As winter arrives, it is important that we consider the potential of freeze claims, especially during breaks for the upcoming holidays. Preventing frozen pipes is probably the most important consideration over the winter breaks, but closing the chapter house before Thanksgiving break involves several additional tasks to ensure that everything is in order and secure. Here’s a checklist we’ve developed to help:

Before break:

During the break:

After returning:

Additional tips:

In the past few issues of News & Notes, we have written about changing dynamics in the property insurance industry. In recent years, insurance companies have found themselves at the forefront of a complex and evolving challenge: the impact of changing weather patterns on property coverage. As the world grapples with more frequent and severe weather events, such as hurricanes, wildfires, and floods, insurance providers have found themselves at a crossroads, compelled to make difficult decisions regarding property coverage. These changes reflect the growing recognition that the traditional insurance models may no longer suffice in the face of a rapidly changing climate landscape.

Insurance companies are increasingly restricting coverage or raising premiums for property insurance as a response to the escalating risks associated with changing weather patterns. Rising temperatures, altered precipitation patterns, and the intensification of extreme weather events have significantly increased the likelihood of property damage. Consequently, insurance providers are left with the unenviable task of recalibrating their risk assessments and pricing models to maintain their financial stability while continuing to offer coverage to policyholders. This shift underscores the critical need for a proactive and comprehensive approach to managing risk, including building reserve funds for your chapter facilities.

We have asked our business partner, Blu & Co., to develop a resource for house corporations that will help House Corporations fund for the future:

By: Annmarie Novotney, CPA
Audit Director / Owner Blu & Co.

National fraternities and sororities have been dealing with changing circumstances on many fronts over the last five years.  Part of this changing landscape involves property management and adapting to significant increases in property claims across the nation.  As a result, property owners must prepare for higher property deductibles, due to the increase in the frequency of claims and in the increase in the severity (cost) of claims than in years past.  

It is critical to an organization’s sustainability to have adequate short-term cash reserves and liquidity resources for operational flexibility and for ensuring that organizational commitments are met timely.  Beyond short-term cash reserves, fraternities and sororities should also consider building reserves to fund insurance deductibles as claims are incurred.  Such reserves (often designated by the Board of Directors) are funded so that intermittent claims can be managed without disrupting already tight operating budgets.

In considering building an insurance reserve fund, organizations should consider the following areas:

Blue & Co.’s Not-for-Profit Services Team advises organizations on ways to improve both the balances and the utilization of reserves and liquidity resources to enhance sustainability over time.  Please reach out to your local Blue & Co. advisor with any questions regarding these recommendations. 

We have recently had several claims involving fraudulent checks. Sororities aren’t the only victims. In an alert sent out in February, the Financial Crimes Enforcement Network, also known as FinCEN, reported that, “Despite the declining use of checks in the United States, criminals have been increasingly targeting the U.S. Mail since the COVID-19 pandemic to commit check fraud.” Criminals are becoming increasingly sophisticated in their methods, making it crucial for organizations to stay vigilant. These fraudulent activities encompass a range of tactics, including counterfeit checks, altered payee information, and even identity theft to gain access to legitimate bank accounts. As a result, it is imperative for chapter and house corporation officers and volunteers to be aware of these risks and adopt strategies to mitigate the threat of check fraud. We recommend the following strategies:

This edition of the MJ Sorority newsletter covers the following topics: property market insurance update, building a reserve fund, addressing check fraud , 2024 economic outlook, FAQs, and more.

National fraternities and sororities have been dealing with changing circumstances on many fronts over the
last five years. Part of this changing landscape involves property management and adapting to significant
increases in property claims across the nation. As a result, property owners must prepare for higher property
deductibles, due to the increase in the frequency of claims and in the increase in the severity (cost) of claims
than in years past.

It is critical to an organization’s sustainability to have adequate short-term cash reserves and liquidity resources
for operational flexibility and for ensuring that organizational commitments are met timely. Beyond short-term cash reserves, fraternities and sororities should also consider building reserves to fund insurance
deductibles as claims are incurred. Such reserves (often designated by the Board of Directors) are funded so
that intermittent claims can be managed without disrupting already tight operating budgets.
In considering building an insurance reserve fund, organizations should consider the following areas:

Blue & Co.’s Not-for-Profit Services Team advises organizations on ways to improve both the balances and the utilization of reserves and liquidity resources to enhance sustainability over time. Please reach out to your local Blue & Co. advisor with any questions regarding these recommendations.

Thanks to our partners at Blue & Co. for this resource.

As you enter the summer months there are several things that should be done to ensure the property is protected while vacant:

Thanks to our business partner, CSL Management, for this resource.

The NPC community is working very hard to ensure that their organization represents diverse membership. An important dimension of this effort is the question of whether your chapter house is accessible to members and guests with a disability, be it a physical or a mental condition.

We have heard from several clients who expressed an interested in an accessibility audit, in which their chapter houses could be inspected to see where the facility could be made more accessible.

One question that has arisen is regarding doing the audit for a location and what liability may be created by doing an audit and not addressing the deficiencies identified for accessibility. This question, first off, needs to examine what liability in fact is being imposed upon sorority chapter houses, if any. The natural assumption is that disability accessibility is imposed through the Americans with Disability Acts (ADA). Please review our resource on this topic that illustrates that the ADA does not apply to fraternal organizations (aka sorority chapter housing).

However, there may be some local municipalities that have imposed similar ADA-like regulations which may or may not apply to the sorority chapter houses.

Therefore, with the lack of any applicable regulation(s) there is no liability imposed on the sorority chapter house. In the absence of any liability, if an accessibility audit is completed and for whatever reason any or none of the recommendations are not addressed, there is virtually little or no threat to your organization or the chapter house.

We do believe that there could be liability if there are promises made to a specific member or prospective member for a condition to be addressed, and the chapter ends up being unable to do so, which could potentially result in a contractual liability claim (also referred to as breach of contract).

Should you have additional questions or concerns regarding this subject, feel free to contact your Client Executive.

One of the least understood federal regulations are those included in provisions of the American with Disabilities Act (ADA). This legislation was passed in 1990 to extend the civil rights protection prohibiting discrimination to persons with disabilities.
ADA addresses the three major areas of employment, government services and public accommodations. Title III of the Act specifically
addresses the requirements of a building that is subject to this legislation.

As with most federal regulations, they often times are not accurately used and such is the case with local governments and sometimes universities will use this federal regulation terminology to serve as a big stick in their community to lead others to believe that they must comply with the ADA. They state that certain new codes are ADA required when in fact it is not part of the legislation which deals with those entities that are eligible under the Act.

Before we can even comment on whether this can be an accurate statement, it begs the question of whether women’s fraternity/sorority (sororities) properties are even subject to this legislation. The answer to that question is a resounding no, as sororities are not subject to this Act for a variety of reasons, primarily the fact that sororities are considered “private clubs” and, as such, are not subject to this legislation. Should you desire to read more detail on why a sorority is not subject to ADA, refer to this Fraternal Law article.

Should you have any questions, please don’t hesitate to reach out to your Client Executive.

WHY IS HAIL SUCH A PROBLEM FOR YOUR PROPERTY’S ROOFING?
Hail can cause serious damage to your chapter house’s roof. Hail stones are made up of ice and come in a variety of shapes, sizes, and weights, which can all contribute to the destruction of your roof after a hailstorm. The weight of hail stones is also a factor that should be taken into account when considering hail resistant roofing as an option. Hail stones can cause dents, cracks, and even holes in your roof, which will leave it vulnerable to water damage and increased energy costs.

COSMETIC/AESTHETIC DAMAGE VERSUS PHYSICAL DAMAGE TO THE ACTUAL ROOF
The insurance industry has previously been willing to repair and/or replace roofs damaged by hail that are more cosmetic in nature or to match the entire roof’s shingles with the new replaced shingles due to actual hail damage. It is fair in saying that these days may be over.

There continues to be significant shifts in the weather patterns in certain parts of the US with increased wind and hail claims. The industry is seeing an increase in the storms producing conditions of hail and wind. There is an increase in the severity of the storms, thus bringing worse damage and the expanse of the areas affected are expanding more easterly than the past.

With the significant increase in hail and wind losses, all insurance companies are being forced to more closely analyze or underwrite each property risk and are looking at numerous alternatives to encourage more roof risk management. Examples we have seen across the insurance industry include:
• Significant increases in wind and hail deductibles in the wind/hail prone areas
• Limitations and exclusions to roof damage repair and replacement

IMPACT-RESISTANCE SHINGLES
Hail resistant roofing provides property owners an extra layer of protection against the destructive nature of hail stones, which can cause significant damage to traditional shingles and other roofing materials. It can withstand impacts from hail stones at speeds up to 150 mph, which is far stronger than traditional roofing materials. This extra protection minimizes the need to replace your roof after a hailstorm hits, and an additional advantage of impact-resistance roofing is its energy efficiencies, meaning you could save money on energy bills in the long run.

Unlike traditional roofing materials, impact-resistance shingles are designed to last longer, usually up to fifty years. The costs associated with hail resistant roofing materials will vary based on the resistance rating of the materials. These ratings run from Class 1 (least resistance) to Class 4 (highest resistance). Click here to see the Insurance Institute for Business and Home Safety’s list of shingle performance ratings. Generally, these roofing materials will cost more than the traditional roofing materials, but they also come with the added protection from hailstorms, last longer than traditional roofing shingles, and provide energy efficiencies.

DON’T WAIT FOR A WIND/HAIL CLAIM TO ADDRESS THE CONDITION OF YOUR ROOF
For the property owners in the following states, there has been significant increases in storms attributing to wind and hail claims:

We urge our clients in these states to take additional measures to have a sound risk management plan in place, to upgrade your roofing materials to the impact-resistance shingles when your roof needs to be upgraded, and should you have a claim, consider upgrading to the preferred materials.

ADDITIONAL ROOFING RISK MANAGEMENT
Travelers Insurance Company, who writes your property insurance, has developed an additional resource for you in your roof property management:

The ruling body for fire safety codes is the National Fire Protection Association (NFPA). This entity determines the fire safety codes and is the recognized standard by which all businesses are to follow.

It is the NFPA that sets the codes for the types of sprinkler systems that must be or can be installed in a building primarily based on its occupancy. In 1896, they developed the first code for systems in residential or habitational type occupancies: NFPA 13.

NFPA 13 is designed to serve two distinct purposes:

The building must be 100% sprinklered including attic space whether accessible or not. The costs to install can be substantial for the following reasons:

For a variety of reasons such as cost and labor, NFPA came out with a modified code in the 1970s for residential housing: NFPA 13R (Residential). The main purpose of this risk management tool was purely the protection of lives, unlike NFPA 13 which also was protecting the physical property.

A criterion for the residential housing was that the structure had to be less than four stories in height. As such, the sorority chapter houses did qualify for 13R status, with the only caveat being the attics were not to be used for any purposes and were to have limited access to the attic space.

When the interest for sprinkler systems began to escalate, we were successful in getting the insurance company to provide substantial credits for a property that met the NFPA 13R code. Even though the primary benefit was life safety or the liability exposure, the insurance company agreed to apply this credit to the property premium due to our rationale, which included the following:

Over the years, we have seen an exposure emerge which has become a challenge, which is that the chapter house attics frequently aren’t sprinklered. Of the six property fires over $100,000 in claim cost, four of them started in the attic, which was unsprinklered and had no other type of fire detection system.

The biggest problem comes from the fact that the fire burns for some time in the attic and/or roof area, and it isn’t until it burns through the attic flooring for the debris to land on the next floor before the sprinkler system is engaged and the fire department is alerted. The second problem then comes when the fire department gets there and has to release far more water than normal to extinguish the fire. Subsequently, you have more of your building damaged by the fire and more water damage in trying to put it out.

The liability insurance company underwriters are still very pleased that there is reduced if not completely eliminated bodily injury exposure, but the property underwriters are growing concerned about the exposure of attic fires.

The obvious solution to this dilemma is to install sprinklers in the attic, but this would be virtually impossible for expense reasons. We have done extensive research on this matter and can reach no other conclusion.

We can however recommend another solution to the fire protection alert delay that presently exists which is the installing of a heat sensor to your existing fire alarm system in the attic space. The fire department gets alerted to a fire much faster than without sensors, and there is ultimately less property damage along with the life safety benefit. For further reading on heat sensors, check out these additional resources.

Every state has laws regarding the care and maintenance of certain mechanical pieces of equipment that potentially pose a greater risk to residents/occupants/guests in a sorority chapter house. This exposure is often referred to as boiler and pressurized vessels. We generally think of the steam operated boilers that heat a house; however, even hot water heaters in some states are also included.

Generally speaking, these laws require: (1) an operating permit to be obtained from the State Department or jurisdiction prior to operating a regulated boiler or pressure vessel; (2) all operating permit inspections to be performed by a boiler or pressure vessel inspector licensed by the Department; and (3) the Department to perform operating permit inspections on all regulated boiler or pressure vessels owned by the state.

Your insurance coverage for boilers and pressurized vessels is part of your property insurance coverage. In addition to paying for a claim should one of these items explode, the coverage also provides extensive safety engineering and inspection services which will ultimately minimize the potential for a loss.

As the law prescribes, inspections must be performed on a regular basis as determined by the state law. These could be anywhere from a quarterly to an annual inspection. As part of your insurance premium, these inspections are done by your property insurer Travelers Insurance Company, and they are free of charge. 

The jurisdiction however should they be asked to inspect by the building owner would have a fee attached to that service, thus why we encourage our clients to rely exclusively upon your insurance company to fulfill this role.

There are basically two separate transactions with this exposure:

The process is as follows:

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