The monetary cost of not doing risk management

[DeltAlum]

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.