Transcript Document 7217893

Chapter Facility Management,
Insurance & Liability
Ned Kirklin
Managing Director, HRH/Kirklin & Co., LLC
Background of HRH/Kirklin & Co, LLC.
100% dedicated to serving college student and alumni
organizations
Founded in 1991 as Kirklin & Company, now a wholly subsidiary
of Hilb Rogal & Hobbs (HRH) since 2002
Insurance and Risk Management programs provided to numerous
college student and alumni organizations
52 NIC fraternities
5 NPHC fraternities & sororities
12 NALFO fraternities & sororities
Professional co-educational fraternities
Numerous local and small fraternal organizations
Over 1,300 fraternity properties insured through the Fraternal
Property Management Association (FPMA)
Insurance Brokerage Agency
We work for you, not the insurance adjuster/underwriter
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Exposures of fraternal
organization volunteers
Purchase of inadequate property insurance
Lack of due diligence by Alumni/House Corporation officers to search out and purchase the
best available property insurance, in terms of breadth and cost, can result in uninsured
property losses and inadequate funds to rebuild a chapter facility. The financial shortfall can
potentially lead to a lawsuit brought against individual directors for failure to fulfill their
fiduciary duties to the Corporation. The legal term is derivative action where the interested
alumni are actually suing on behalf of the Corporation with recovered assets going to the
benefit of the Corporation.
The critical issue as an Alumni/House Corporation officer is to never be penny wise and
pound foolish. Do not put yourself in a situation where you have to ask for donations from
alumni members to raise money that should, could, or would have been paid by an insurance
program; this lack of effort to review options and buy the most comprehensive program
available in the market may lead to uninsured losses and accusations of fiduciary negligence.
Violation of contract/housing agreement
It is important to closely monitor tenant rights within your
jurisdiction to make certain any eviction of a tenant or member due
to disciplinary action or lack of rent payment is done so in
accordance with local requirements.
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Exposures of fraternal
organization volunteers (continued)
Employment practices liability
Claims for discrimination, harassment and wrongful termination by chapter cooks, house
mothers or resident advisors do arise in a chapter setting out of the employer/employee
relationship. Even if the undergraduate chapter is the technical employer the Chapter
Advisor(s) and Alumni/House Corporation will not be spared in any litigation. It is important
that appropriate supervision is provided to monitor the relationship between the employer
and employee. If insurance protection is desired for Employment Practices Liability (EPL)
exposure it can be included under most non profit D&O insurance policies.
Wrongful termination of membership
Proper adherence to the disciplinary policies and expulsion procedures of the organization
are critical when dealing with matters of discipline or financial delinquency. Failure to do so
has led to claims for financial loss/harm by the individual who believe he has been
wrongfully expelled. To a lesser extent claims have been brought by family of legacies who
believe their descendent was owed or promised membership.
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Claim Example:
Careless smoking
University of Oregon
(August 2003)
Third story smoking
deck allowed
Ashtray was a 5 gallon
plastic bucket
$800,000 in damage
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Claim Example:
Improperly stored materials
Chico State University
Mattresses stored next
to the facility
Fire started by arsonist
$600,000 in damage
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Claim Example:
Arson/Chapter Closure
Arkansas State University
(July 2002)
Chapter closed due to
member conduct
Suspected members set
the fire
Central alarm station was
never serviced and not
working
$1,200,000 in damage
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Fiduciary Responsibilities
House Corporation Directors
Each house corporation board member
has a duty of…
Diligence
Loyalty
Obedience
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Fiduciary Responsibilities
House Corporation Directors (continued)
Articles of Incorporation
Annual Return Filing with State/Federal
Contracts and Lease Agreements
Physical Plant Upkeep
Proper Insurance
Workers compensation
General liability
Property Coverage
Financial records maintained
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Responsibilities
House Corporation Directors
Provide general advice and guidance to undergraduate officers in
managing the facility and property
Supervising of long-term housing, authority for financial details related to
housing, and direction of planning for future housing needs, including
management of the chapter’s reserve fund
Coordination of general alumni activities, communications and reunions
to encourage the alumni to continue their interest and support of the
chapter and the Fraternity, especially if there is no alumni chapter
Meet regularly to review the rent, finances, upkeep on the physical plant,
insurance coverage, and to provide input to the bylaws of the chapter that
relate to the house corporation
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Additional Responsibilities
of the House Corporation
Develop individual lease agreements for members and general
tenant lease agreement for chapter
Develop standard facility rules and policies (ex. no smoking,
candles, space heaters, extension cords, etc.)
Employ a professional property management company to perform
regular maintenance and repairs for the facility
Assure the facility is properly prepared for seasonal and school
breaks, regardless if members are in the facility
Operate the facility and corporation in line with all applicable laws
and regulations (federal, state, local)
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Additional Responsibilities
of the House Corporation
Develop clearly defined roles and
responsibilities for all chapter
employees (cook, house director,
resident advisor) with due
diligence in selection/screening
process
Financial accounts maintained
accordingly with audit and review
performed by CPA, co-signature
on all checks, and reconciliation
of accounts performed by a third
party without access to accounts
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Lines of Defense to Risk
There are three basic
lines of defense
against any tort
liability claim.
Loss Prevention
Loss Control
Insurance Contract
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Facility Maintenance
Mechanical items and systems professionally inspected and serviced on
an annually or more frequent basis
Plumbing system professionally inspected and serviced on an annually
or more frequent basis
Electrical and emergency systems professional inspected and serviced
on an annually or more frequent basis
Roof professionally inspected and serviced on a biennial basis
Foundation and overall structure professionally inspected and serviced
Self inspection process in place and conducted on an annual or more
frequent basis
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Fire & Health Safety
No smoking policy, smoking only allowed outside of facility on
level surface with appropriate disposal receptacle
Fire sprinkler system installed throughout the facility, including
member suites and common areas
All appropriate fire safety regulations are met and/or exceeded,
including kitchen areas, member suites and common areas
Proper posting of evacuation plans in member suites and
throughout facility, especially common areas
Participation in regular fire drills with results reviewed by
corporation board and property manager
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Fire & Health Safety (continued)
Central alarm system updated with proper monitoring devices such
as “hard wired” detectors, audible (bell) and visual (strobe) alarms
Electromagnetic self-closing doors for hallways and stairwells as
well as proper fire rated doors on external exits and throughout the
facility
Exterior doors and windows properly close and latch, meeting all
necessary building and fire requirements
The interior and exterior of the facility is clear of extraneous debris,
reducing possibilities for arson and/or vandalism
Supply of paint and other combustible materials is store in a dry and
secure area
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Facility Renovations
Electrical systems updated to meet current
building standards as well as accommodate for
modern amenities such as computers, televisions
and other small electronics
ADA updates for facility including walkways,
door handles, bathroom fixtures and other
common areas and/or specific living areas
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Evaluating your Rent
1.
House Corporation Rent = {Market Value x 1% for 12 months} + operating
expenses
*Rule of thumb often used in connection with apartment and rooming houses
$1,000,000 (MV) x .01 x 12 = $ 120,000 + $40,000 (OE) = $160,000
2.
House Corporation Rent = Market Value ÷ 5.25
*This formula is another rule of thumb used in connection with rooming houses. The
divisor is dependent upon local market conditions and may be determined by dividing
the selling prices of rooming house properties that have been sold by their gross
incomes.
$1,000,000 (MV) ÷ 5.25 = $190,476
3.
House Corporation Rent = Gross Income of Chapter ÷ 3
*Rule of thumb developed by the University of Minnesota
70 members x $5,000 per member annually (GI) = $350,000
$350,000 GI ÷ 3 = $116,667
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Is your property properly injured?
Replacement Cost
(Lehigh University)
Fire started by light fixture in closet, chapter
house was under-insured because the insured
value was based on a tax-assessed value and not
a replacement cost value
Ordinance & Law Endorsement
(University of Missouri-Rolla)
Chapter house fire started in boiler room, no
ordinance and law endorsement within the
policy, insurance did not cover cost to rebuild at
today’s building and safety code
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Chapter Property Insurance
Fraternal Property Management Association (FPMA)
provides educational assistance to fraternity volunteers in an effort to strengthen
their ability to manage the chapter properties of their fraternal organization
provides a comprehensive and competitively priced property insurance program to
protect the physical plants that house the undergraduate members
Benefits of participation in FPMA
A semiannual FPMA newsletter that focuses on risk management and issues
facing property managers and their fraternity or organization
A property insurance program that provides in most cases, broader insurance
coverage for less premium
A biennial inspection that provides recommendations for physical plant
improvements, addressing life safety and property conditions, along with
completion of a replacement cost valuation
Security of knowing coverage will still be available at an
affordable rate even after a significant loss
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Chapter Property Insurance
Coverage Opportunities
Agreed Amount
Provides for removal of coinsurance clause ensuring the chapter will not be
personalized for unintentional undervaluation of a chapter property
Replacement Cost
Provides for replacement of building and contents owned by chapter or alumni
association/housing corporation
Business Income (loss or rents)
Provides for the payment of rental income to the house corporation that would
otherwise be lost if the house can no longer be occupied due to fire or to other
extensive damage that prohibits occupancy
Extra Expense
Provides for the payment of additional expenses a chapter or corporation might incur
if a fire or extensive property damage requires extraordinary expenditures
Law & Ordinance
Provides the additional funds necessary to bring a damaged structure
up to current building and safety code requirements following a fire
or other extensive damage to the chapter facility
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Chapter Property Insurance
Discount Opportunities
50% discount for first full and partial policy term and subsequent
policy term following fire sprinkler installation
30% discount for fire sprinkler installation in third full policy term
and thereafter
10% discount for modern and safe facilities (construction or major
renovation of facility after January 1, 1990)
10% discount for employing a professional property management
company
5% discount for multiple locations (adjacent housing)
5% discount for completion of a strategic assessment
with Pennington & Company
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FPMA Participants at the University of Illinois
Alpha Chi Rho
Alpha Chi Sigma
Alpha Delta Phi
Alpha Epsilon Pi
Alpha Gamma Rho
Alpha Sigma Phi
Alpha Tau Omega
Beta Theta Pi
Delta Chi
Delta Phi
Delta Tau Delta
FarmHouse
Kappa Delta Rho
Kappa Sigma
Phi Kappa Psi
Phi Kappa Tau
Phi Kappa Theta
Pi Kappa Alpha
Pi Kappa Phi
Pi Lambda Phi
Sigma Alpha Epsilon
Sigma Nu
Sigma Phi Delta
Sigma Pi
Sigma Tau Gamma
Theta Xi
Zeta Beta Tau
Zeta Psi
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Property Inspections for facilities
participating in FPMA
HRH/Kirklin contact: Kathy Payne, Inspection Coordinator
[email protected] or 1-800-736-4327, extension 201
Inspections performed on at least a biennial basis for all properties
Recommendations and requirements for improvement and necessary
updates provided, regarding fire, building and safety regulations
Facilities failing to meet requirements inspected on an annual basis until
recommendation are met at a satisfactory level or subject to possible
cancellation of policy
Inspections performed in addition to that of health and fire safety of local
governing authorities
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Loss Control:
What to do in the event of a property loss
HRH/Kirklin contact: Rich Jungman, Manager-Claims & Client
Services, [email protected] or 1-800-736-4327, extension 215
Notify the fire & emergency services and obtain medial attention for any
injured parties. Notify the police if laws have been broken.
Obtain temporary housing for any displaced residents of the fraternity.
Do what is reasonable and necessary to protect property from further
damage. Keep records and receipts of expenses to be filed with your claim.
Notify insurance agent of the loss as soon as possible.
If feasible, separate damaged/undamaged items and conduct an inventory.
Take photos of all damaged property, once the facility and general area are
secured.
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Estimation of annual premium
Copy of current property
insurance coverage policy
Simple comparison in
breadth of coverage,
annual premium and
FPMA benefits
Susanne Haas
Marketing Assistant
[email protected]
1-800-736-4327
Extension 203
Emily Fay
Marketing Assistant
[email protected]
1-800-736-4327
Extension 217
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Resources available online at
www.kirklin.com
FPMA application
Sprinkler discount
application
FPMA informational
brochure
Property Management
Educational Resources
Risk Management
Educational Resources
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Thank You!
Ned Kirklin
Managing Director
[email protected]
1-800-736-4327
extension 200
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