Date: 1 June 2002, Issue 29 Liability Insurance Incorporation, and Other Matters About Bill Bates Links to other "Interactive" columns View Feedback | Say "HI" Email Notification of (Feedback) updates!

The Need for Insurance

Upon consulting brokers in our area we learned that insurance companies no longer write coverage for "one-day events" and the minimum policy written would need to be for one year. Further, no company seemed interested in our business (calls not returned, etc.) and the cost was estimated to be in the region of $800 to $1000. This pretty much was the minimum profit we hoped to make on the Sing ... and our ticket prices had already been set at what we felt was the maximum price for our area and type of show.

The Venue's Insurance Does Not Protect You

So now we needed coverage to protect us not only from items we brought into theater, but from mishaps that might occur resulting from the theater and its equipment. For example (according to this broker), if someone walking down the aisle to their seat, tripped and broke a hip or had some other accident, their lawyer could sue both the theater and the organizers as. It seems that our chorus' decision to obtain insurance coverage was the right one for more than one reason.

Is Incorporating An Alternative?

The first chorus we consulted (we'll call them Chorus A) had the services of a beginning lawyer who explained that once incorporated they would become an "entity" under the law and could only be sued up to the value of the entity's (Chorus A's) assets. That sounded good and if that was the case it would be possible for us to live with the risk rather than take out liability insurance every time we planned an event.

We then consulted a second chorus (Chorus B) in our district who also had been incorporated and while they were advised of certain protection as an incorporation, they were given to understanding that there were still liability risks to individual members. Chorus B, therefore took out an annual policy for "participant" liability insurance with additional coverage for their sound equipment and risers. There seems to be a major difference in interpretation from Chorus A's lawyer to Chorus B's lawyer. What then IS the value of incorporating? Here was Chorus B's response:

"Of course one of the bonuses of being incorporated allowed us to apply successfully for a Trillium Foundation Grant (eg. lottery proceeds). One of the prerequisites for applying is that the organization must be incorporated. Since Trillium money is readily available, the cost to incorporate is a good investment."

..... and they go on to quote a section of their registered by-laws which in part explains why it is important to incorporate:

21. No Director or officer of the Chorus shall be liable for the act, receipts, neglects or defaults of any other Director or officer, or for joining in any receipts or other act for conformity, or for any loss or expense happening to the Chorus through the insufficiency or deficiency of title to any property acquired by order of the Board of Directors for or on behalf of the Chorus, or for the insufficiency or deficiency of any security in or upon which any of the moneys of the Chorus shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortuous act of any person with whom any of the moneys, securities or effects of the Chorus shall be deposited , or for any loss occasioned by any error of judgment or oversight on his part, or for any other loss, damage or misfortune whatsoever which shall happen in the execution of the duties of his office, or in relation thereto, unless the same shall happen through his own dishonesty.

22. Every Director or officer of the Chorus and his heirs, executors, and administrators, and estate and effects, respectively shall, from time to time and at all times, be indemnified and saved harmless our of the funds of the Chorus from and against:

      a) all costs, charges and expenses whatsoever which such Director or Officer sustains or incurs in or about any action, suit or proceeding which is brought, commenced or prosecuted against him, for in respect of any act, deed, matter or thing whatsoever made, done or permitted by him, in or about the execution of the duties of his office;

      b) all other costs, charges and expenses which he sustains or incurs in or about or in relation to the affairs thereof, except such costs, charges or expenses as are occasioned by his own willful neglect or default.

Different Opinions on the Benefits of Incorporation

We then contacted Paul Michael Hassett, the Associated Male Choruses of America legal counsel and he consulted with an Ontario colleague before giving his opinion. Within the week we had a telephone call from Paul stating that the laws in New York State where he practiced and Ontario did not to differ on this point - "The whole theory of incorporation is founded on limitation of liability for individual members I don't understand why you are being told otherwise...!" There is no doubt in Paul's mind about this issue.

During this investigative process we had now approached four different insurance brokers and everyone told us that incorporation would not protect our members from liability. (One said that it might be "a bump in the road" but it would not protect us. Two were friends so we were reasonably sure that they were not just trying to sell us insurance that we did not require.

At this juncture we were now faced with differing options between lawyers and lawyers and some lawyers and all brokers consulted. A frustrating and worrisome position to be in!

Yet Another Problem Surfaces

With this in mind, we again contacted the theater's broker and asked him to act in our behalf and obtain a quote. Yet another problem surfaced! Since our chorus was not incorporated nor registered as a legal entity, insurance companies we were informed would not write a policy for us. It seems that unless we did one or the other, the policy would need to name each and every member and volunteer involved in our event, something that they just would not undertake to do.

So now we have the necessity of making a choice to either incorporate or register our chorus before we can obtain insurance! And to that we will need to add the cost of liability insurance. Since registration is less expensive, we decided to investigate that possibility then consider incorporating at some future time.

Encouraging News

This sounds great and we are now at the point of investigating registering our chorus and then will try to obtain a policy with Chorus B's company. I hope to be able to write the final chapter of this saga next month for your interest.

We also trust that the experiences related in this column will cause other choruses to re evaluate their insurance needs in the light of no clear cut opinion on the benefits of incorporation as it relates to protection for individual members.

Bill