Coverage Corner

PERSONAL LIABILITY PARTY: CONCERNS WITH USING A VENUE

By Kevin C. Amrhein, CIC

If you spent much of last spring getting sloshed on Zoom, you weren’t alone.

Just in case you forgot, here is a recap of what was happening at the time: nothing. No wedding receptions, no birthday parties, no social gatherings.

This spring, in many areas, restrictions on gatherings remain and likely will for the foreseeable future. In other areas, relaxed restrictions mean businesses which rely on such are welcoming guests with open arms and broad hold harmless agreements. If an insured wants to book a venue for a reception, birthday/graduation party, or any gathering, what should he/she expect from the ISO homeowners (HO) policy?

THE BIRTHDAY PARTY EXAMPLE

The plans we made last April for our daughter’s birthday party were abruptly cancelled by the venue – the downtown Science Center which offers “‘Everything is Awesome’ Lego Parties” for kids. (She and her friends were devastated when “COVID the Clown” pooped the party.)

I had signed the paperwork, including a contract in which I agreed to hold the venue harmless for claims of liability arising from the party. Should a guest blame the venue for a slip down the stairs, scalding a lip on piping-hot pizza, or taking a tossed Lego block to the eyeball, it was on me. Should the venue be blamed when a partygoer damages another guest’s property – like when the kids break the photographer’s equipment or the DJ’s lighting display – it was on me.

I further accepted responsibility for any damage caused to the venue’s property. Had this party actually happened, I’d have been on the hook for the actions of two-dozen amped-up kids and their sleep-deprived, over-caffeinated parents. Neat.

THE ISO HO POLICY

In summary, Section II – Liability Coverages responds to claims of BI or PD for which an “insured” is legally responsible. While the applicability of liability assumed by contract is an interesting legal discussion, for the purpose of this article, let’s assume the hold harmless agreement is valid. After review of the Insuring Agreement, the next step is to search for any applicable exclusion. For many agents, one that may jump to mind is F.1.b. – sometimes referred to as contractual liability. Here is the wording:

Coverage E (Personal Liability) does not apply to:

1. Liability…

Under any contract or agreement entered into by an “insured”. However, this exclusion does not apply to written contracts:

(1) That directly relate to the ownership, maintenance or use of an “insured location”; or

(2) Where the liability of others is assumed by you prior to an “occurrence”;

unless excluded in a. above or elsewhere in this policy;

Provided the claim is not excluded elsewhere in the policy, the exceptions to this exclusion are significant. In my example, the written hold harmless agreement directly relates to the use of an “insured location” (exception 1). If that weren’t the case, exception 2 would apply as my assumption of liability was prior to an “occurrence.”

Should I get a bill from the venue for damage to its property caused by a guest, finding coverage may be more challenging. The reason is that the broadening language above is only applicable if the claim is not excluded elsewhere in the policy. Here is an example of problematic wording found in Exclusion F.3.:

“Property damage” to property rented to, occupied or used by or in the care of an “insured”. This exclusion does not apply to “property damage” caused by fire, smoke or explosion;

Should I be liable for damage caused by something other than fire, smoke, or explosion, there is a limited giveback of up to $1,000 found in Section II – Additional Coverages, C. Damage To Property Of Others. Some carriers may be amenable to increasing this amount by endorsement.

TAKEAWAYS FOR THE AGENT

▲ Prepare for inquiries from insureds regarding coverage applicable to gatherings.

▲ Unless obligated to do so (example: vendor requirement), many insureds will not consider insurance when planning a gathering. Agents should be clear in communications – newsletter, website, social media, etc. – of the importance of considering insurance as part of the planning process.

▲ Clearly understand the HO policy’s position on liability assumed by contract.

▲ Review the Personal Umbrella as it may differ from the underlying HO policy.

That’s all for now. Until the next round … cheers!

Kevin C Amrhein, CIC, is IA&B‘s education consultant. He works with our CISR and CIC programs, as well as our special topic seminars and live webinars. Catch him at one of our upcoming professional training offerings: IABforME.com