Litigation Risk

Liberty! Fraternity! Liability!

Universities, fraternities and their local chapters, and individuals may face liability for sexual assault, alcohol abuse or other actions.
By: | April 13, 2015 • 4 min read
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Recent incidents alleging alcohol abuse, sexual assault and other bad behaviors at America’s college fraternities have drawn national attention. Much of the discussion has focused on causes and prevention, but with litigation inevitable in some of these incidents, questions of liability are sure to arise.


Individuals directly involved in such incidents face potential liability, but claims can also extend to the local and national fraternity organizations, to the universities and colleges with which they are affiliated, and even to the local chapters’ officers and their families.

“It all depends on how the claim or the complaint that is filed in court is framed. What are the allegations in that litigation? Who are the named defendants, and what are the circumstances of how it happened and can it be corroborated?” said Michael Liebowitz, senior director of enterprise risk management and insurance at New York University.

The local and national fraternities may face liability for incidents that  occur during fraternity events, especially on fraternity premises. Most local chapters have liability coverage purchased by their national organizations through a handful of companies that specialize in insuring fraternities and sororities. The largest of these, James R. Favor & Co., was actually acquired by a group of national fraternity organizations in 2006.

But just because a fraternity has general liability insurance, doesn’t mean a particular incident will be covered.

But just because a fraternity has general liability insurance, doesn’t mean a particular incident will be covered.

“Insurance policies typically exclude any criminal violations. So if it’s considered a crime, the policy is not going to cover it,” said Leta Finch, leader of Aon Risk Solutions’ national higher education practice.

In March 2014, “The Atlantic” reported that most fraternities have stringent, but largely unenforced, alcohol policies in place. The vast majority of fraternity-related injuries, assaults and other incidents involved violations of alcohol policies, which effectively provide liability protection for the fraternities while placing the individual members outside the coverage.

Lisa Zimmaro, assistant vice president for risk management and treasury at Temple University in Philadelphia, said that “fraternity insurance carriers have huge exclusions for alcohol-related events and sexual assault. … If the insurance carrier for the fraternity excludes certain acts, then the victim would have to look elsewhere for compensation for damages.”

One place they might seek compensation is from the university or college with which the fraternity is affiliated — and the nature of that affiliation can help determine what liability the institution might face.

Institutions that provide fraternities with space on campus, security, financial support or other resources could be perceived as having greater liability.

Closer relationships mean greater liability. Institutions that provide fraternities with space on campus, security, financial support or other resources could be perceived as having greater liability. Those with more distant and less structured affiliations would face fewer liability issues.


Institutions should also be aware of exclusions to their coverage.

“If it is excluded on the policy and there is a finding in a civil action, the university would end up paying out of pocket. Just because there is an insurance exclusion doesn’t get them off the hook,” said Zimmaro, who added that institutions should also be aware of sub-limits.

“There maybe sub-limits, even if there’s not an outright exclusion, maybe coverage up to $5 million instead of $25 million. Know the limits of what your policy is going to pay,” she said.

The best way to avoid liability may be to prevent fraternity incidents from occurring, but ironically, codes of conduct and prohibitions on behaviors can increase liability if they lack adequate follow through.

“The minute colleges and universities start to dictate policy on fraternities and sororities, they are vicariously picking up liability, because then they are going to be forced to police it.” — Michael Liebowitz, senior director of enterprise risk management and insurance, New York University

“The minute colleges and universities start to dictate policy on fraternities and sororities, they are vicariously picking up liability, because then they are going to be forced to police it.

“[If] something bad happens because someone broke the rules, then the question is, ‘Why didn’t you have surveillance in place to monitor what was going on?’ So it is very much a double-edged sword,” said Leibowitz.

Finch pointed out that enforcing codes of conduct that lack clear consequences can also leave institutions exposed to liability from violators who feel they have been disciplined unfairly, treated inconsistently or been denied due diligence rights.

Parents of fraternity members can also face liability — and not just the parents of those directly involved in incidents.


Leibowitz said that while primary liability lies with the fraternity member who committed the acts in question, “the rest of it lies with the officers of the chapter, from the president straight on down, because they’re the ones that set the tone, they’re the ones that are supposed to control what goes on. … If you want to be an officer, it comes with responsibility, and responsibility comes with liability.”

Zimmaro agreed. “Families are sued all the time for the acts of their students who are involved in incidents involving any kind of organization where someone gets hurt. An attorney is going to look for a compensation source, and if it’s mom and dad, then it’s mom and dad.”

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]
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Risk Management

The Profession

Scott Clark agreed to join Miami-Dade County Public Schools for two years to help build its risk management department. Then he forgot to leave.
By: | March 2, 2015 • 5 min read

R&I: What was your first job?

I got into the insurance business working for the Combined Insurance Co. of America on a part-time basis while I was attending the University of Illinois.

I was interested in the business partly because my great-grandfather started a regional property insurance company in 1917 in Indianapolis, Ind., named Merchants Property Insurance Co. of Indiana. It is still family owned and I succeeded my father on the board of directors when he passed away in 2011.

R&I: How did you come to work in risk management?

I was recruited by Wausau Insurance Cos. … As it turned out, the Superintendent of Schools for Miami-Dade County Public Schools (M-DCPS), Leonard Britton, had been reading about risk management and told his friend — who happened to be my boss with Wausau — that he wanted to create a risk management department from what was the current insurance department.

I [agreed] to meet with Superintendent Britton … he told me of his vision. Ultimately, I told Dr. Britton that I would come to the school for two years and help him build a risk management program for the district [but] I forgot to leave. I’m currently in the middle of my 29th year here!

R6-14p42_Profession.inddR&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I think the biggest change is the fact that risk managers are not just viewed as insurance purchasers but professionals that sit at the highest levels of our organizations and serve business leaders on a macro level rather than just serving as insurance people within our organizations.

With a push from the risk management community, the insurance industry has become more accountable to their policyholders. This includes listening to the risk management community with regard to the types of coverage risk managers are seeking, including terms and conditions; issuing policies in a timely manner; and overall becoming a partner in creating strategic risk solutions.

R&I: What emerging commercial risk most concerns you?

Like many other industry professionals I am concerned about cyber risk, but my concern transcends the normal risks associated with cyber. It’s not just about making sure that … the personal information of my 345,000 students and 50,000 full and part-time employees is not hacked.

We have a significant focus on placing technology in the hands of our students, and to move them from traditional book learning into a high-tech environment of teaching and learning. That includes providing students with tablets, outfitting classrooms with SmartBoards and empowering all 345,000 students to become technologically savvy so that they will be able to compete in a technologically sophisticated world.

When you do that, cyber capability and protecting the risk around it becomes paramount. We must take necessary steps to protect [employees’ and students’] personal information, Social Security numbers, grades, and family information. Many fees which were once paid with cash are now paid with credit cards at our 400+ locations and this information must be protected as well.

With a push from the risk management community, the insurance industry has become more accountable to their policyholders.

R&I: Who is your mentor and why?

My mentor is a gentleman whom I have had the privilege of knowing and working with for my entire career at Miami-Dade County Public Schools. His name is Jim Marshall and he is a principal in the consulting firm of Silver Insurance Consultants based in St Petersburg, Fla.

I’ve worked with him for the better part of my 29 years at the Miami-Dade schools. His firm has been a consultant to Miami-Dade in property/casualty and risk management including claims administration. Jim has been instrumental in providing wording for many of the district’s manuscript insurance policies.

He is one of the most knowledgeable people I know and someone I would go to when I need clarity on how to handle a risk management issue.

R&I: What have you accomplished that you are proudest of?

Being identified as a national leader in risk management and serving as president of the Risk and Insurance Management Society (RIMS) in 2011.

R&I: What is your favorite book or movie?

Devil in the White City by Erik Larson is my favorite book. The book is set in Chicago around 1893 and is an interesting depiction of the 1893 Chicago World’s Fair intertwined with fictional characters and sub-plots.

Being from Illinois, I found the book fascinating for its historic depiction of the creation of the buildings for the 1893 World’s Fair on the South side of Chicago close to where the University of Chicago now is, and Erik Larson’s ability to augment this nonfiction story with creative fictional story lines and sub-plots.

I remember vividly how young the North Korean soldiers appeared to be, and I was only 20 years of age myself at the time.

R&I: What is the most unusual/interesting place you have ever visited?

Seoul, South Korea. I was fortunate enough to be able to travel with my best friend and fraternity brother and his family my senior year at U of I. His father was a project engineer for Amoco and they were building a refinery in the Seoul area.

I believe it struck me as a kid from Illinois as it was so different from other places I had traveled and we were actually able to go to the demilitarized zone and step into North Korea.

I remember vividly how young the North Korean soldiers appeared to be, and I was only 20 years of age myself at the time.

R&I: What is the riskiest thing you have ever done?

As a risk manager, I dare say that I typically do not participate in risky things; however, the two things which come to mind which I would typically not do include taking a small seaplane from Vancouver to Victoria (we returned by way of Ferry).

The other was a helicopter ride over the Hawaiian waterfalls and the pilot realized halfway through the trip that he was on the wrong radio frequency and unable to communicate with other helicopters in the area.

R&I: If the world has a modern hero, who is it and why?

Heroes are very personal and it’s not my place to name one for the world; however, my father who passed away in 2011 was one of mine. He taught me right from wrong, supported me and was very proud of my career in the insurance industry.

Janet Aschkenasy is a freelance financial writer based in New York. She can be reached at [email protected]
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Sponsored: Liberty International Underwriters

A Wake up Call for Any Company That Touches Food

With costly outbreaks on the rise, don't let product recalls and contamination spoil your business.
By: | October 1, 2015 • 5 min read

It’s not easy to be in the food industry these days.

First, there is tougher regulation. On August 30, 2015, the Food Safety Modernization Act (FSMA) required companies to file planning paperwork for Preventive Controls for Human Food. The final FSMA rules take effect on August 30, 2016.

Next, increases in food recalls, some deadly, are on the rise. In early September, 9,000 cases of frozen corn were pulled from shelves after a listeria scare. A few days later, a salmonella outbreak in cucumbers imported from Mexico resulted in one death, while sickening hundreds of consumers nationwide.

Courts are getting tougher, too, as owners/executives in particularly egregious cases involving consumer deaths have been prosecuted criminally, with one receiving a recommendation for a life sentence.

Finally, advances in science – including whole-genome sequencing technology, which maps DNA of microbes to more easily pinpoint precisely where contamination occurs – can expose every player in the supply chain to potential losses and lawsuits.

“Few companies have the balance sheet or brand loyalty to survive a serious recall. Outbreaks, new regulations, prosecutions and science have made purchasing product recall and contamination insurance literally an act of survival for companies of all ages and sizes,” said Jane McCarthy, Senior Vice President of Global Crisis Management at Liberty International Underwriters (LIU), who has over 30 years of industry experience.

Working with growers, processors, manufacturers, importers, shippers, packagers, distributors, wholesalers or retailers, LIU’s policy provides indemnity to pay for losses a company might incur from a recall, including logistic expenses, lost income and access to crisis management and public relations consultants.

Legislation tightens on food-related companies

LIU_SponsoredContentPassed in 2011, the FSMA gives the Food and Drug Administration a far more proactive weapon in the war on tainted food, as the focus shifts to prevention combined with the FDA’s newfound authority to close businesses that aren’t complying with FSMA rules and regulations.

In addition to the August 30, 2015 deadline for filing paperwork for preventive controls, as part of the law, all companies need to be registered if they do anything with food in the United States, or a company is a foreign entity bringing food into the U.S.

“It’s the law and every regulation and benchmark has to be met,” McCarthy said. “The FDA will shut someone down if they don’t think a company is handling a food product properly. With these new rules and regulations, the whole industry has to change.”

With LIU’s product contamination policy, companies have 24/7 access to pre-loss consultancy through red24, one of the world’s leading security consultants and global crisis management consultancies. For example, they’ll work with clients to best prepare them to meet the FDA’s 48-hour response deadline should a food contamination or product recall incident occur.

Costly outbreaks on the rise

LIU_SponsoredContentAccording to a Wall Street Journal article, food recalls from 2012 to 2014 increased more than five times compared to the total number of recalls from the prior eight years combined. The Journal also reported that foodborne illness is often never formally reported, so about 48 million Americans, or one in six, get sick each year from food. The CDC estimates 128,000 hospitalizations and 3,000 deaths from tainted food.

Food contaminations happen in two main categories: allergens (peanuts, etc.) and pathogens (bacteria). There were four listeria outbreaks in 2014 alone, compared with one in each year from 2011 to 2013. Listeria is a particularly tricky and virulent pathogen that continues to survive and blossom, even in refrigerated environments. Listeria does not impact the appearance, taste or smell of food it invades, so a company in the food industry can only confirm contamination through testing or, unfortunately, once a customer becomes ill.

“Listeria is one of the worst nightmares. Not only is it deadly, but once it gets into a plant, it’s very difficult to eradicate,” said industry veteran Meg Sutton, LIU’s Senior Claim Officer. “It sneaks into drains and crevices that you thought were clean. Attempts to clean those drains and crevices, if done improperly, can result in aerosolizing the listeria and spreading it throughout the facility. In some cases, companies are forced to shut down the plant for extended periods of time, resulting in significant business interruption and loss of revenue.”

Courts get tough on deadly cases

LIU_SponsoredContentWith the increase and severity of food contamination recalls rising, the courts are getting tougher too. The food industry was rocked last month by a recommended life sentence for the ex-CEO of a peanut manufacturing company following a multiple-felony conviction for knowingly selling tainted peanut butter that ended up killing nine people.

“The judge ended up sentencing him to 28 years in federal prison, still the harshest penalty ever in a case of food contamination. While our policy won’t cover your defense if you’ve committed a crime, the penalty is another wake up call for the food industry that executives at the highest levels will be held accountable,” McCarthy said.

Science boosts detection, transparency

LIU_SponsoredContentAdvances in DNA mapping are on the rise. “Before this technology, people would say, ‘It wasn’t us! Prove it!’ and that was pretty much impossible,” McCarthy said. “Those days are gone now.”

By using today’s scientific methods to trace back to the source (grocery store, restaurant, wholesaler, etc.), experts can determine the production facility or farm that originated the food or food additive. They can swab the facility for DNA matches and pinpoint the contamination.

Considering those four prime drivers, it’s not surprising that interest in food product recall and contamination coverage from companies of all sizes is gaining momentum.

“We don’t want them to just buy our insurance,” McCarthy said. “We want them to be better for it with us as their partner by making sure they have the right coverage in place and improving their business from a health, safety and compliance standpoint.”

Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty International Underwriters. The editorial staff of Risk & Insurance had no role in its preparation.

LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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