Risk Management for Weddings
August 2008
One of my favorite memories in life has to
be the weekend my beautiful daughter got married. I remember the joy of walking
her down the aisle, dancing with her at the wedding reception, and smoking a
good cigar with my new son-in-law, a draft beer in hand, as we watched the sun
set over the beautiful Utah mountains.
by
Jack Hungelmann
Corporate
4 Insurance Agency, Inc.
Whether the word "wedding" brings back memories of joy or whether it was
one of the most stressful days of your life, weddings bring with them special
risks not always covered by auto, home, or even umbrella policies. The challenge
in personal risk management is to first identify the property, liability, vehicle,
and contractual risks associated with a wedding and then to decide with a client
the most effective way of treating each risk.
Roger and Mary Jane Peterson recently called me because their daughter Molly
was getting married the following weekend. The groom has eight siblings plus
parents coming from New Hampshire. They were planning to rent a 15-passenger
van for the week they would be here. Mary Jane checked with the car rental agency.
Her plan was to rent the vehicle in her name so she could pick the vehicle up
and drive to the airport, to pick up her in-laws. Then, at the end of the week,
she would deliver them back to the airport and the vehicle back to the rental
agency. The remainder of the week, the groom's father would be the driver.
The rental agency was asking for an additional $10 per day for a second nonspousal
driver—$70 extra for the week. She asked for my advice as to whether this was
the best way to handle this rental risk.
The Usual Risks Assumed in a Car Rental Contract
Every car rental contract includes two contractual obligations to the person
signing the contract:
- To return the car to the agency in the same condition as when it was
rented—no matter what the cause!
- To defend and pay any judgment against the rental agency for injuries
and property damage arising from the use of the car that exceed the statutory
minimum liability limits—even if the renter
was not the driver who caused the accident! (The rental agency as
vehicle owner has to carry at least the minimum liability limits of its
state.)
In addition to the extra expense, there are three pitfalls to Mary's strategy
of renting the van in her name:
- If this 15-passenger van worth $30,000 is destroyed in a collision,
even if it is the groom's father's fault, under the terms of their contract,
the rental agency will come after Mary Jane because she contractually agreed
to be responsible for all damage.
- If the vehicle is caught in a hailstorm, or is stolen, again the rental
agency will collect from Mary Jane. The contract has no exceptions for "acts
of God."
- If the groom's father causes a serious accident with injuries, and if
he and the rental agency are jointly sued for compensation, his auto liability
policy will defend and pay any judgment against him but will not necessarily
cover the rental agency. Plus, as soon as the rental agency is sued, it
will send Mary a registered letter with a copy of the rental contract reminding
her that she has agreed to defend and pay any judgment against them for
lawsuits that exceed state minimum liability requirements. In Minnesota,
that is just $30,000 per person for injuries!
The difference between acting as a personal risk manager or insurance agent
for a client could not be better illustrated than by this example. An insurance
agent would first look to see where the coverage exists and, if there is no
coverage, try to find a way to arrange the coverage. A personal risk manager
first will try to reduce or avoid as much of the risk as possible before looking
at the insurance issues.
The solution I proposed was to have the groom's father arrange the car rental
ahead of time directly with the rental agency, with the contract in his name
only. This way he is appropriately taking on every rental contract obligation
since he's the one benefiting from the use of the vehicle. Then, he can pay
for just 2 days of a second driver—Mary Jane—to pick up the van, drive to the
airport to pick up the group, and then return it the following week. (He obviously
could also arrange the rental directly from an agency at the airport. Mary Jane
declined that option because the rental rates for a passenger van from an onsite
agency were excessively high compared to what was available off-site. The second
reason is good hospitality. She wanted to be the one picking them up and delivering
them back to the airport.)
The bottom line? With good risk management, Mary Jane is off the hook for
nearly every risk associated with the rental, except for her liability for collision
damage or injuries or property damage she causes while picking up and delivering
the vehicle as an operator. I made sure that her personal automobile and umbrella
policies will provide all the coverage that she needs. (Be careful, many do
not cover all three risks.)
Other Wedding Risks
We also discussed other risks associated with the wedding.
The Wedding Reception Contract
As a risk manager, it is important to train your clients to send you contracts
to review before they sign them. That way,
if there are any inappropriate risk assumptions in the contract, you can point
them out, and they can either renegotiate the terms or find a different facility.
For the Peterson wedding reception, Roger faxed me the contract from the restaurant
they were considering to host the reception. In the contract, he was agreeing
to hold the restaurant harmless and to defend and pay any judgment against the
restaurant arising out of the wedding reception.
The problem with that language is that there was no exception for the negligence
of the restaurant or its employees!
So, for example, if the wedding guests suffered food poisoning at this reception,
Roger was assuming all the restaurant's liability and defense costs. Once I
pointed that out to him, he complained to the restaurant. At first, they refused
to negotiate the language. Sad to say, the restaurant's comment was, "We have
been in business 23 years, and this is the first time we've ever had anybody
take issue with our contract." But once they realized that Roger was serious
about withdrawing his business from them, they agreed to add an exception to
the language so that he would not be responsible for the negligence of either
the restaurant or its employees.
However, Roger still had responsibility for all other liability arising from
the reception. We had reduced the contractual risk for sure, but we still had
to find coverage for the rest. I found the coverage he would need under his
personal umbrella policy which did not have a contractual liability exclusion.
Some umbrella policies do, so be careful.
Wedding Jewelry Risks
Since homeowners policies by and large exclude personal jewelry of any significant
value, the rings are best scheduled. That way, loss or disappearance of the
$5,000 diamond wedding ring, for example, would be a covered loss. Usually,
no deductible applies when scheduling. If the bride and groom do not already
own a home, set up a renters policy for them to take effect before the wedding.
Then the scheduled jewelry can be added to that policy.
Sterling Silver Risks
Sterling silver has limited theft coverage under homeowners policies—typically
$2,500. The easiest way to protect this risk without going to the trouble and
coverage pitfalls of a schedule is to simply raise the theft limit high enough
to cover whatever sterling is being given as gifts.
Gifts at the Wedding Reception
There will be typically many wrapped gifts exposed to vandalism, theft, collapse
of the table, etc. The best way to cover the majority of those risks with the
least amount of hassle is to add special perils contents coverage to the bride
and groom's homeowners or renters policy. That way, nearly everything but breakage
of very fragile items will be covered.
Reception Liquor Liability
If there is an open bar, and your clients are picking up the bill, make sure
that their homeowners and umbrella liability policies contain "host liquor"
coverage. If the guests, on the other hand, are paying for the liquor and it
is served by restaurant employees, make sure that your client is not agreeing
to indemnify the restaurant or reception hall in the rental agreement for alcohol-related
incidents. Also, make sure your client is not providing his own booze and his
own bartenders and charging for drinks as he probably will be completely uninsured
if a lawsuit arises out of the activity.
Conclusion
In closing, acting as a risk manager for clients at the time of a wedding
can help reduce or eliminate many risks that potentially could cause serious
financial loss to the family's assets during a very stressful time in their
lives. Once the risks have been reduced through contractual or other means,
the task that remains is to arrange insurance for those risks creatively and
has cost effectively as possible.
Jack Hungelmann's book Insurance for Dummies,
contains much of this information and is available at your favorite bookstore
or
online. For more information on his risk management and insurance business,
go to www.JackHungelmann.com
where you can check out sample newsletters, brochures, other articles written
on various issues. For background information, see Mr. Hungelmann's
biography.
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