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Paying the bill isn't enough. Insurance is a contract. As part or our agreement with the carrier we agree to play by the risk management rules agreed upon by the fraternity and the insurer. Keeping up our part of the bargain means that we have to keep our promises, not just pay the tab when we get a bill.
If we break our promise with the carrier then the carrier can deny coverage. If we play by the rules and something bad happens then we are covered. If we don't play by the rules and something happens then we can be denied coverage.
I don't want the example to sound childish at all, rather, these are some basic concepts of insurance law.
An exaple might help. If you buy a house you will probably have some sort of general peril type of policy, commonly called a "Homeowner's" policy. One provision might be that it applies to non-commercial activity in your home; things like slip and falls for visitors, dog bites, that sort of thing.
If you engage in commercial activity in your home, such as seeing clients there, then the house becomes more like a commercial establishment.
If somebody slips and falls in a business the costs can be much higher. The carrier quoted you a rate for a home, not a business. If you tried to get coverage on the cheap by calling your business establishment your home then you might have a coverage problem.
How about the recreational breeding of pit bulls? Silly example, but if you bred pit bulls at home you might have a higher risk of dog bite injuries than if you had a single golden retriever. If you told the insurance carrier that you had a golden retriever and in actuality you had a backyard full of pit bulls then the risk would change and it could be said that you misrepresented the facts in order to minimize the risk (cost) to you.
Bottom line is that risk management is a risk reduction program designed to cut the liklihood of injury. That results in lower premiums. As it is the risk associated with insuring a college fraternity lies somewhere between insuring the Love Canal and Three Mile Island*. We don't need higher premiums.
John Gezelius
California, '78
* the Love Canal was a toxic waste problem on the east cost in the seventies. An entire neighborhood had to be purchased and torn down as part of the remediation effort. Three Mile Island is a nuclear power plant that had an 'incident'. The risk of ensuring a fraternity therefore lies somewhere between toxic waste dumps and nuclear power plants!
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