Insurance Information for U.S. Clubs and Shared Interest Groups
Compiled by the Harvard Insurance Office
Many Harvard Clubs and SIGs do not purchase insurance to cover club activities. As a result, members may feel financially exposed to claims or suits and clubs are faced with a dilemma when the site hosting an event requests an insurance certificate. The following is a brief synopsis of what the club or SIG might do in regard to insurance.
1. EVENTS HELD AT CLUB or SIGs MEMBERS’ HOMES.
An individual’s homeowner’s policy should cover losses or claims, up to the amount of the policy coverage, arising out of an event. It is important to tell the homeowner that the club or SIG does not have any insurance. The homeowner should call their insurance carrier or agent to confirm that their policy provides coverage. When possible, always have the club or SIG, its directors, officers, and members added to the homeowner’s policy as “additional insureds” for losses arising out of the event. There usually is no cost for adding additional insureds.
2. WHAT DOES ADDING THE CLUB or SIGs, ITS DIRECTORS, OFFICERS, AND MEMBERS TO A HOST’S HOMEOWNER’S INSURANCE POLICY OR A VENDOR’S POLICY ACCOMPLISH?
Let’s take the example of a caterer or bartending service. A club or SIG member hosts an event, and hires a caterer to prepare and serve food. All guests get food poisoning and claims are made against the club or SIG, or both the club or SIG and the caterer. By being on the caterer’s policy as “an additional insured,” the caterer’s insurer will negotiate with the injured parties and affect a settlement or deny the claim. If the latter happens, and the club or SIG is sued, the caterer’s insurance company will defend the club or SIG, and pay legal fees and any judgment entered.
Being added to the policy of a person or group that is ultimately responsible for a loss, or conditions which contribute to or cause a loss, is fair. If the caterer prepares the food and has control over all the elements of the service, the club or SIG should not be held responsible for the loss. But claims and suits do arise and involve the hiring of lawyers and this technique of being added to the policy saves the club or SIG the costs associated with a claim. Being added as an additional insured is something clubs or SIGs should try to do with every vendor they use. Sometimes the club or SIG may be told this is not possible. Ask why or ask that the vendor’s insurance agent call you to explain why.
3. INSURANCE CERTIFICATES FROM VENDORS.
If you hire vendors—a band, a caterer, a security service, or valet parking service—make sure they have insurance. Ask for a certificate of insurance to be provided to the club or SIG prior to the event. You want to confirm that vendors have Workers Compensation to cover injuries to workers and Comprehensive General Liability to cover injury or damage to others. You also want to confirm that the amount of coverage is sufficient. (See number 7.)
Also, a certificate of insurance has a box near the bottom entitled “Description.” That box should say something like, “The policy covers XYZ Company’s activities at the Harvard Club’s Annual Dinner on 4/15/03.” This way you know the event is indeed covered.
You should have a contract or agreement with the vendor which states that the vendor agrees to have insurance, and in a separate paragraph, that the vendor agrees to hold harmless and indemnify the club or SIG, its directors, officers, and members, from any and all losses arising out of the vendor’s activities (it may refer to “acts” or “negligence”). This language gives you recourse to the vendor’s assets if a claim is settled and the insurance is not enough or is cancelled.
4. WHAT IF A VENUE/SITE FOR AN EVENT ASKS THE CLUB or SIG FOR AN INSURANCE CERTIFICATE?
If the Club or SIG does not have insurance, there are some alternatives:
• Explain that the caterer and bartending service have insurance and that the club is afforded coverage under these policies. This should suffice but if it does not,
• Purchase a Special Events Liability (SEL) policy, which will cover the time period of the event and usually costs $250–$500.
5. WHAT SHOULD CLUBS or SIGs LOOK OUT FOR WHEN SIGNING CONTRACTS WITH OTHERS?
While this is not intended to be a primer on contracts, here are a few areas to be aware of.
• Hold Harmless Indemnification. This means that the Club or SIG releases the hotel, for example, from all losses, claims, or suits arising from the Clubs’ or SIGs' use of the premises regardless of fault. So if the floors are too highly waxed (the hotel’s doing) and someone falls and gets seriously injured, the Club or SIG would be responsible for the claim. Reword this section to say: “The Buyer (or whatever term they use) agrees to hold harmless and indemnify the Seller from all losses (do not agree to any and all losses) arising out of the Buyers’ negligence.” This is equitable. It says the venue will be responsible for losses due to its actions and the Club or SIG will be responsible for its own negligence.
• Releases. This is the same concept as above. You are releasing the venue from responsibility for its actions. Like the Hold Harmless Indemnification, the release undoubtedly will be overbroad to protect the venue and to shift responsibility onto the club or SIG. Delete and agree to a modified version along the lines shown in the preceding section.
• Limitation of Liability. This is another variation on the same theme. Many times it will say, “The Seller is only liable to the amount of the contract.” So if you paid $50,000 to rent a ballroom and there is a $1 million claim, the Seller has limited their exposure for the claim, which may be their fault, to $50,000. Delete this entire section.
• Some contracts state that the hotel, for example, will not be responsible for the personal belongings of the guests at an event. This is standard.
• Insurance Requirements. While you may purchase a one-day policy, the contract may require additional types of insurance such as workers compensation and automobile liability. These are not applicable. The club or SIG does not have employees and does not own or use cars in the course of the event. The fact that people drive to the event is not pertinent in regards to the insurance. Delete this additional coverage.
• Some contracts state, in a variety of ways, that the club or SIG will be responsible for the activities of contractors, subcontractors, assigns, business invitees, guests, and numerous other parties. Modify this provision to state that the club or SIG is responsible for the activities of the club or SIG and club or SIG directors and officers.
6. WHAT SHOULD CLUBS or SIGs INCLUDE ON THEIR SPECIAL EVENTS POLICY OR A COMPREHENSIVE GENERAL LIABILITY POLICY, IF THEY BUY ONE?
The most important item is “who” is insured. There will be a definition of the word “insured” on the policy and it should be broad. The club or SIG is the primary insured but its directors, officers, members, and volunteers should also be named. If the policy does not state this explicitly, an endorsement should be added to the policy naming all the groups.
The next is “what” is insured. Many policies are not explicit but the policy form, which is hard to decipher, may only include losses arising out of the premises, such as the main location of the club or SIG. So, anything offsite is not insured. Ask your agent or broker to tell you, in writing, what coverage it applies to, such as all activities of the club or SIG at any location within the Continental U.S. and Canada. Note: policies usually have geographic restrictions and Hawaii is outside the area, as is Mexico. Be aware and amend the policy accordingly.
Look at coverage extensions such as Personal Injury and Contractual Liability. Personal Injury is coverage for libel and slander while Contractual Liability protects against liabilities the club or SIG may have assumed under a contract provision.
Examine the policy exclusions and ask your broker what the exclusions mean or what kind of losses they are intending to exclude. You may find that you need the excluded activities and you will need an endorsement to delete the exclusion.
7. WHAT AMOUNT OF INSURANCE SHOULD WE PURCHASE?
No one has the answer to this question. Ask your broker to get quotes for $1 million (the Harvard Insurance Office considers this the minimum amount), $5 million, and $10 million. The club or SIGs should do an analysis on incremental increases in cost. For example, it may cost an extra $1,000 to increase coverage from $1 million to $5 million.
8. SHOULD THE CLUB or SIG PURCHASE A DIRECTORS AND OFFICERS (D&O) POLICY?
A Comprehensive General Liability policy, endorsed to include the directors and officers, will protect them from all matters involving bodily injury and property damage but a Directors and Officers Liability (D&O) policy excludes bodily injury and property damage.
It is unclear what a D&O policy covers in the context of a club or SIGs. For-profits, especially large companies, need them because stockholder suits are covered. But since not-for-profits, including clubs or SIGs, do not have that exposure it is difficult to cite specific claims that could be brought against a club or SIG and covered under a D&O policy. Ask your broker to give you examples and assess whether the club and SIG has the exposures the broker cites.
9. OUR CLUB or SIG DOES STUDENT MENTORING AND MEMBERS INTERVIEW FOR THE ADMISSIONS OFFICE. WHAT CAN WE DO TO PROTECT AGAINST LOSSES FOR IMPROPER BEHAVIOR?
The club or SIG should issue a policy statement on these situations. The Harvard Insurance Office prepared the following for the Phillips Brooks House (PBH).
Program staff members dealing with children must avoid situations which could be viewed as inappropriate:
• Refrain from excessive and unwarranted physical contact.
• Avoid impromptu one-on-one sessions.
• Try to hold scheduled one-on-one sessions in a public place.
• When one-on-one sessions are held in private spaces, keep the door open.”
For a copy of the entire PBH manual, please contact the Clubs and SIGs Office.