in the contract of any visible property defect or damage that was present before your function was held. This eliminates the possibility of the venue alleging that you damaged their property while holding the event in their facility.
Review the contract carefully and look for indications of transferring the risk with the following verbiage:
- Additional Insured
- Hold Harmless
If you are unsure whether or not unfavorable language is in the contract, complete this form to have your contract reviewed. After consulting with an attorney specializing in contract review, MJ has taken a little different approach when it comes to reviewing contracts containing indemnification and hold harmless clauses. Over the years, we have found that most contracts contain these clauses and more times than not, we were unsuccessful in having the clauses removed. Amending or rewriting a contract is more of a legal issue rather than an insurance issue; therefore, MJ is not in a position to provide legal advice on these clauses. We will still be reviewing contracts for insurance requirements, i.e. Additional Insured and Primary Additional Insured; however, when the only items embedded are hold harmless and indemnification clauses we are advising that the contract meets the insurance review. This is not saying that you shouldn’t be mindful of these conditions and take greater precaution than you normally would with your event because of these contractual requirements.
Additional Insureds are specifically designated parties that have the same benefits afforded by the insurance coverage that you have as a named insured. This means that you will have to share your policy limits with any Additional Insured to your location. There is no premium charge for this substantial coverage that they receive.
Additional Insureds increase the number of potential claims that could be made against your insurance policy. As they are covered by your policy once you sign a contract obligating your organization to list them as an Additional Insured, you lose the opportunity 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 the defense costs of a claim in which the Additional Insured was grossly negligent and in which you had little to no responsibility.
If renting a facility and alcohol is being served by either the facility or an outside caterer, here are some points to consider (in addition to the other facility example above):
- Look for the publicly displayed liquor license for the venue or ask to see a copy of the license for the vendor serving the alcohol to ensure that it is in
- Secure a Certificate of Insurance which includes the minimum limits on the next page plus the coverage for Liquor Liability, which is in addition to their
General Liability coverage.
If hiring a contractor or contracting with a venue/service, points to consider:
Secure the services of only an insured contractor or company and ensure that they have the following recommended minimum limits of liability insurance by getting a copy of their Certificate of Insurance (where applicable):
- General Liability $1,000,000 per occurrence
- Liquor Liability $1,000,000 per occurrence
- Automobile Liability $1,000,000 per occurrence
- Workers’ Compensation $500,000 per accident
The main reason why we recommend that your contractors have their own insurance is so your organizations coverage would not have to respond to a claim that was caused solely by your contractor. The reason why we recommend the above minimum limits is that these are industry standards and should we need to file a claim against the subcontractor for damage or bodily injury they caused, we would want sufficient limits to access or what we refer to as subrogation against a third party.
The Certificate of Insurance Request Form
- Always complete the Certificate of Insurance Request Form as COMPLETELY as possible.
- Always specify your GREEK CHAPTER NAME. NOT Alpha Alpha Alpha* at ISU. Is that AAA at Indiana State University? Iowa State University? Illinois State University?
- CORRECT: Beta Chapter of Alpha Alpha Alpha Sorority*
- Always be ACCURATE when stating the name and address of the venue requesting the Certificate of Insurance. Remember: A Certificate of Insurance is issued to provide proof that your organization is adequately insured. Therefore, you would not request that the Certificate of Insurance be issued to Alpha Alpha Alpha Sorority*, or to Susie Sorority, or Abigail Advisor, my Advisor. This is the name and address of the VENUE or VENDOR that has asked that you provide proof of insurance.
Is there a contract?
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.
- When you have a question on a contract or have a contract with insurance verbiage….please complete the Certificate of Insurance Request Form and upload the entire contract via the form on our website.
- A snippet may not contain all the requirements needed in determining how favorable or unfavorable the contract is. Contracts often have insurance languagethroughout the entire document, which can be easily missed and often contradict other things in contracts.
- Please avoid sending contracts without an explanation or supporting documents. Always complete the Certificate of Insurance Request Form with any contract to avoid big delays.
Requesting a Certificate from Someone Else
- When reviewing or requesting a Certificate of Insurance from a third-party vendor or a venue when they are providing the alcohol, always ensure that the limits are specified on the Certificate of Insurance. We recommend the following limits, but check with your organization’s policies. Recommended minimum limits (when applicable):
- General Liability—$1,000,000
- Liquor Liability—$1,000,000
- Workers’ Compensation/Employee Liability—$100,000/$500,000/$100,000
- Automobile Liability (for buses) —$1,000,000
- Feel free to cut and paste the following verbiage to request a Certificate of Insurance from a third-party.
As part of our event planning process we are required by our National Organization to obtain a Certificate of Insurance from venues/vendors we chose to use for our events. It is recommended that we use vendors/venues with a minimum of $1, 000,000 General Liability and $1,000,000 Liquor Liability. The Liquor Liability and Liquor Liability limits must be shown on the Certificate of Insurance for venues/vendors where alcohol is being provided. The purpose of this document is to simply provide the limits and proof that coverage is in place. We are not asking to be covered under your insurance policy as we have an insurance policy that will cover any damages caused by our negligence.
*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.
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.
We are often asked about the worthiness of using liability waivers by our clients. In the past, under the advice of legal counsel, we have taken a somewhat ambivalent attitude toward encouraging our clients to have their members sign waivers or requiring that non-members participating in chapter events sign waivers as we were concerned that the waivers wouldn’t stand up in court.
However, over the past several years, there has been a shift in case law that has caused us to reconsider our position on waivers and releases. This, coupled with the dramatic increase in liability incidents and claims among our clients, has caused us to re-evaluate our position. Our research and the advice of legal counsel now indicates that participant waivers/releases may be advantageous for our clients in two ways prior even to the test of court:
- Waivers may help clients educate their members about the risks associated with various types of events; and
- Waivers may prevent a lawsuit from ever being filed because the participant has acknowledged his or her assumption of risk.
We are now encouraging our clients to utilize participant waivers (both for their own members and for events sponsored by the Fraternity/Sorority with non-member participants) for the following types of events:
- Any athletic event
- Any “risky” event (Link to risky events position paper)
- Any competition
We have developed a participant waiver/release template for our clients’ use. Please be sure to read through the waiver in its entirety and make necessary edits so that the waiver applies to your specific event. You will see examples and further information in the footnotes of the waiver/release template.
Once the appropriate waiver has been drafted by included the requested information in the template form, waivers may be distributed in paper or electronic format. If distributed and collected as hard – copies, chapters should either keep the paper copies or scan and save as an electronic file in accordance with your organization’s document retention policy. It’s important that chapters not go to all of the effort of collecting signed waivers to simply dispose of them the day after the event as claims often come much later than that.
A potentially better option is to use a web-based liability waiver platform that will help your chapters create and distribute waivers to participants and then save signed waivers in a searchable database. There are a few websites that offer this. One such company that we recommend is SmartWaiver as we believe that the waiver creation and distribution process is relatively seamless and pricing is reasonable and upfront.
It is very common for third parties to request a Certificate of Insurance that proves the fraternity/sorority or chapter has purchased insurance coverage. This request can be satisfied by obtaining a Certificate of Insurance that shows your limits and coverages. When a third party asks for evidence of your insurance, you need to complete the Certificate of Insurance Request Form in the appendix of this document or complete the Certificate of Insurance Request Form on our website.
If yes, do not sign the contract until you have contacted Ruth Akers at MJ Insurance. If you sign the contract, you may unknowingly be obligated your organization to unfavorable liability and/or indemnification requirements that could put your organization in jeopardy.
If you are unsure if the contract contains insurance requirements, look for the following verbiage examples:
- “The renting party (i.e. the chapter) shall be solely liability and responsible for all costs, expenses, damages, liabilities, claims or suits incurred or resulting from the use of the property rented.”
- “The renting party agrees to fully indemnify and save and hold harmless [specific venue/entity name] from and against any and all claims.”
- “The renting party shall submit proof of insurance naming [specific name of venue/entity] as additional insured.”
While these examples are the most frequently used phrases that cause us concern from an insurance standpoint, contract language is often complicated, so it is always better to be safe and send the contract to Ruth Akers for review.
If a third-party is requiring Additional Insured status, they are looking to your organization’s policy to defend them and pay claims on their behalf, even if they are negligent in causing a claim.
Additional Insured requests relating to social events are heavily scrutinized; therefore, it is important that you allow two weeks to allow for the necessary parties to review.
The below suggestions are recommendations only, not requirements. The information below should be kept on file for your records. We do not need copies of this information.
Please refer to your organization’s risk management policies for specific conditions required by your fraternity/sorority.
When you rent an establishment or engage the services of someone, it is recommended that you obtain a Certificate of Insurance to ensure they have purchased insurance for their operation. If the third-party vendor does not have insurance, then the fraternity’s/sorority’s policy may have to respond, which is not preferable. Your agreement with a third party vendor will dictate what coverages should be represented on the Certificate of Insurance. For example:
- If you are renting an establishment, you will need to have evidence of their General Liability coverage.
- If an establishment is providing alcohol related services, you will need to have evidence of their General Liability, Liquor Liability and Workers’ Compensation coverages.
- If you are hiring a contractor, you will need to have evidence of their General Liability, Workers’ Compensation and Automobile Liability coverages.
- If you are hiring a bus company for group transportation, you will need to have evidence of their Automobile Liability coverage.
As a guideline, the following limits of liability are a minimum that you should accept from a third- party:
|Workers’ Compensation/Employer’s Liability||$100,000/$500,000/$100,000|
We have established the above minimum recommendations for the following reasons:
- Increased cost of materials and health care costs have significantly impacted the average cost of a claim.
- If there is bodily injury, the costs could very easily exceed the minimum threshold notes above.
- The cost of the insurance premium for a lower limit of insurance would likely be less than a fifteen percent discount for the contractor or venue. The industry now views the minimum limits above as the minimum they will offer and rarely provides limits lower than $1M.
- We and our clients believe that those that control the exposure should bear the most responsibility in paying for a claim.
A red flag should arise any time a contractor or venue shows resistance to or hesitation with these minimum limits of insurance, and you may want to reconsider your arrangement. In our experience, if a contractor or venue refuses to provide proof of adequate insurance limits, it is because they do not have any insurance, not because they do not have adequate limits.
Any time a chapter contracts with a venue, contractor or any third-party for services, it should be clear that each party is responsible for the consequences of their performance and/or work and the conditions under which the service will be rendered. This contractual relationship exists so those who are in the best position to control the exposure are also the most likely to incur the liability for those incidents that may occur. In an ideal world, each party’s insurance policies would respond to the extent that they are negligent in causing either property damage or bodily injury. The essence of this risk management technique is to transfer the liability to the entity/individual the most able to control the exposure. Establishing a minimum expectation is a reasonable effort to ensure that this transfer happens and that you are doing business with a professional and reputable entity or individual.
Does MJ Insurance approve events?
No, MJ Insurance offers recommendations based on prudent risk management. Your National Organization has the ultimate decision as to the approval of your event. It is important that you review the rules and policies of your national organization before you begin the event planning process.
I have a Certificate of Insurance that I received for an event we had last month. Can I use it again for an event that is being held next week?
No, Certificates of Insurance are all issued on an event specific basis; therefore, each time someone requests a Certificate of Insurance from you, you must obtain another Certificate of Insurance. Furthermore, the venue/third-party requesting the Certificate of Insurance will want to be sure that their name is listed as a Certificate Holder on the Certificate of Insurance, which is another reason why Certificates are issued on an event specific basis.
I have an Insurance Overview that shows we have coverage. Can I use it when I am asked for a Certificate of Insurance?
No, the Insurance Overview contains specific and confidential information regarding your chapter and should not be shared with anyone outside your organization.
How long does it take to process a Certificate of Insurance?
It depends on what exactly is required by the specific venue and the nature of the event. We recommend that you submit requests two weeks in advance in order to ensure timely delivery, but we are happy to help you with Certificate requests at any time. Completing the Certificate of Insurance Request Form in its entirety is the best way of ensuring timely processing of your Certificate request.
We are renting a venue that will be serving alcohol. Is evidence of their state liquor license sufficient?
Each state has very strict guidelines for businesses who are licensed to sell alcohol, and we certainly recommend that you only use businesses that have a current liquor license. However, it is equally if not more important, that you require evidence of the business’ liquor liability insurance coverage, which is separate coverage from general liability insurance and will have a separate limit of liability. For much more information on this issue, please refer to our position paper.
It is increasingly common for other organizations and/or people (third parties) to request some evidence that the fraternity/sorority or chapter has insurance coverage in place. The form that confirms that coverage is, in fact, in place is called a Certificate of Insurance, and it shows your limits and coverages.
We will need the following information from you in order to provide you with a Certificate of Liability Insurance:
- Fraternity/Sorority and Greek Chapter Name
- Date of the event
- Type of event (i.e. Philanthropic, Social, Chapter-Oriented, etc.)
- Whether or not alcohol is being served (if alcohol is being served, who is serving the alcohol?)
- Name and address of the venue and/or individual requesting the Certificate of Insurance
- The contact information and preferred contact method (i.e. e-mail, fax, etc.) for the individual to whom the Certificate should be sent
- If the venue is requesting Additional Insured status, please forward the contract immediately to us for review.
Please provide all of the above information and any questions you may have by completing the Certificate/Event Request Form.
In addition, it is also very common for you to receive a request from a lendor requesting that you provide evidence that you carry property insurance. Banks often require you to list them as a Mortgagee or Loss Payee on your policy for property for which they provide a loan. Companies from whom you lease equipment, such as a copy machine vendor, also often request proof that you are carrying insurance to cover any damage to their equipment. This document is referred to as the Property Certificate of Insurance.
In order to process your Property Certificate request, please provide us with the following information by completing the Non-Event Specific Certificate of Insurance Form:
- Name and address of the entity/individual requesting the Property Certificate
- Any written documentation, such as a contract, that stipulates your obligation to provide the entity/individual with proof of insurance
- Loan number, if applicable
- E-mail address of the entity/individual requesting the Property Certificate
We are seeing an increase in the number of riskier and more robust activities being proposed as chapter events and activities, such as the following:
Ropes courses Hay rides
Mud/color/zombie runs Rock climbing/Climbing walls
Skeet shooting Paintball
Trampoline events Slip-and-Slides
Haunted attractions Mazes
Bounce Houses and Dunk Tanks Eating contests
Hamster balls Any type of inflatables
On their own, these activities are concerning because of the greater potential for injury due to the more physical and/or dangerous nature of these activities. With good risk management, some of the potential risks associated with these types of events can be mitigated; however, some of these events are inherently dangerous. If we continue to see more claims in these areas, the insurance company may be forced to take action by eliminating some of the coverage that our clients now enjoy. We would prefer that good risk management eliminate action from the insurance company.
In addition to the more physical nature of these activities from a risk management standpoint, we are seeing the contracts in these types of scenarios increasingly contain verbiage that is unfavorable for our clients. Examples of this are where the service/venue includes the requirement that the fraternity/sorority add the venue/service provider onto their policies as an additional insured, contractual verbiage that releases the venue from any and all liability, and the requirement that all chapter members and/or participants sign waivers or releases to eliminate the service/venue from liability. This trend toward more aggressive contractual language with these types of events is concerning for our clients primarily due to the fact that they have little or no control over the equipment and the facility that is being used by its members and to then release the service provider/venue from responsibility is not good business practice.
Thus as we see it you have an increase in the more risky activities, where the service provider/venue is completely “released” from any and all liability and we have the additional trends below to exacerbate the matter:
- Liability incidents are up 15 percent
- Member injuries are up 68 percent
- Economic pressures and uncertainty with health care has impacted both the number and the severity of liability claims
Please refer to your own organization’s policies regarding approved events.
Not all risky events are created equal; please refer to the table below for some specific examples:
|Type of risky event||Red Flag||Better option, yet still risky|
|Ropes courses||Homemade ropes courses on the chapter property||Engaging with an established company or organization that utilizes trained individuals to facilitate ropes course|
|Bounce houses||A bounce house setup on chapter property open to the public||Going to a well-managed facility that has various amusement activities available|
|Slip-and-slide||Set up on chapter property||Going to a well-managed water park|
|Organized runs/walks||Mud/Zombie runs with obstacles||A more traditional 5K on paved surfaces, with appropriate city permits, permissions, etc.|
As you can see from the examples above, there are ways to make seemingly risky activities more advantageous, primarily by holding the event:
- At a licensed establishment that carries adequate insurance limits and practices good risk management in their operations
- At a well-managed facility (as opposed to at the chapter house or somewhere on campus)
If the event is held at another business, they will be primarily responsible for the liability to your members and their business insurance policy will be responding to any claims.
Refer to your inter/national Headquarters for your organization’s policies regarding approved events. Ultimately, it is up to the discretion of each inter/national Headquarters to determine whether or not to allow a specific type of event.
We recommend, when possible, that chapters find alternatives to the types of risky events listed and/or unfavorable contractual risk transfer.
If it is not feasible for you to find an alternate (and insured) venue for the event or to change the event altogether, we recommend that you utilize the services of MJ Insurance Sorority Department by contacting Ruth Akers, Senior Account Manager.