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Insuring Your Event’s Future … Risk Management TodayIt often happens when festival and event producers get together. At the end of the day, conversations turn to behind-the-scenes “war” stories. You know − things that went wrong at the worst possible moment and all of the hair-raising moments that followed until order returned. Most of the time, the stories are hilarious and laced with liberal doses of 20/20 hindsight. Once in a while, however, the stakes have been higher, the consequences greater. Then someone remarks, “We sure got lucky that day. We did’t have …” you may fill in the blanks here … a) enough, b) any, or, c) the right kind of …” insurance.” Who says events must be insured? Is it the law? Is it just a belt-and-suspenders mentality at work in a litigious society where anyone can sue anyone at the drop of a hat? Are volunteer organizations and non-profits exempt from lawsuits? Who is legally responsible if … happens?” (You may fill in the blanks here, too.) Don’t know the answers? Never asked the questions? Oh, dear… Questions! Questions! Questions!Take steps today to generate the answers you need. You can read more in Planning It Safe: How to Control Liability and Risk in Volunteer Programs, a 1998 publication project co-sponsored by the now defunct Minnesota Office of Citizenship and Volunteer Services (no longer in existence), the Minnesota Department of Human Services, and the Minnesota State Bar Association. This super resource is in short supply but you can go to http://www.comm.media.state.mn.us/bookstore to see if there are any copies available. In addition to lots of answers, this book has re-printable checklists and forms for safety and security, accident reporting, insuring volunteer drivers, and waivers for your use. It also has a great list of other books relating to volunteers and risk control issues. Priced at less than thirty dollars, this could be the best money you ever spent. How do you get started with a risk management program to protect your event?
Brock Fluegge, vice president of Insurance Center, Inc., spoke at the MFEA conference in October, 2004. His company is an independent insurance agency located in Bloomington and Willmar, MN. He concentrates his efforts in the areas or work site, commercial, and specialty insurance and searches for insurance products that best serve his clients’ needs. When he’s working with celebrations, festivals and events, that can mean:
Fluegge points out that while common special event policies only cover liability and direct physical damage, weather policies can protect your event against loss of profit caused by any weather condition and can be customized to your event’s specific conditions. For instance, if you’re doing a February cross-country ski race, you may want to insure against not having any snow at race time. If you’re doing an open-air concert with an expensive feature act, you may want to cover yourselves against a mid-July rain-out. Policies can he tailored to your unique circumstances, he says. All that’s required is a clear mental picture of those circumstances (including worst-case scenarios) and sufficient lead-time to get an insurance policy in place. To help you get your arms around the whole topic of insurance as part of your celebration’s risk management program, Brock Fluegge has given MFEA permission to reprint the following: Insurance Definitions You Need to Know for Your Festival or Event
INSURANCE A formal social device for reducing risk by transferring the risks of several individual entities to an insurer. The insurer agrees, for a consideration, to assume, to a specified extent, the losses suffered by the insured. ADDITIONAL INSURED A person other than the named insured who is protected under the terms of the contract. Usually, additional insureds are added by endorsement or referred to in the wording of the definition of "insured" in the policy itself. ADVERTISING INJURY LIABILITY "Advertising Injury" means injury rising out of an offense committed in the course of your advertising activities, if such injury rises out of libel, slander, defamation, violation of right of privacy, piracy, unfair competition or infringement of copyright, title or slogan. BINDER A binder is a legal agreement that serves to effect insurance coverage for a specified period of time until the actual insurance policy can be issued. A binder can be issued by either an insurance agent or company and must provide the following information:
CARRIER Sometimes used to designate the insurer. The term "insurer" is preferred because of the possible confusion of "carrier" with transportation. See also Insurer. CERTIFICATE OF INSURANCE (1) A statement of the coverage and provisions of a master contract in group insurance that is issued to individuals covered in the group. (2) A form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance in loan transactions and for other legal requirements. COMMERCIAL GENERAL LIABILITY Often referred to as CGL, this policy provides broad protection for situations in which a business must defend itself against lawsuits or pay damages for personal injury or property damage to third parties. The two basic coverage forms available under the CGL are an occurrence form and a claims-made form, providing an extended reporting period. These forms include the following coverages: Bodily Injury and Property Damage Liability; Personal Injury and Advertising Injury Liability; Medical Payments; and as applicable, Products and Completed Operations coverage. Unless modified, an aggregate limit applies to the first three coverages, and a separate aggregate applies to the Products and Completed Operations coverage. Coverage is provided for most of the premises, products, completed operations, personal injury, advertising, and contractual liability exposures of an organization. This coverage form may be issued as a stand alone policy, or in conjunction with other coverage forms like Commercial Auto, Property, or Inland Marine. COMMERCIAL INSURANCE COVERAGES Definitions of many commercial coverages (those which are applicable to lines of business insured through the K&K programs are indicated in blue) are listed alphabetically throughout the glossary. Among these coverages are Aviation Insurance, Cargo Insurance, Commercial Credit Insurance, Commercial Multi-Line Policy, Crop-Hail Insurance, Employers' Liability Insurance, General Liability Insurance, Kidnap and Ransom Insurance, Inland and Ocean Marine Insurance, Products Liability Insurance, Professional Liability Insurance, Public Liability Insurance, Rain Insurance, Surplus Lines, Title Insurance and Workers' Compensation. COMMON POLICY CONDITIONS Under the latest commercial lines program, a form including six common conditions which apply to all coverage parts attached to a commercial policy. COVERED LOSS Illness, injury, death, property loss, legal liability, or any other situation or loss for which an insurance company will pay benefits under a policy when such event occurs. DECLARATIONS That part of the policy describing the named insured, address, effective date, term of the policy, applicable coverages, the amount of insurance and the premium. DEDUCTIBLE A provision in an insurance contract stating that the insurer will pay that amount of any insured loss that is in excess of a specified amount. The specified amount is the deductible. DIRECTORS & OFFICERS LIABILITY Designed for the Directors and Officers of boards, corporations, or nonprofit organizations, this coverage provides protection for claims arising from the fiduciary duties owed the corporation, shareholders, or other third parties from certain fiduciary, tortuous conduct, fraud or deceit, or the violation of certain statutes. EMPLOYEE BENEFIT LIABILITY This coverage protects you, an employer, from claims by employees or former employees resulting from negligent acts or omissions in the administration of your employee benefits programs. Employee Benefits programs can be defined include group life, health, and accident insurance, profit sharing plans, employee stock subscription plans, and workers' compensation, unemployment insurance, social security benefits, disability benefits, etc. EMPLOYEE DISHONESTY COVERAGE Employee dishonesty coverage protects an employer from financial loss due to the fraudulent activities of one or more employees. The coverage includes protection for loss of money, securities, and other property of the insured. Some scheduled policies are still available, but the majority are written on a blanket basis. This provides coverage for all employees, subject to the policy definitions. The limit of liability is "per loss" and is applied on an "occurrence" basis. All acts involving the same employee or group of employees is considered one occurrence. EMPLOYMENT PRACTICES LIABILITY COVERAGE Protects the corporation, directors & officers and employees for claims resulting from wrongful termination, discrimination, sexual harassment, wrongful discipline and failure to employ or promote. Whether you are right or wrong in the eyes of the jury, the typical defense costs alone average $100,000 - $200,000 per case! ENDORSEMENT An additional piece of paper, which was not part of the original insurance contract, that cites certain terms, conditions, or changes, and which becomes a part of the insurance contract. Additions to personal lines insurance policies are accomplished through the use of riders, which are similar to endorsements. EXCESS INSURANCE A coverage designed to be in excess over one or more primary coverages, and which does not pay a loss until the loss amount exceeds a certain sum. Contrast with Primary Coverage. EXCLUSION A contractual provision that denies coverage for certain perils, persons, property, or locations. “FIRST” NAMED INSURED The first named insured appearing on a commercial policy. The latest forms permit the insurer to satisfy contractual duties by giving notice to the "first" named insured rather than requiring notice to all named insureds. FIRST PARTY INSURANCE Insurance which applies to coverage for the insured's own property or person. Contrast with Third Party Insurance. HAZARD The presence of a condition that could cause loss or injury to property or persons. For example, smoking in bed increases the chance for loss of property and life resulting from fire. HOLD HARMLESS AGREEMENT A statement or warranty, typically in contracts, whereby one party agrees not to pursue legal action or suit for injuries sustained by that party, as a result of the actions of the other party. A contractual assumption of the liability exposures of another. As an example, a lease agreement commonly requires the tenant to hold the landlord harmless for bodily injury or property damage experienced by others on the premises. INSURABLE RISK A risk which meets most of the following requisites: (1) The loss insured against must be capable of being defined. (2) It must be accidental. (3) It must be large enough to cause a hardship to the insured. (4) It must belong to a homogeneous group of risks large enough to make losses predictable. (5) It must not be subject to the same loss at the same time as a large number of other risks. (6) The insurance company must be able to determine a reasonable cost for the insurance. (7) The insurance company must be able to calculate the chance of loss. INLAND MARINE This insurance coverage (sometimes referred to as a floater) is just property insurance for property loss exposures which cannot be conveniently or reasonably confined to a fixed location or a standard form. This may include movable property, instrumentality's of transportation and communications (such as bridges, roads, piers, and television and radio towers), and the legal liability coverage of bailees. This also includes electronic data processing equipment. INSURED The party to an insurance arrangement whom the insurer agrees to indemnify for losses, provide benefits for, or render services to. This term is preferred to such terms as policyholder, policy owner, and assured. See also Named Insured. INSURER The party to an insurance arrangement who undertakes to indemnify for losses, provide pecuniary benefits, or render services. It is desirable to use the word "insurer" in preference to "carrier" or "company" since it is a functional word applicable without ambiguity to all types of individuals or organizations performing the insurance function. The word insurer is generally used in statutory law. INSURING AGREEMENT (OR CLAUSE) That portion of an insurance contract which states the perils insured against, the persons and/or property covered, their locations, and the period of the contract. LIABILITY INSURANCE Provides protection for the insured against loss arising out of his/her legal liability to third parties. LIABILITY LIMITS The stipulated sum or sums beyond which an insurance company is not liable to protect the insured. LIMITS The maximum amount of benefit that an insurer agrees to pay in the event of a loss. LITIGATION The process of a lawsuit. LIQUOR LIABILITY This type of liability insurance provides coverage for bodily injury or property damage for which you may be held liable by reason of:
LIQUOR LIABILITY (CONT.) This coverage only applies if you are involved in the following activities:
LOSS An occurrence that is the basis for submission and/or payment of a claim. Losses can be covered, limited or excluded from coverage, depending on the terms of the policy. LOSS CONTROL Any combination of actions taken to reduce the frequency or severity of losses. Installing locks, burglar or fire alarms and sprinkler systems are loss control techniques. LOSS FREQUENCY The number of times a loss occurs over a specific period of time. LOSS RATIO The losses divided by the premiums paid. The numerator (losses) can be losses incurred or losses paid, and the denominator (premium) can be earned premiums or written premiums, depending on what use is going to be made of the loss ratio. LOSS SEVERITY The amount of a loss expressed in financial terms. MATERIAL MISREPRESENTATION Definition: The policyholder/applicant makes a false statement of any material (important) fact on his/her application. For instance, the policyholder provides false information regarding the location where the vehicle is garaged. MEDICAL EXPENSE PAYMENTS This is a coverage under the General Liability coverage. This coverage will reimburse an injured party for medical and/or funeral expenses incurred as a result of bodily injury or death sustained by accident under the conditions specified in the policy, regardless of whether you are liable or not. The most we will pay for any one person is the limit specified in the policy. MINIMUM PREMIUM The smallest amount of premium for which an insurer will issue coverage under a given policy. MORAL HAZARD A condition of morals or habits that increases the probability of loss from a peril. An extreme example would be an individual who previously burned his own property to collect the insurance. NAMED INSURED Any person, firm, or corporation, or any member thereof, specifically designated by name as the insured(s) in a policy. Others may be protected as insureds even though their names do not appear on the policy. A common application of this latter principle is in Automobile policies where, under the definition of insured, protection is extended to cover other drivers using the car with the permission of the named insured. NEGLIGENCE Failure to use that degree of care which an ordinary person of reasonable prudence would use under the given or similar circumstances. A person may be negligent by acts of omission or commission or both. OCCURRENCE An event that results in an insured loss. In some lines of insurance, such as Liability, it is distinguished from accident in that the loss does not have to be sudden and fortuitous and can result from continuous or repeated exposure which results in bodily injury or property damage neither expected nor intended by the insured. PERSONAL INJURY LIABILITY Protection against liability for damages other than physical injury arising out of false arrest, detention or imprisonment, or malicious prosecution; libel, slander or defamation of character; invasion of privacy, wrongful eviction or wrongful entry. PHYSICAL HAZARD Any hazard arising from the material, structural, or operational features of the risk itself apart from the persons owning or managing it. PREMISES The buildings, other structures and land where the insurance protection is applicable. It is usually described and defined in the property casualty policy. RATE The cost of a given unit of insurance. For example, in Ordinary Life Insurance, it is the price of $1,000 of the face amount. In Disability Income Insurance, it is usually the price per $10 or per $100 of monthly benefits. In Property Insurance, it is the rate per $100 of value to be insured. The premium, then, is the rate multiplied by the number of units of insurance purchased. RISK 1) Uncertainty as to the outcome of an event when two or more possibilities exist. See also Pure Risk and Speculative Risk. (2) A person or thing insured. Contrast with Hazard and Peril. RISK MANAGEMENT Management of the pure risks to which a company might be subject. It involves analyzing all exposures to the possibility of loss and determining how to handle these exposures through such practices as avoiding the risk, reducing the risk, retaining the risk, or transferring the risk, usually by insurance. SELF INSURANCE A form of risk financing through which a firm assumes all or a part of its own losses. Self-Insurers may purchase insurance to cover excess losses. SHORT-TERM POLICY A policy written for a period of less time than is normal for that type of policy. SUBROGATION A principle of law incorporated in insurance policies that enables the insurance company, after paying a loss to its insured, to recover the amount of the loss from another who is legally liable for it . TERM (POLICY PERIOD) The period of time for which a policy or bond is issued. THIRD PARTY A person who files a liability insurance claim against another person or entity (first party). TORT Any wrongful act, damage or injury done willfully, negligently or in circumstances involving strict liability, but not involving breach of contract, for which a civil lawsuit can be brought. TRANSFER OF RISK Shifting all or part of a risk to another party. Insurance is the most common method of risk transfer, but other devices, such as hold harmless agreements, also transfer risk. One of the four major risk management techniques. See Risk Management. UMBRELLA This type of liability insurance provides coverage over a single underlying policy, or several different underlying policies. The limits provided by this policy will not respond to the loss until after some specified underlying policies limits are spent, exhausted, or otherwise not available. If underlying limits are not available, and the coverage is not excluded from the Excess/Umbrella coverage, this policy will respond as primary. UNDERWRITER A technician trained in evaluating risks and determining rates and coverages for them. The term derives from the practice at Lloyd's of each person willing to accept a portion of the risk writing his name under the description of the risk. UNDERWRITING The process of selecting risks and classifying them according to their degrees of insurability so that the appropriate rates may be assigned. The process also includes rejection of those risks that do not qualify. VALUABLE PAPERS COVERAGE An "all risk" insurance coverage that covers the cost of research to reconstruct damaged records, as well as the cost of new paper and transcription. The term "valuable papers" refers to written, printed, or otherwise inscribed documents and records, including books, maps, films, drawings, abstracts, deeds, mortgages, and manuscripts. WAIVER A rider waiving (excluding) liability for a stated cause of injury or sickness. (2) A provision or rider agreeing to waive premium payments during a period of disability of the insured. (3) The act of giving up or surrendering a right or privilege that is known to exist. In Property and Liability fields, it may be effected by an agent, adjuster, company, employee, or company official, and it can be done either orally or in writing. WORKERS’ COMPENSATION A system (established under state laws) under which employers provide insurance for benefit payments to employees for their work-related injury, death and disease regardless of fault. Not to be mistaken as health insurance. This coverage form provides coverage in two ways; (1) compensation for the employee for job-related injuries, irregardless of negligence, and (2) protection (Employers Liability) from liability suits brought by workers against the employer.
Insurance Center, Inc. 5001 American Blvd W, Ste 785 Bloomington, MN 55437 Email: bfluegge@insurancecenterinc.net Web: www.insurancecenterinc.net Toll Free (888) 858-2544 P (952) 854-0109 F (952) 224-2052
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