Oh my, there must be something in the water! Recently, I had the opportunity to respond to questions on Event Liability Insurance (ELI) from several of our clients. In each case, the fact patterns were very similar.
One client had invested heavily in income producing real estate. There were a variety of properties in different locations; all geographically diversified (diversification is an excellent risk management technique). Limited liability companies (LLCs) were created for each of the properties, and there was even a master LLC as a member for each of the LLCs holding the real estate.
Finally, each of the properties had General Liability Insurance coverage as did the Master LLC, and the client’s trust was named as an additional insured. Our office had done a very good job on managing the risk associated with income producing real estate.
The client telephoned with a question: “If one of our renters wants to have a wedding on one of our properties, Do I need to do anything different?” The answer is a resounding “Yes!”
A wedding is an event, and events, while generating additional revenue, also create additional liability exposure. The reason for such an emphatic response is that General Liability Insurance (GLI) does not cover many of the claims that might occur during a special event.
Generally, GLI policies often exclude coverage for fireworks displays, claims involving alcohol, music activities that encourage crowd participation and temporary seating structures. Each of these can take place at a wedding.
The client, as all clients do, sought the cheapest solution to the problem – “Can’t I just have them sign a waiver?” Of course, the answer is “Yes, you can have them sign the waiver, but it will afford you little or no protection.”
Our recommendation was twofold: one, purchase the special event insurance policy; and two, add the cost of the policy to the cost of the rental. Additionally, add a little extra for the time necessary to secure the coverage. An alternative is to have the hosts for the wedding purchase the special event policy and name the LLCs (property and master) as additional insureds.
Since COVID fears are subsiding some, now is the season for special events. Weddings, graduations, and business retreats are filling calendars. Our advice is to think twice before you host an event; and if you do have an event, purchase special event policy.