NOTIFY THE INSURANCE COMPANY

Robert E. Manley, Manley & Burke

When there is an incident involving personal injury or property damage at a fraternity house, the minute anyone knows that a claim is being asserted, it is important to notify the insurance company.

What is the assertion of a claim? Perhaps angry, alcohol infused words at the time of the incident do not rise to the level of the assertion of a claim. On the other hand, a letter from the injured party, from the injured party’s parents, or from the injured party’s lawyer asking for compensation for injuries is a pretty clear assertion of a claim. The insurance company should be notified immediately.

What insurance company should be notified? Certainly, the insurance company of a fraternity needs to be notified. If individual fraternity members were participants in the incident, they probably should also notify their homeowner’s insurance carrier. The insurance companies can then quarrel among themselves about which company will pay if there is liability.

In some fraternity insurance policies, the named insured clause of fraternities is being amended to exclude from coverage a member of the fraternity who causes injury to another person while in violation of fraternity risk management policies. The “named insured” clause of an insurance policy gives the identification of those persons who are covered. It typically includes the general fraternity, the chapter, the house corporation, the alumni chapter, and all members acting on behalf of the fraternity in accordance with fraternity policies. For example, a member of a fraternity knowingly serves alcohol to an underage person who becomes intoxicated and as a result of the intoxication, causes personal injury to another person. Under this more recent type of “named insured” clause found in some fraternity policies, the member who served the, alcohol to an underage person would not be covered.

The person who provided alcohol to an underage person at a fraternity function should also notify the homeowner’s policy that covers the home in which his family resides.

A recent decision in Alabama illustrates the importance of the duty to notify the insurance company. In mid-November, 1991, Chris Sanders allegedly hit Melissa Wiggins in the face during a party at the Alpha Tau Omega Fraternity House at the University of Alabama.

Sanders’ family homeowner’s insurance company was State Farm. State Farm was not notified of the incident until December 13, 1994, more than three years after the incident occurred. State Farm declined coverage because of the failure to give it timely notice.

A  default   judgment   was  entered   against  Sanders for $100,000.00. In July of 1995, Wiggins and Sanders sued State Farm to demand that State Farm pay the default judgment.  The court quite properly held that  State Farm had no obligation to pay this judgment. The reason for the decision was that the insured failed to give the insurance company notice of the incident within a reasonable time. State Farm Fire & Casualty Company vs. Melissa Wiggins, et al. 972 F. Supp. 570 (1997). The Federal District Court, in deciding a lawsuit for declaratory judgment to declare the rights of the respective parties, held that Sanders and Wiggins lost their rights because the Alabama Supreme Court had previously ruled ”notice must he given within a reasonable time in view of the facts and circumstances of the case.” Haston v. Trans Am Insurance Servs. 662 So.2d 1138, 1141 (1995).

Just because there is insurance docs not mean that it i:, safe to sit back and do nothing after a claim has been presented. It is the duty of the person against whom the claim is asserted to notify every insurance company who may have responsibility to pay the claim if there is liability. This is especially true now that a number of fraternities arc readjusting the “named insured” clause of their policies to exclude wrongful acts by a fraternity member who violates the fraternity’s risk management policies.