Chapter and Individual Member Held Not to be Named Insureds

Daniel McCarthy, Manley Burke

The United States District Court for the Middle District of North Carolina recently granted summary judgment, finding that a chapter and individual members were not named insureds because of their bad behavior and failure to follow Lambda Chi Alpha’s national policies.¹  The original case stemmed from injuries John Lee Mynhardt sustained on February 3, 2007.  Mr. Mynhardt, a student at Elon University, attended a party at the house of John Cassady, who was also the Vice President of the Lambda Chi Alpha Chapter on campus.  Mr. Mynhardt suffered a broken neck when several attendees attempted to forcibly remove him from the party.

He filed suit against Elon, the national fraternity, the local chapter, and several chapter members, including Mr. Cassady, alleging negligence, willful and wanton conduct, and gross negligence.  Several of the members settled, the national fraternity, Elon and one member were earlier granted summary judgment.

Liberty Corporate Capital, the insurer for the national fraternity, defended the chapter pursuant to a reservation of rights.  Liberty also reserved its rights with respect to Mr. Cassady, but did not defend him.

Liberty then filed a declaratory judgment action, seeking a declaration that the chapter and Mr. Cassady were not entitled to a defense or indemnity.  The District Court noted that the insurance endorsement unambiguously covered local chapters and individual members only when they follow the national organization’s policies and procedures, act within the scope of their duties, and on act on behalf of the national fraternity or chapter.  A chapter or member is only an “insured” if all three requirements are met.

The Court held that neither the chapter nor Mr. Cassady could show that they were acting in accordance with the national’s policies.  Specifically, the Court noted that the party was open to the public, used a common container (a keg of beer), did not prohibit underage drinking, and did not provide professional security or party monitors.  In denying coverage, the Court stated, “This was not a party that violated fringe or minor provisions of the Fraternity’s policies; in throwing an open, unsecured party with unrestricted access to alcohol in bulk, the Chapter members blatantly violated numerous policies.” 

1  Liberty Corporate Capital, Ltd. v. Delta Pi Chapter of Lambda Chi Alpha, et al., United States District Court for the Middle District of North Carolina, Case No. 1:09cv765.