The monetary cost of not doing risk management
 

Fraternities pay high insurance costs

By Cara O’Connor
Arizona Summer Wildcat
Wednesday July 23, 2003

Liability expenses exceed those of sororities, result from hazing activities, alcohol violations

Fraternities at the Uuniversity of Arizona have been in a lot of trouble lately.

The Dean of Students office has cracked down on hazing activities and alcohol violations, revoking the recognition of four fraternities since December: Pi Kappa Alpha, Sigma Alpha Epsilon, Sigma Chi and, most recently, Kappa Sigma.

And the Dean of Students office is not the only place that fraternities are feeling the heat. The organizations are also paying up in the courtroom.

Lawsuits against fraternities have become more prevalent in recent years, costing fraternities tens of millions of dollars in settlements.

In recent times, legal action against fraternities has even made an appearance at the University of Arizona.

In 2001, the mother and sister of a pledge who died in a motorcycle accident during initiation week brought a lawsuit against Phi Delta Theta fraternity, accusing the fraternity of pressuring the student to binge drink.

The UA chapter of Pi Kappa Alpha fraternity (Pike) had its national charter revoked in June. Between 1993 and their recent passing, the chapter had incurred more than $120,000 in liability program expenses from three claims, according to a letter from Pike Executive Director Eric Wulf.

Liability expenses like these drive up insurance prices, making it more expensive for all fraternities to operate.

Fraternity men cover the extra expense with their membership dues.

“I would say a large chunk of it goes to insurance, probably second only to rent,” said Clint Walls, Interfraternity Council vice president of public relations.

The university requires that housed fraternities and sororities have $1 million in liability coverage. Fraternities that host social events with alcohol (sororities are not permitted to host such events) are required to have an additional $1 million of coverage, said Kathy Adams Riester, senior coordinator of the Center for Student Involvement and Leadership (CSIL).

While each year sororities pay $7 to $14 per member for insurance coverage, fraternities pay anywhere from $150 to $300 per member for the same coverage, said Cindy Stellhorn, vice president of M-J Insurance Inc.

“I wouldn’t be surprised by that figure,” Walls said. “Sororities are not the ones who are doing the crazy risk taking.”

Stellhorn said the highest risks in sorority houses are candles, curling irons and appliances, as well as injuries at socials and philanthropy activities.

The biggest risks for fraternities involve alcohol abuse, hazing practices and social events with alcohol.

“Fraternities are not only more likely to take unnecessary risks, but they have more opportunities to,” Walls said.

Fraternity men will pay anywhere from $240 to $2,400 this school year for membership dues. These dues do not include rent or meal plans. Pledges can expect to pay higher dues their first semester, including additional fraternity initiation fees.

Sorority women will pay anywhere from $170 to $5,220 this year in dues. Much of this goes to pay for housing and meal plans, even for those who live off-campus.

Sororities also tend to invest more in housekeeping and facility upkeep than fraternities do, as is evident in the appearance of the chapter houses, Riester said. Many chapters also pay to have a live-in house director.

The groups without chapter houses generally have the lowest chapter dues because they have a lesser need for insurance.

Arya,

Thanks for posting this. It is not just true at Arizona, but every fraternity at every school in the country.

A number of us, who have been advisors or national officers have harped on this for years.

Maybe seeing these specific numbers will be a wake-up call.

And, before anybody begins complaining about fraternities being targeted -- look at some of the other postings in this forum regarding lawsuits, chapter closings, hazing, etc.

That's what causes those rates.

What is the monetary benefit of following risk management rules? Are national orgs going to cut your rates? I doubt it. The chaters that follow the policies and the chapters that don't follow the policies both have high rates. Look at the post a couple down about LXA at ASU. They were sued after a student left their party and the student was hit by a drunk driver. Having a large insurance policy just paints a bullseye on your back for the lawyers.

I think sororities have lower rates because girls are less prone to break rules in the first place but one of the things their risk management policies have accomplished is transfering most of their liabilities over to the fraternities. They drink, just not at their own house. They end up drinking at fraternities and when shit goes down the fraternity takes the blame.

Anyone remember the incident a CU-Bolder? A sorority was charged with hazing. It had something to do with a pledge and alcohol poisoning. The event took place at a fraternity because the sorority wasn't permitted to serve alcohol in their house. http://www.greekchat.com/gcforums/sh...ado+and+hazing


Fraternities should just try to figure out a way to transfer the liability to someone else, such as the students that attend the parties. One thing the fraternities could do is have the parties BYOB and not have them at their house. I went to a fraternity party at another school and their house was kind of far from campus. The house was secluded and their was take-out store across the street. They had a party in their back yard with about 1000 people and they didn't serve any of the alcohol. If someone crashes their car, gets hit by a drunk driver or whatever accident it will be tough for the family to sue the fraternity becase the fraterntiy didn't serve them.

This is possibly the thing that bothers me most about the NPC groups' alcohol free house rules...even more so than the concept of not being able to drink a beer in your house when of age. Girls like to drink just as much as guys - let's not kid ourselves. To put everything on the guys is not fair or nice and certainly shoots the notion of sexual equity in the Greek system all to hell. If NPC would have really cared about this aspect of things, or cared about their Greek brothers, they would have been advocating things like alcohol free housing for fraternities a long time ago. I have a feeling, however, that many groups were quite content to take advantage of the men's hospitality.

Don't get me wrong, I don't believe in AFH for anyone, but it should be either both or none.

One of the better articles
 

This is a great article, with some thought going into the writing, and some great facts.

I wish someone would report on the liability and claims history of the fraternities which banned alcohol several years ago. Are they doing better on risk management?

It was always my thought that NPC has had AFH for many years and since the large push towards AFH for men's groups that NPC then passed our resolution in 2000 to help the effort. Meaning if we could not drink at an IFC/NIC house then becoming AFH would be easier? Anyone understand that?

Liability wise, I think NPC groups are more "watched" over by their own org than many chapter's of men's groups. And when you look at costs of insurance we have to make sure we TRY to become more safe and more educated about such issues.

Yes we want to drink in our house and if you are of age that is an issue but we have an org to look after not just a one person. And when you join a group that is how you have to look at some situations.

Well, how do you suppose those rates got that high? It's because chapters don't practice risk management.

I don't know if your fraternity would pass the savings along, but mine certainly would. We would benefit much more by having a bigger membership. We lose a lot of great people because they can't afford to join.

In the ASU case, it's really not too much different than a bar being sued for serving someone who causes an accident. Happens all the time.

As for the bullseye -- you paint one right on your a$$ if you don't have the policy, because you can ruin the rest of your life if you lose a legal action and don't have coverage.

And, by the way, the reason insurance is so expensive for even the good chapters is because the Nationals average it out. If that didn't happen, the bad chapters bill would be so high they couldn't exist.

Wake up, Max. It isn't an insurance industry problem we're dealing with here -- it's people who are too dumb to realize the consequences. The ones who keep breaking the rules and driving the rates up because of the growing number of claims.

It's like your car insurance. When you get a ticket or have an at fault accident, your costs skyrocket. You just have to realize where the blame belongs. If we didn't break things, and haze pledges and kill people, our insurance wouldn't be a problem.

Maybe the rates are so high because nationals are always pushing for numbers so they can build new 20,000 ft HQ buildings. As a result the chapters have to lower their standards and take new members that are high risk. The nationals are expansion happy and they give charters to anyone that can afford the dues. When a chapter does break rules the nationals are so money hungry that they don't revoke the charters which causes the rates to go up for the rest of us.

You should look in the mirror. How come some nationals are building new HQ buildings when their numbers are down, revenues are down and their costs are up?

That analogy is lame. The girl in the ASU case didn't cause the accident. She was the victim. The bar or fraternity was not sued because they served someone that caused the accident. They were sued because they had a better insurance policy than the drunk that actually caused the accident.

How can you average out the high cost and pass the savings along at the same time? That is a contradiction.


If the the bad chapters bill is so high they couldn't exist then, so what! Let them die out and pass the savings on to the good chapters. You are the guy that is always preaching about risk management issues and now you are worried about bad chapters dying out.


Let's be honest. Do you really about risk management issues? I think you broke most of the same rules that you are always telling us not to break. I think your real concern is declining revenues and increased costs and you are just looking for ways to increase your revenues and cut your costs.

If they event took place at the official location, or as an official event of the organization, anything that can happen at the event, the fraternity could be held liable for.

Instead of looking for loopholes to continue irresponsible behavior, we as greeks need to start living up to the standards that our founders envisioned. The "standards" of the groups we see the articles about are not looking at the standards of the orgs, but the lowest common denominator of how to get maximum numbers and fun, damn the consequences, because "it can't happen here."

Unfortunately, unless the GLO is local, or extremely small in the total number of chapters, by simple human nature, we'll see unfortunate examples of sheer stupidity that give all of us a bad name indirectly. Either as a whole a paradigm shift is going to have to be made (i.e. some entire national orgs (Phi Delt, Sigma Nu and others going dry entirely as policy), or legal problems may well sunset some organizations permanently.

Delt, hope you don't mind my jumping in here, and, I'm assuming you did have a lot of "fun" and maybe broke some rules when you were in college, about a generation before I did...

The big change Madmax, has been societal. When I joined LXA in the 80's - risk management wasn't in anyone's vocabulary - we rarely heard about lawsuits or anything else. We'd hear about incidents, and chapters being closed, and that was the end of that problem.

In the late 80's and into the 90's, attorneys started to wisen up to the vast amount of untapped money that previous cases could have won in suits. Real lawsuits didn't really start getting traction until after the Rutger's LXA and other incidents made national news.

Unfortunately, there is some truth in what you say about us breaking the rules we are telling you not to break. The difference between then and now, is that society generally regarded it then as "boys being boys," where now society sees it for the bad image we unintentially in part created, and a veritable gold mine in lawsuits.

It's similar to the hazing analogy - how many chapters with serious hazing problems all offered the same explanation - "it's always been that way" or "if I went through it, damn it, so will the other new guys coming in" mindset. Nevermind that it is wrong, or doesn't follow the true ideals of the organization, it falls under the "tradition" bandwagon. It's the same thing with risk management, but it's more the "it can't happen here" mindset versus tradition.

All grist for the mill.

Max,

If you're talking about the new Delt International Headquarters, do your homework before you open your mouth. The building was purchased with alumni donations. Our overall membership numbers have been increasing, even while our number of chapters has decreased because we have closed the bad ones. We've done it by colonizing smaller school with higher academic standards, and recolonizing at schools that hold us to high standards before they let us back on campus. And our Foundation just finished a $9.5 million fund raising effort from our Alumni. Last I heard, our alumni giving was tops in the NIC.

Now, read the posts again.

I didn't say you can average and then give the good chapters more. I said that if Nationals didn't average, the bad chapters rates would be so high they couldn't exist. When I said that savings would be passed on, it was in a different paragraph, addressing a different issue -- whether Nationals would pass savings back if costs went down.

Let's remember context, OK?

LXAAlum,

Be my guest! I'm really weary of people who haven't had enough life experience to understand how it works.

I wish the hell I didn't feel compelled to comment on these kinds of things, but I think it's these attitudes and misunderstandings that will kill the fraternity system in the long run if they don't wake up.

Finally, you're absolutely right about having some fun and doing some dumb things. But times were a whole lot different then, as you allude, and the harsh spotlight of reality wasn't hitting us right in the face.

LXAAlum amd DELTAlum,

What a shame that your posts cannot be transmitted to each and every Chapter across the country.

I am also one of those that remember when boys will be boys era.

If anyones chapter does something without thinking, then, WE all pay for it. :(

I also think the concept of "one-upsmanship" plays into the having fun and doing dumb things - the legacy we created for greeks today. They hear of some of the fun things that used to be done, that in actually were for the most part harmless fun, just absent common sense, that the members of today feel they need to do "one better" than we did. The problem is we mostly went right up to the line, but there's no space left but to cross over the line today to get that "we can do it even better" satisfaction. The goal is to always be better, it's just that the definition of "better" is shifting. (Better does not neccessarily mean "bigger" or "more spectacular" these days).

Like I said, the time will come for a complete paradigm shift (as greeks have had to do many times in the past, almost always successfully I might add), or to fade away into insignificance, obscurity, and extinction.:(

This was posted on another thread, but I think it's worth repeating here. Essentially, Lloyds of London has refused to pay a claim against the Arizona State fraternity chapter because the chapter broke the law.

Which means, at least in the case of this particular policy and company, anytime a chapter serves underage drinkers, etc., they are no longer covered.

That's a really scary precedent.

I hope we don't get a lot of arguments that the company is being unfair.

It's the law.

Arizona Republic
July 18, 2003

No insurance coverage for ASU frat that served alcohol before fatal hit-run

by Jessica Wanke

An Arizona State University fraternity lacks the support of its insurance
company in a $1 million settlement it was ordered to pay for its role in
the 2001 death of an incoming freshman.

On June 12, a Maricopa Superior Court entered a judgment to be paid by
Lloyds of London, the insurer of the Lambda Chi Alpha fraternity, as part
of a civil suit filed by the deceased student's family. The insurance
company is saying the fraternity's policy does not cover such an incident.

Only days before the fall 2001 semester was to begin, Jessica Woodin, then
18, left a party at the fraternity's house on "old row" after drinking
three beers, according to court testimony. And at about 2 a.m., Woodin
walked into Apache Boulevard against the McAllister Avenue crosswalk light
where she was hit and killed by drunk driver Mark Torre, a Phoenix lawyer.

During the trial in 2002, the subject of Woodin's intoxication came up as a
factor in her death.

After Torre was convicted and sentenced to 9½-years in prison, the family
began to look at the other parties involved in the incidents of Aug. 18,
2001. The Woodins identified the fraternity as one of the parties who were
partially responsible for their daughter's death.

In the settlement the prosecutors agreed to not collect the money from the
fraternity chapter or its members and now they are unable to collect the
money from the insurance company.

Executive vice president of Lambda Chi Alpha national, Tim Helmbock, said
the organization pays for a policy that protects its students against
injuries or accidents, but because the members at ASU violated the law by
serving alcohol to minors, they cannot be covered. (Bold letters added)

Mark Meltzer, the Woodin family's attorney, said that he has been dealing
with the fraternity's ASU chapter, their national headquarters and the
insurance company separately, but that the interests of all three are
intertwined.

The family's civil suit has several other defendants, including the law
firm Torre worked for and the two Scottsdale bars, Axis Cigar Bar and Z
Tejas Grill, where he and a fellow lawyer drank prior to hitting Woodin.
Meltzer would not say whether there were any other settlements.

DeltAlum, you're spot-on. It says all over Kappa's RM forms that if we break laws or fail to comply with Fraternity RM guidelines, our insurance coverage is void.
LXAAlum, you've got it. There was a time when Greeks were the paragon college students, about whom universities and fraternities bragged like proud fathers. Now it seems that in many places, Greeks have become the drunken uncle who embarrasses everyone at the family wedding. It's time to get back to basics, people. What are we striving for? How should we live our lives?

I take my vows seriously. I've done some pretty stupid things in my day, and each time, my sisters gently reminded me that I wasn't living up to the standards I'd sworn to uphold. Nobody is above reproach, but (after being angry for a while), I was grateful to my sisters for showing concern. It is a sad day when Greeks feel such a sense of entitlement that we feel we may break the law and defy anyone to call us out.

Not bad for post #1000!

I'd say excellent for post # 1000.

People need to learn to take responsibility for their actions. In the article it said that after the criminal trial the family of the girl who was killed started looking for other parties involved in their daughter's death. As far as I am concerned the only other party involved in her death is her. The same goes fot the Phi Delt at UA who was killed in a motorcycle accident. A bunch of my sisters lived in his dorm freshman year and they'll all tell you that he was always drinking, no one "made" him drink. That's a cop out for the family.

I'm tired of people getting hurt or killed while they're drunk from fraternity parties and then suing the fraternity. In most cases no on poured the drink down their throats. They made a conscience choice to drink and I think that they or those that survive them need to just deal with that. I mean you make a bad choice the result may reflect that.

If we could stop your quote right there, we wouldn't have these problems and wouldn't be having this discussion.

Taking responsibility for oneself means drinking moderately, obeying the law and not putting yourself or anyone else in danger.

Well of course, in a perfect world....but people are going to continue to drink to much and make other bad choices. All that I want is for people to start facing the reprocussions once they have made those bad choices.

It would be nice to have people be responsible enough to accept the consequences of their decisions. However when someone dies, the people left behind are saddened and angry. Its easier to blame someone--anyone--other than your dearly departed.
And when that "someone" happens to have deep pockets, even better.

For me, in a perfect world, we would be striving to live up to the ideals of our Founders every single day. Living up to our ideals includes obeying the law and our respective RM policies. The truth of the matter is that if that chapter of Lambda Chi Alpha hadn't been serving alcohol to minors, their name would never had been mixed up in this tragedy. All the parties involved need to step up and take some responsibility for their part in what happened. Unfortunately in this situation, that happens to include our fellow Greeks.

What a crying shame. :(

It is true that Lloyd's of London did not pay in the LXA case. My husband talked with Lloyds' rep at the Executive Board meeting of his own fraternity last week. The negotiations began at $18,000 and the settlement was $150,000 but IT WAS NOT PAID BY THE INSURANCE COMPANY for the reasons previously stated - the fraternity chapter was not covered because they had not adhered to the policies.

In answer to another post - yes, some fraternities do pass on the savings in insurance premiums to chapters who have had no incidents. Again, I am referring to my husband's fraternity. The chapters who have had incidents pay higher premiums and those who have had no incidents have their premiums reduced.

It is also my understand that Lloyds of London is going to have each member sign a statement that he understands that if he is violating the policy, he and his parents will be responsible if there is an incident and not the fraternity. And, yes, they do believe it will stand up in court.

Oh dear god! If that happened to me, nobody'd be able to sue me 'cuz they wouldn't be able to find the body! My parents would kill me! :eek:

I think that may be part of their reasoning. Make it personal!!! I forgot to mention that this information will be sent to parents also. You really can't blame the insurance companies. They agree to take care of the groups as long as they follow the rules but when they don't, it's on the individual's shoulders! Same thing as your own insurance - if you set fire to your home, insurance is not going to pay -- if it is an accident, it will.

Glad you wrote that, because that probably would have been the next direction the thread went.

Few people like insurance companies. Few understand how they operate -- or how insurance works.

In the end, though, they are businesses, just like the businesses that college students hope to work for and make a decent living. They're not charities. If they lose money, they don't survive.

So, if they have a high risk group to insure, the premiums are going to be high.

If fraternities want premiums to come down, they have to stop breaking the law/rules so the number of claims will diminish. It's as simple as that.

The above is dependent, of course, on whether fraternities can get insurance at all. The fact that we have to go to firms like Lloyds -- or form consortiums to self-insure speaks volumes about how high our risk is.

But we've been through that before.

Sorry, one additional comment.

Undergraduates need to think about their future.

We hear so much about the burden of beginning life/career with huge student loans to repay.

What would it be like to have several hundred thousand dollars of debt stacked on top of that because of liability from a lawsuit?

Some parents may be able to cover that possibility, but mine couldn't have. Nor could we if one of our kids was in that situation.

Some dumb mistake now could ruin the rest of your life.

I don't like the idea of the parent liability one bit. The vast majority of these men are over 18 and should understand the consequences of such behavior. Hell, I felt bad enough getting my parents to pay my tuition--and that was something that they had planned on paying! Imagine my embarassment if they had to pay for my mistakes as well...

I agree, but clearly they don't realize the potential consequences -- or just plain don't care. Look at the record.

It doesn't matter what we like - in the case of a law suit, they are going after the person/people with the money and that definitely is not a college student! If the parents are still counting their child as a deduction on their tax return, then they are still responsible for him/her.