Q: Whenever we hold an event we purchase event insurance to protect our organization, “just in case” something goes wrong. My question is, if a third party is hosting or sponsoring an event to benefit our organization, should we still purchase event insurance or should it be covered by the third party?
A: This is a decision to be made by your risk management committee in concert with your insurance agent. However, since you are asking me, I would suggest a general policy that requires the third party to take out comprehensive event insurance based on the type of event being held, the likely exposure and the amount at risk. Such comprehensive insurance might cover cancellation of the event; general liability; liability for liquor-related problems before, during or after the event; property damage, including damage to rental property such as the extra chairs, tables, dishes and glassware needed for a dinner party; an accident suffered by a participant and/or volunteer, even prize indemnity if there is a chance that someone might make the hole in one that obligates the sponsoring party to present the lucky golfer with a new sports car!
You might want to consider including in the policy the minimum amount of insurance that must be purchased. You might also wish to state the point at which the event insurance is purchased – e.g., at the point the first contract is signed or the first deposit is made. I would definitely insist that the group be able to demonstrate that the insurance company writing the policy is licensed to do business in your state. Finally, in your contract with the organization looking to support your cause, I would ask that they hold your nonprofit harmless if a problem should arise. Such a clause may not be legally binding, but it might make someone think twice about coming after your organization.
All this being said, I would still recommend that your organization buy additional liability insurance for these events. Why? Event insurance, which is in the form of a rider, is relatively reasonable, especially when you are looking to cover only a single occurrence. If something does go wrong and the event is being held in your name, someone looking for a deep pocket to go after may find yours very inviting. While ultimately your organization may be held blameless, you could have to invest a lot of time and money in defending the organization until such a judgment is made.
You probably don’t have to be concerned with event cancellation coverage since you will not be the ones out of pocket if for some reason the event doesn’t fly. But, again, I would ask your insurance agent on a case-by-case basis. Be very clear about what the event will entail, where it will be held, how many people are expected, whether liquor will be served, and so on.
Most events will come off without a hitch. Insurance is for that rare occasion when it doesn’t. You’ve already determined that you can’t really risk it. Now you need only determine the degree to which you will protect your organization.