Money

Liability Insurance: What you need to know

Why Does the Fraternity Make Liability Insurance Coverage Available to Undergraduate Chapters?

One of the benefits of membership in Delta Tau Delta is the opportunity to have a significant amount of liability insurance coverage at a group-discounted rate. The coverage protects the local chapter, its officers and members, the house corporation, appointed volunteers, and the international Fraternity from claims arising from incidents of bodily injury and property damage. It also protects against claims arising out of libel, slander, false arrest, invasion of privacy, eviction from premises, consumption of food and beverages, and individual malpractice.

Other insurance coverage included in Delta Tau Delta's risk management program includes directors and officers liability coverage, fidelity coverage and a member accident protection plan for undergraduates.

How is Liability Insurance Calculated and Billed?

The Calculation

Each year the Fraternity's Central Office staff receives numerous telephone calls from undergraduate chapter officers inquiring as to why their chapter was invoiced so much for liability insurance and asking for an explanation of the insurance calculation.

A standard per-man rate is calculated and used as the starting point. It is based on the annual insurance premiums paid directly by the Fraternity to insurance carriers and the other deductibles, reserves and overhead costs involved in providing the Fraternity's risk management program. From this standard, three criteria may increase or decrease a chapter's per-man rate. Those are:

1. The legal environment of the state in which a chapter is located, as provided by the insurance company.
2. An adjustment based on the chapter's living arrangement. It is based on whether a chapter is housed in an owned facility, housed in a rented facility, or does not have a common housing arrangement.
3. Whether a chapter has had an incident within the past three years that has resulted in a loss claim to the Fraternity's insurance program. Those losses are categorized in three ranges: $2,500 to $10,000; $10,000 to $200,000; and more than $200,000. An MRG level III violation during the previous school year is also treated the same as a $2,500 to $10,000 loss.

Application of these three factors may decrease or increase the per-man rate of a chapter. Across Delta Tau Delta, the average per-man rate is approximately $175.

The Billing

Each chapter's adjusted per-man rate is then multiplied by the number of annual dues the chapter was billed during the most recent fiscal year period (August 1 through July 31) to determine the liability insurance billing for the current period. Several checks and balances are in place to verify that this annual dues number is truly reflective of the "exposure" the chapter represents to the insurance program.

Determining The Headcount

Chapter membership is a moving number as men join and depart from undergraduate chapters throughout the school year. The most fair, measurable, and accurate number the Central Office has for spreading the liability insurance costs across the Fraternity is the annual dues count for each chapter from the most recent fiscal year.

Adjusting for the Unusual

Liability insurance headcounts may be reduced to accommodate an atypical year in a chapter where a significant decline in membership has occurred. Those would include situations such as numerous expulsions or other known serious problems.

Another typical adjustment occurs if "carryover" spring pledges were initiated during the same year that current year spring pledges were initiated, thus artificially inflating a chapter's headcount. In that case, the previous year's spring pledge numbers are subtracted from the annual dues count so as to not "double-count" members.

Finally, annual dues totals are compared from one year to the next to identify major fluctuations that still need to be explained and adjusted.

Factoring in Total Exposure

Chapters often complain they are being billed for xx men when only yy men returned to school in the fall. This scenario is true for every chapter! The liability insurance billing represents the total "exposure" the chapter is expected to have over the period of August 1 to July 31. Chapters will be pledging and initiating new men during the course of the year. But from year to year, they should typically maintain consistent annual dues numbers. If not, the inconsistencies should be flushed out during the checks and balances process of the insurance billing calculation described above.

The Central Office does not have any way of knowing how many men will return to school in the fall for each chapter and colony. Even if it did, the total insurance dollars that need to be spread among the members would still be the same. The only difference would be that the number of men the dollars are divided by would be smaller and therefore the cost per man would increase.

Colony Calculations

Colonies are billed a subsidized flat rate amount per man based on the number of annual dues paid for the previous period and/or based on a percentage of the number of men who were pledged during the period.

How Can My Chapter Control Its Costs?

Due to claims in recent years, there have been significant increases in premiums across the insurance industry. This is an industry-wide trend and does not pertain only to the fraternity segment. However, members of Delta Tau Delta and other fraternities have an opportunity to control at least a portion of their premium by following prudent risk management procedures. Undergraduate chapters exert considerable influence at the local level within their chapter and across the campus culture. Please do your part in controlling costs by living a life committed to excellence.

cc: Chapter Presidents
Chapter Treasurers
Chapter Advisors
House Corporation Presidents
House Corporation Treasurers
Arch Chapter Members
Division Vice Presidents
Chapter Consultants