A standard homeowners insurance policy protects more than a house and possessions, it also offers liability protection from accidental damages involving other people—such as a guest injured from a slip and fall or a sliced ball on the golf course that nails someone in the head.
When it comes to insurance for special events, the liability issues can become a lot more complicated—whether it’s a wedding, a fundraiser or even a bridge club game. In lawsuit-happy America anyone can be just one misstep away from getting sued.
“Liability is being subject to having to be legally responsible for another’s loss or injury or pay money damages to that person,” says Kenneth Anspach, a Chicago-based attorney specializing in insurance coverage, environmental law and commercial litigation. “Those are all the reasons why you would need insurance.”
Even though a homeowner’s insurance policy offers some protection away from the home, it’s only for accidental mishaps. Unintentionally hitting someone with a golf ball would be covered, but chasing after them with a nine iron would not.
In order to prove a claim, Anspach says an injured party would have to prove the homeowner was negligent and that a reasonable person would have resolved a problem before it happened.
“If your friend was eating a banana and threw the banana peel on the ground and then slipped on it before you had a chance to pick up the banana peel that wouldn’t be your negligence,” Anspach says. “If the banana peel was left there by your three-year-old child a week ago and now it’s black and has fruit flies flying around it and then someone slips and falls on it, that would be your negligence.”
Scott Wharry, a product design senior specialist at American Family Insurance, says homeowner’s liability covers not just the insured, but also their spouse and their children under age 21 who live at home.
House parties and fundraisers
Liability issues can often come into play whenever alcohol is involved. A normal party or even a wedding held in the home would be covered under a regular homeowners insurance policy, but the rules surrounding a fundraiser are a bit less clear.
Jerid Schmickle a senior vice president at NAS Insurance, says there’s a coverage gap in liability for homeowners policies. A small party in the home would be covered, but an inebriated guest who had an accident on the way home would not.
Schmickle has been involved in special events policies for years. In the past he’s handled business liability insurance coverage for festivals such as Lollapalooza, Bonnaroo and Austin City Limits. He said the question of whether someone needs additional liquor liability coverage is often a concern for smaller events such as private parties, corporate and charity events.
“You could have a charity event to raise money, just as long as it’s not through the sale of drinkable alcohol on site,” Schmickle says.
Schmickle adds most good brokers will help the event planner figure out whether they need liquor liability coverage or not.
In checking coverage for such an event, Schmickle says an underwriter considers how the alcohol is being served, sold and who gets the money. If the insured gets any of the proceeds he says they would need liquor liability or additional dram shop insurance. Dram shop insurance is coverage for those who sell alcoholic beverages that protects the vendor against lawsuits involving bodily injury or property damage caused by customers. It is required for most bars, restaurants, hotels and motels. The laws vary by state, but Schmickle says it’s likely that a homeowner would be held liable if an attendee drove drunk afterwards and got into an accident.
Wharry says a fundraiser would likely be covered under a standard homeowners policy, as long as the homeowner receives no compensation. If the homeowner does receive funds from the event, it could be considered a business venture and would not be covered. Wharry recommends people check with their agent to verify their coverage before hosting an event.
“We might be getting into a little bit of a gray area if you’re talking about an entry charge or fee to attend the event,” Wharry says.
Wharry says if someone is hosting a free event they should not have a problem getting coverage, but if there is an entry fee or door charge then the event might be considered “profit-motivated” or “for-profit” which could be construed as business-related and they would need the appropriate coverage.
Rob Nuccio, owner and president of RV Nuccio and Associates, Inc. offers special events insurance, including liability and liquor coverage. He agrees that fundraisers in a residence are in a gray area, but says anyone charging admission should have the event insured and consider an alternative location.
“You shouldn’t have it at your house anyway because they’re going to destroy it, you’re better off renting a hall somewhere,” Nuccio says.
Weddings and other festivities
When planning a wedding, a large birthday party or some other special event outside the home, most people might not think of getting insurance. Nuccio began offering wedding insurance in the early 1990s that provides cancellation and liability coverage, with à la carte options such as coverage for the photographer if he goes out of business and it will even pay for psychiatric counseling if the groom or bride gets cold feet.
Nuccio says higher-quality facilities actually require liability insurance with the facility being included on the policy as an insured. He says a $30,000 wedding would cost about $225 for a one-time premium, which compensates for the loss of deposits from an event cancellation as well as liability.
“Dad put a lot of money on this event. Your average wedding is $30,000 so six months before the wedding he’s got more than half of that out on the line already and it’s all non-refundable,” Nuccio says.
Being left at the altar is not the only reason for a wedding cancellation. Nuccio says he’s also seen cancellations from medical emergencies, natural disasters or the wedding hall going bankrupt. In one case, a cat had a litter of kittens on the wedding dress. In another, a brush fire shut down a major highway and cut off access to the event.
While it’s the cancellation coverage that convinces many people to buy wedding insurance, Nuccio says the liability issue for a wedding or any special event is just as important.
“If you’ve got any asset base at all you definitely want liability coverage. Whether the facility requires it or not, it would be a bad idea to have a wedding and not be covered,” Nuccio says. “If Uncle John has too much to drink and he leaves your wedding and he goes out and flattens some poor guy in a crosswalk, you’re getting named in the lawsuit and your homeowner’s insurance won’t cover.”
Schmickle says not all reception halls provide liability coverage, as was the case with his own wedding that was held at a winery. He had to bring in outside vendors to provide hard alcohol, but not before he made sure they had sufficient liability insurance.
