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.
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.
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.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.