Chapter Facility Management,

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Chapter Facility Management, Insurance
Liability
Ned Kirklin Managing Director, HRH/Kirklin Co.,
LLC
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• Background of HRH/Kirklin Co, LLC.

• 100 dedicated to serving college student and
  alumni organizations
• Founded in 1991 as Kirklin Company, now a
  wholly subsidiary of Hilb Rogal Hobbs (HRH)
  since 2002
• Insurance and Risk Management programs provided
  to numerous college student and alumni
  organizations
• 52 NIC fraternities
• 5 NPHC fraternities sororities
• 12 NALFO fraternities sororities
• Professional co-educational fraternities
• Numerous local and small fraternal organizations
• Over 1,300 fraternity properties insured through
  the Fraternal Property Management Association
  (FPMA)
• Insurance Brokerage Agency
• We work for you, not the insurance
  adjuster/underwriter

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• Exposures of fraternal
• organization volunteers

• Purchase of inadequate property insurance
• Lack of due diligence by Alumni/House
  Corporation officers to search out and purchase
  the best available property insurance, in terms
  of breadth and cost, can result in uninsured
  property losses and inadequate funds to rebuild a
  chapter facility. The financial shortfall can
  potentially lead to a lawsuit brought against
  individual directors for failure to fulfill their
  fiduciary duties to the Corporation. The legal
  term is derivative action where the interested
  alumni are actually suing on behalf of the
  Corporation with recovered assets going to the
  benefit of the Corporation.
• The critical issue as an Alumni/House
  Corporation officer is to never be penny wise and
  pound foolish. Do not put yourself in a situation
  where you have to ask for donations from alumni
  members to raise money that should, could, or
  would have been paid by an insurance program
  this lack of effort to review options and buy the
  most comprehensive program available in the
  market may lead to uninsured losses and
  accusations of fiduciary negligence.
• Violation of contract/housing agreement

It is important to closely monitor tenant rights
within your jurisdiction to make certain any
eviction of a tenant or member due to
disciplinary action or lack of rent payment is
done so in accordance with local requirements.
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• Exposures of fraternal
• organization volunteers (continued)

• Employment practices liability
• Claims for discrimination, harassment and
  wrongful termination by chapter cooks, house
  mothers or resident advisors do arise in a
  chapter setting out of the employer/employee
  relationship. Even if the undergraduate chapter
  is the technical employer the Chapter Advisor(s)
  and Alumni/House Corporation will not be spared
  in any litigation. It is important that
  appropriate supervision is provided to monitor
  the relationship between the employer and
  employee. If insurance protection is desired for
  Employment Practices Liability (EPL) exposure it
  can be included under most non profit DO
  insurance policies.
• Wrongful termination of membership
• Proper adherence to the disciplinary policies
  and expulsion procedures of the organization are
  critical when dealing with matters of discipline
  or financial delinquency. Failure to do so has
  led to claims for financial loss/harm by the
  individual who believe he has been wrongfully
  expelled. To a lesser extent claims have been
  brought by family of legacies who believe their
  descendent was owed or promised membership.

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• Claim Example
• Careless smoking

• University of Oregon (August 2003)
• Third story smoking deck allowed
• Ashtray was a 5 gallon plastic bucket
• 800,000 in damage

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• Claim Example
• Improperly stored materials

• Chico State University
• Mattresses stored next to the facility
• Fire started by arsonist
• 600,000 in damage

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• Claim Example
• Arson/Chapter Closure

• Arkansas State University
• (July 2002)
• Chapter closed due to member conduct
• Suspected members set the fire
• Central alarm station was never serviced and not
  working
• 1,200,000 in damage

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• Fiduciary Responsibilities
• House Corporation Directors

• Each house corporation board member has a duty
  of
• Diligence
• Loyalty
• Obedience

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• Fiduciary Responsibilities
• House Corporation Directors (continued)

• Articles of Incorporation
• Annual Return Filing with State/Federal
• Contracts and Lease Agreements
• Physical Plant Upkeep
• Proper Insurance
• Workers compensation
• General liability
• Property Coverage
• Financial records maintained

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• Responsibilities
• House Corporation Directors

• Provide general advice and guidance to
  undergraduate officers in managing the facility
  and property
• Supervising of long-term housing, authority for
  financial details related to housing, and
  direction of planning for future housing needs,
  including management of the chapters reserve
  fund
• Coordination of general alumni activities,
  communications and reunions to encourage the
  alumni to continue their interest and support of
  the chapter and the Fraternity, especially if
  there is no alumni chapter
• Meet regularly to review the rent, finances,
  upkeep on the physical plant, insurance coverage,
  and to provide input to the bylaws of the chapter
  that relate to the house corporation

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• Additional Responsibilities
• of the House Corporation

• Develop individual lease agreements for members
  and general tenant lease agreement for chapter
• Develop standard facility rules and policies (ex.
  no smoking, candles, space heaters, extension
  cords, etc.)
• Employ a professional property management company
  to perform regular maintenance and repairs for
  the facility
• Assure the facility is properly prepared for
  seasonal and school breaks, regardless if members
  are in the facility
• Operate the facility and corporation in line with
  all applicable laws and regulations (federal,
  state, local)

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• Additional Responsibilities
• of the House Corporation

• Develop clearly defined roles and
  responsibilities for all chapter employees (cook,
  house director, resident advisor) with due
  diligence in selection/screening process
• Financial accounts maintained accordingly with
  audit and review performed by CPA, co-signature
  on all checks, and reconciliation of accounts
  performed by a third party without access to
  accounts

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• Lines of Defense to Risk

• There are three basic lines of defense against
  any tort liability claim.
• Loss Prevention
• Loss Control
• Insurance Contract

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• Facility Maintenance

• Mechanical items and systems professionally
  inspected and serviced on an annually or more
  frequent basis
• Plumbing system professionally inspected and
  serviced on an annually or more frequent basis
• Electrical and emergency systems professional
  inspected and serviced on an annually or more
  frequent basis
• Roof professionally inspected and serviced on a
  biennial basis
• Foundation and overall structure professionally
  inspected and serviced
• Self inspection process in place and conducted on
  an annual or more frequent basis

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• Fire Health Safety

• No smoking policy, smoking only allowed outside
  of facility on level surface with appropriate
  disposal receptacle
• Fire sprinkler system installed throughout the
  facility, including member suites and common
  areas
• All appropriate fire safety regulations are met
  and/or exceeded, including kitchen areas, member
  suites and common areas
• Proper posting of evacuation plans in member
  suites and throughout facility, especially common
  areas
• Participation in regular fire drills with results
  reviewed by corporation board and property
  manager

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• Fire Health Safety (continued)

• Central alarm system updated with proper
  monitoring devices such as hard wired
  detectors, audible (bell) and visual (strobe)
  alarms
• Electromagnetic self-closing doors for hallways
  and stairwells as well as proper fire rated doors
  on external exits and throughout the facility
• Exterior doors and windows properly close and
  latch, meeting all necessary building and fire
  requirements
• The interior and exterior of the facility is
  clear of extraneous debris, reducing
  possibilities for arson and/or vandalism
• Supply of paint and other combustible materials
  is store in a dry and secure area

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• Facility Renovations

• Electrical systems updated to meet current
  building standards as well as accommodate for
  modern amenities such as computers, televisions
  and other small electronics
• ADA updates for facility including walkways, door
  handles, bathroom fixtures and other common areas
  and/or specific living areas

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• Evaluating your Rent

1. House Corporation Rent Market Value x 1
for 12 months operating expenses Rule of
thumb often used in connection with apartment and
rooming houses 1,000,000 (MV) x .01 x 12
120,000 40,000 (OE) 160,000 2. House
Corporation Rent Market Value 5.25 This
formula is another rule of thumb used in
connection with rooming houses. The divisor is
dependent upon local market conditions and may be
determined by dividing the selling prices of
rooming house properties that have been sold by
their gross incomes. 1,000,000 (MV) 5.25
190,476 3. House Corporation Rent Gross
Income of Chapter 3 Rule of thumb developed
by the University of Minnesota 70 members x
5,000 per member annually (GI)
350,000 350,000 GI 3 116,667
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• Is your property properly injured?

• Replacement Cost
• (Lehigh University)
• Fire started by light fixture in closet, chapter
  house was under-insured because the insured value
  was based on a tax-assessed value and not a
  replacement cost value
• Ordinance Law Endorsement (University of
  Missouri-Rolla)
• Chapter house fire started in boiler room, no
  ordinance and law endorsement within the policy,
  insurance did not cover cost to rebuild at
  todays building and safety code

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• Chapter Property Insurance

• Fraternal Property Management Association (FPMA)
• provides educational assistance to fraternity
  volunteers in an effort to strengthen their
  ability to manage the chapter properties of their
  fraternal organization
• provides a comprehensive and competitively priced
  property insurance program to protect the
  physical plants that house the undergraduate
  members
• Benefits of participation in FPMA
• A semiannual FPMA newsletter that focuses on risk
  management and issues facing property managers
  and their fraternity or organization
• A property insurance program that provides in
  most cases, broader insurance coverage for less
  premium
• A biennial inspection that provides
  recommendations for physical plant improvements,
  addressing life safety and property conditions,
  along with completion of a replacement cost
  valuation
• Security of knowing coverage will still be
  available at an
• affordable rate even after a significant loss

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• Chapter Property Insurance
• Coverage Opportunities

• Agreed Amount
• Provides for removal of coinsurance clause
  ensuring the chapter will not be personalized for
  unintentional undervaluation of a chapter
  property
• Replacement Cost
• Provides for replacement of building and contents
  owned by chapter or alumni association/housing
  corporation
• Business Income (loss or rents)
• Provides for the payment of rental income to the
  house corporation that would otherwise be lost if
  the house can no longer be occupied due to fire
  or to other extensive damage that prohibits
  occupancy
• Extra Expense
• Provides for the payment of additional expenses a
  chapter or corporation might incur if a fire or
  extensive property damage requires extraordinary
  expenditures
• Law Ordinance
• Provides the additional funds necessary to bring
  a damaged structure
• up to current building and safety code
  requirements following a fire
• or other extensive damage to the chapter
  facility

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• Chapter Property Insurance
• Discount Opportunities

• 50 discount for first full and partial policy
  term and subsequent policy term following fire
  sprinkler installation
• 30 discount for fire sprinkler installation in
  third full policy term and thereafter
• 10 discount for modern and safe facilities
  (construction or major renovation of facility
  after January 1, 1990)
• 10 discount for employing a professional
  property management company
• 5 discount for multiple locations (adjacent
  housing)
• 5 discount for completion of a strategic
  assessment
• with Pennington Company

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• FPMA Participants at the University of Illinois

• Alpha Chi Rho
• Alpha Chi Sigma
• Alpha Delta Phi
• Alpha Epsilon Pi
• Alpha Gamma Rho
• Alpha Sigma Phi
• Alpha Tau Omega
• Beta Theta Pi
• Delta Chi
• Delta Phi
• Delta Tau Delta
• FarmHouse
• Kappa Delta Rho
• Kappa Sigma

• Phi Kappa Psi
• Phi Kappa Tau
• Phi Kappa Theta
• Pi Kappa Alpha
• Pi Kappa Phi
• Pi Lambda Phi
• Sigma Alpha Epsilon
• Sigma Nu
• Sigma Phi Delta
• Sigma Pi
• Sigma Tau Gamma
• Theta Xi
• Zeta Beta Tau
• Zeta Psi

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• Property Inspections for facilities
• participating in FPMA

• HRH/Kirklin contact Kathy Payne, Inspection
  Coordinator
• kpayne_at_kirklin.com or 1-800-736-4327, extension
  201
• Inspections performed on at least a biennial
  basis for all properties
• Recommendations and requirements for improvement
  and necessary updates provided, regarding fire,
  building and safety regulations
• Facilities failing to meet requirements inspected
  on an annual basis until recommendation are met
  at a satisfactory level or subject to possible
  cancellation of policy
• Inspections performed in addition to that of
  health and fire safety of local governing
  authorities

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• Loss Control
• What to do in the event of a property loss

• HRH/Kirklin contact Rich Jungman, Manager-Claims
  Client Services, rungman_at_kirklin.com or
  1-800-736-4327, extension 215
• Notify the fire emergency services and obtain
  medial attention for any injured parties. Notify
  the police if laws have been broken.
• Obtain temporary housing for any displaced
  residents of the fraternity.
• Do what is reasonable and necessary to protect
  property from further damage. Keep records and
  receipts of expenses to be filed with your claim.
• Notify insurance agent of the loss as soon as
  possible.
• If feasible, separate damaged/undamaged items and
  conduct an inventory. Take photos of all damaged
  property, once the facility and general area are
  secured.

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• Estimation of annual premium

• Copy of current property insurance coverage
  policy
• Simple comparison in breadth of coverage, annual
  premium and FPMA benefits

Emily Fay Marketing Assistant efay_at_kirklin.com 1-8
00-736-4327 Extension 217
Susanne Haas Marketing Assistant shaas_at_kirklin.com
1-800-736-4327 Extension 203
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• Resources available online at www.kirklin.com

• FPMA application
• Sprinkler discount application
• FPMA informational brochure
• Property Management Educational Resources
• Risk Management Educational Resources

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Thank You!
Ned Kirklin Managing Director nkirklin_at_kirklin.com
1-800-736-4327 extension 200