Condo Media - August 2017 - 16

Asked & Answered

Party Fouls

Should associations take out insurance policies for special event spaces?

Q
A

16

CONDOMEDIA

Our condominium community has a large clubhouse, in which we hold association-sponsored
events (the annual Christmas party, for example)
and that we also make available, for a fee, to owners for private functions. A new board member
recently asked a question we haven't considered
but probably should: Should the association have
special "event" insurance in addition to the coverage in our master policy? And should we require
owners who use the space to have this supplemental coverage as well?

There may be insurance questions that can be answered simply, but if they exist (which we doubt), this
isn't one of them. Gregory Pierce, LIA, CPA, vice president and director of business development at NorthStar Insurance Services, Inc., provides the answer.
The key concern for the association and for owners,
he explains, is "liquor liability"-the potential liability
that could arise if a guest at one of these events drinks
too much and injures himself (by diving into the
shallow end of the swimming pool) or drives while intoxicated and injures or kills someone else. It is more
likely than not that the injured guest, or individuals
the guest injures, would sue the association, the owner
sponsoring a private event, or both.
The general liability coverage in the association's
master policy would cover "host liquor liability" for
an association-sponsored event. As long as you're not
charging residents for alcoholic beverages, your master
policy should provide the coverage you need, paying for
your defense if you are sued for an event-related claim,
and paying the damages if the injured party prevails.
Hiring a catering firm (which has its own host liquor
liability coverage) would further insulate the association from liability risks, because the caterer's policy
should be the primary target for any claim.
But neither the association's master policy nor a caterer's policy would prevent the association from being
sued. If you're sued, you will have to defend yourself,
and if you want your insurer to defend you (which, presumably, you will), you will have to file a claim under
your master policy.

Pierce advises associations to obtain special event
coverage, because you would turn to that policy rather
than your master policy for your defense.
Insurance considerations for condominium owners
are similar to those for the association, but laced with
somewhat more ambiguity. The HO6 form adopted in
1991, and still widely used today, clearly provides host
liquor liability coverage for owners. The 2000 and
2011 forms include exclusions for "motor vehicle liability" that may or may not limit the coverage, Pierce
says. Insurers may interpret the language differently.
"But an owner facing a liability claim doesn't want to
wonder which version of the insurance policy they
have, or how their insurer is going to interpret it."
The association doesn't want to wonder if an owner
has coverage either, because the association may represent the only deep pocket available if both the owner
and the association are sued for an owners' event, and
it turns out that the owner isn't adequately insured.
Pierce's bottom line: Obtaining special event coverage
is the recommended "best practice" for both associations
and for owners; and associations should make obtaining
that coverage a requirement for owners who use association space for private functions.
The coverage is inexpensive, Pierce points out, and
while it may not be essential, he thinks it is definitely
worth having. "It's like wearing suspenders and a belt
to keep your pants up," he says. "You may not need the
suspenders, but they provide additional support - and
peace of mind."
Condo Media - August 2017

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