By Barbara F. Dunn, Esq.
Partner: Barnes & Thornburg LLP
Event professionals play an integral role in managing risk and liability for their organization. As such, it is important to understand the “tools” event professionals have in their “tool box” to manage risk on behalf of their clients and for their own organization.
As you review this information, keep two important mottos in mind: “Hope for the best but plan for the worst” and “It is easier and cheaper to keep you out of trouble than to get you out of trouble”. With that said, let us focus on some key risk management tools: risk avoidance, risk shifting (indemnification), and risk retention (insurance).
The best way event professionals can manage a risk is to make sure the risk never happens in the first place. That means event professionals and their staff members are ensuring the safety of their attendees before, during and after the event.
Before the event, event professionals should use a comprehensive site inspection list to check the facilities to be used for the conference. Special attention should be paid to pathways and lighting. Planners should ensure that any additional needs, e.g., extra signage or personnel, will be on hand to ensure the safety of attendees.
During the event, event professionals should work closely with staff to ensure the safety of attendees. Often this may mean having security and personnel stationed in key entrance and exit areas to ensure a proper flow of individuals.
After the event, event professionals should follow up promptly on any complaints of safety problems or issues. Any problems should be thoroughly investigated and then followed up with the person who reported the problem.
One of the most effective ways planners can manage risk on behalf of their organizations is to shift risk to vendors. An example of risk shifting is indemnification. The concept is that the organization shifts risk to the party which can best control the risk. For example, if the organization is hiring a bus company to transport attendees at their conference, the risk is that the bus will get into an accident and attendees will get hurt. In this case, the organization shifts that risk to the bus company by asking the bus company to indemnify the organization in their contract. The indemnification language states that the bus company will indemnify and hold the organization harmless (from a financial standpoint) from any claims due to the bus company’s negligence. Here’s a sample indemnification clause:
“Supplier shall indemnify, defend, and hold harmless [Organization Name], its officers, directors, employees and agents and each of them (collectively “the indemnitees”), from and against any and all claims, demands, actions, judgments, costs, and expenses, including costs of defense thereof, incurred by any of the indemnitees caused by or arising from the negligence, gross negligence, or intentional misconduct of Supplier, its officers, directors, employees, agents or contractors.”
With this clause in place, should the bus get into an accident, an attendee gets hurt, and that attendee sues the organization, the organization can invoke its rights under the indemnification clause and have the bus company hire lawyers to defend the lawsuit on the company’s behalf right from the beginning and to pay any damages awarded against the organization.
Indemnification clauses should be part of every contract as there is always the possibility that the good or service which is being purchased will cause harm to someone and the organization will be sued. By having indemnification in the contract, the organization knows that it will be protected in such circumstances.
One last note re: indemnification: It is important to have the organization’s lawyer draft or review each indemnification provision as this is the type of clause in which one word can make a difference in the scope of the protection.
Risk Retention (Insurance)
Another way organization can cover their risk is through risk retention. When an organization purchases insurance, it is agreeing to “retain” the risk (up to the dollar amount of the deductible). Everything in excess of that deductible is covered by the insurance company. Let us explore some types of insurance:
General commercial liability insurance is often referred to as GCL or CGL or errors and omissions insurance. This insurance is the backbone of any organization’s insurance coverage as it protects against personal injury or death among other things. For example, if an organization is sued by an attendee who slipped and fell at their event, this liability insurance would cover the cost of defending the lawsuit along with paying any damages which are awarded against the organization.
Note that liability insurance coverage should start at 2 million dollars. While many organizations may have 1 million dollars of coverage, such amount is not sufficient in today’s dollar terms given the cost to defend a personal injury lawsuit.
As with the indemnification provision, it is important to have the organization’s l awyer and insurance representative involved in the review of liability insurance to ensure the organization is getting comprehensive coverage. Of particular concern is the list exclusions, i.e., those items which are not covered under the policy. Note that liquor liability claims are typically excluded from general commercial liability insurance. Given the risk that the organization may be held liable for liquor liability claims under social host liability (topic to be addressed in the next column), event professionals should ensure that their organization has obtained an endorsement or rider to have such claims covered under the policy.
Directors and officers liability insurance is another type of insurance in which the directors, officers and other key personnel are protected by insurance in the event they are individually named in a lawsuit.
Property and casualty insurance covers equipment and other property owned by the organization and insures it against fire, theft or other damage.
Event cancellation insurance is another type of insurance which protects the revenue and costs associated with the organization’s conference. If the organization would have to cancel its event entirely or shut it down earlier than scheduled due to weather problems or transportation strikes, event cancellation cancellation insurance would cover the greater of the revenue which would have been incurred in connection of the event or the expenses incurred in connection with the event. While this type of insurance no longer provides coverage for acts or terrorism (although organizations can purchase riders to obtain such coverage), it covers many other occurrences which could impact an event. Note that many groups which had to cancel spring events in Mexico due to the government orders surrounding the H1N1 outbreak benefitted greatly from having event cancellation insurance in place.
So now that you have an understanding of risk avoidance, insurance and indemnification, you can begin using these “tools” in your work as event professionals to minimize the risk to your client and your own organization.
Barbara Dunn is a Partner with the Associations and Foundations Practice Group at Barnes & Thornburg where she concentrates her practice in association law and meetings, travel and hospitality law. Barbara can be reached at (312) 214-4837 or [email protected]
©Copyright 2014. Barbara F. Dunn, Barnes & Thornburg LLP. Chicago, Illinois, USA. All rights reserved under both international and Pan American copyright conventions. No republication permitted without the express written consent of the copyright holder.