Uninvited Liability:

etween guests, employees, contractors, suppliers, vendors, franchise partners, and investors, hotels and resorts have enough legal headaches just dealing with the people they actually do business with. The last thing they need is a legal hassle arising from a non-guest: someone who likely doesnt contribute (directly or indirectly) to the companys bottom line. Unfortunately, any facility opening its doors to special events, including weddings, conferences, banquets, and receptions, will typically see thousands of nonguests gate crashers and other freeloaders walking through their doors every year, each and every one a potential claim waiting to happen. High school proms bring the added wrinkle of bringing large groups of underage kids together for one last bash before the school year ends. And because the non-guest usually has nothing at stake (its not their credit card on file), things can get out of hand in a hurry. All risk, no reward not a good combination.

How Hotels Can Mitigate Risks To Non-Guests

Indemnity, however, is just the first step. It does a hotel no good to be indemnified by an entity that doesnt have enough money to pay for losses arising from the mishaps that may occur during their event. Thats why all of the hotels standard agreements need to include specific insurance requirements. Under these provisions, event planners and hosts are required to (1) buy insurance in a specified amount to cover liabilities arising from their events and (2) name the hotel as an additional insured under the policy. That way, the hotel has a direct right of action to enforce insurance rights should a dispute Indemnity provisions require one arise with the insurance company. party (the indemnitor; e.g., the high Further, a resorts protection under school hosting its prom) to protect their clients insurance policy may and hold harmless the other party cover a broader range of liabilities (the indemnitee; e.g., the hotel) than what may be permitted under from liability according to the a standard indemnity agreement. terms of the parties agreement. The scope of how much and what Finally, and most importantly, kinds of liabilities can be subject hotels need to follow through Hotels and resorts can do a number to an indemnity agreement varies and make sure their eventof things to protect themselves from jurisdiction to jurisdiction. hosting clients actually arrange from these walking liabilities. First, Standard form agreements should the insurance required under the and most obvious, is mitigating be regularly reviewed to ensure agreement. A contractual insurance

the risk through operations. Wellplanned events, increased security, properly trained staff, clearly communicated expectations, highly specific emergency and contingency plans all of these help reduce the natural risk from large special events attended by throngs of non-guests. Its an overused clich, but it applies here: an ounce of prevention is worth a pound of cure. But no amount of preparation can fully eliminate all risk. Thats why all hotels and resorts need to take special care in drafting two important provisions of their standard contracts: indemnity and insurance. These two provisions, working together, increase the hotels ability to draw on third parties to pay for claims (and losses) when calamity ensues.

that hotels are indemnified from as much liability as permitted under the law of their jurisdiction.

requirement is almost completely worthless if the insurance is never actually purchased. When that happens, the hotels only recourse is to turn to their client to cover the would-be claims (and it is their clients questionable financial ability to cover those claims that led the hotel to require insurance in the first place). Although some insurance policies include so-called automatic additional insured clauses, many do not. Most agreements require that the procuring party provide proof of insurance, which usually entails a certificate of insurance showing the hotel is added as an additional insured. A certificate, however, is not part of the insurance policy, and does not ensure the hotels coverage. At the very least, hotels should require their clients produce a copy of the endorsement showing the hotel was properly added to the policy. Even better, hotels should require (when plausible) an actual copy of the complete policy required under the contract. Certificates, declarations, and endorsements display only the most basic information; a review of the actual insurance policy is necessary to determine whether it sufficiently protects the hotels interests.

Coordinating the sometimes overlapping, sometimes conflicting indemnity and insurance provisions in a propertys contracts can be difficult. Not only must these provisions appear in all of the event-related contracts, but they are critical in all contracts with any vendor or contactor engaging guests and non-guests. Many resorts outsource management of certain on-site operations to national chains e.g., of coffee shops, restaurants or bars to add name brand recognition to those operations. The stakes are even higher when these third party contractors engage non-guests in potentially high-risk transactions. For example, a hotel may use a national bar and grill chain to operate its on-site restaurant, which then serves alcohol to nonguests of the hotel. Although the hotel may have no dealings with these bar patrons, the hotel will certainly be a targeted deep pocket in the event of an accident (or worse). These dealings add yet another level of complexity if the outsourced contractor is providing services to a special event bringing large numbers of non-guests to the resort. Coordinating the indemnity and insurance provisions of all these contractual arrangements

requires a strong commitment to detail that cannot be overstated. Hotels and resorts always need to be proactive in both their operations and their contractual arrangements to mitigate all manner of risks. Commitment to these principles is all the more important when it comes to protecting the company from the possible claims arising in engaging non-guests, who are a source of only risk, and not reward. About the Author: J o s e p h G. Balice (jbalice@ andersonkill. com) is an attorney in the Ventura, California, office of Anderson Kill & Olick, P.C. Mr. Balice primarily focuses his practice on insurance recovery and commercial litigation. For more information about Anderson Kill, please visit www.andersonkill.com