Risk Management
Insurability Checklist
Evaluating Your Legal Liability
The Checklist consists of lists of questions about club policies, programs or procedures that could carry legal liability risks.
The Checklist can be used by a club as an organization management self-evaluation document to help understand and evaluate the
potential risks they might face.
Subjects addressed in the Checklist were identified through studies of areas in which claims against clubs covered by D&O have most often been brought.
You Can't Pass or Fail
It must be emphasized that the Checklist is not an objective criterion document, but instead a
subjective evaluation document. The Checklist is not a test that a club can "pass" or "fail." Although the questions are designed to be answered either
"yes" or "no," there are no right or wrong answers for all clubs in all circumstances. In most cases the answer "yes" suggests a low risk
for the club and the answer "no" suggests that consideration should be given to whether a risk exists and whether it is acceptable
to the club. But a club's answers will not necessarily identify the club as one that is, or is not, "liable" or one that is, or
is not, "insurable." Legal liability for a club can only be assessed with respect to its specific factual situation under
applicable legal authority. Ultimately, only a court can determine if a club is "liable" when the club is challenged. Whether the club is likely to be
able to secure insurance indemnification depends upon underwriting guidelines, available underwriting authority and other internal insurance
company factors when the club applies for insurance. Ultimately, a club is "insurable" only if it is actually offered acceptable insurance
coverage by a reputable insurance company.
You Can Reduce Your Risk
The exercise of attempting to answer the Checklist can be valuable, however, because the questions do relate closely to liability and insurability. Use of the Checklist may lead a club to more knowledgeable planning to eliminate or reduce unnecessary liability risks. Even if the club has no liability insurance and is "self-insured," this exercise can help make it a better risk. Use of the Checklist may lead an insurance company to more knowledgeable consideration of what coverages to offer, what conditions to specify, and what premiums to quote. This should reduce losses, improve insurers' profitability, attract insurers to the D&O market, and make the insurance more easily available to clubs.
Insurability Checklist
Contracts
Publications
Personnel
Finances
Meetings
General
Contracts
1. Does the club use a written contract signed by all parties whenever
it becomes committed to a significant legal, financial or other obligation?
2. Are contracts reviewed by staff before they are signed to assure that they
contain all of the intended and acceptable terms such as for price or fee, date
of delivery or performance, interest or penalties and termination or cancellation?
3. Are contracts reviewed by legal counsel before they are signed to assure
that they contain minimum requirements, are legally enforceable, do not violate
the law or present unanticipated tax or tax exemption problems, other problems?
4. Does the club insist that every contract it enters into, no matter
who drafts the contract, must be written in "plain English" - with simple and
understandable statements of terms and conditions?
5. Are any changes in the arrangements contained in a written contract made
only by insertions that are initialed by all parties or by use of a separate
written agreement signed by all parties?
6. Does the club assure itself that the individual negotiating on behalf
of the other party actually has the authority to bind that other party?
7. Is there an established policy as to who among the volunteers and
staff is specifically authorized to bind the club to legal, financial, or other
obligations?
8. Are volunteers and staff periodically advised regarding authority to bind
the club?
9. When several aspects of a function or arrangement must depend on one another
for success, are related contracts for each aspect specified as contingent upon
one another - for example, committing through different contracts with several
hotels and a convention center to be used simultaneously for a large meeting,
or committing through different contracts with separate suppliers of computer
hardware and computer software?
10. When a contract incorporates another document into its terms by reference
to that document, is the other document obtained, reviewed, approved and attached
to the contract?
11. Does the club specifically assign someone to monitor performance
under the terms of the contract by all parties involved?
12. When a contract provides that it is automatically renewed unless terminated
by a specified date, is that date carefully logged on a permanent calendar to
assure against unintended automatic renewal?
13. Are original, signed copies of contracts maintained in secure and permanent
files?
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Publications
1. Do the club's publications carry a copyright notice--the word "Copyright",
the abbreviation "Copr.", or the "c" in a circle symbol, followed by the date
of first publication and the name of the copyright owner?
2. Are important club publications registered with the Copyright Office
of the Library of Congress?
3. Does the club assure that it owns the copyright for its publications
and their content under the "work for hire" doctrine--either the work is created
by a club employee who receives a salary or by someone else who is paid
an author's fee or honorarium?
4. Where a work is created "for hire," is the ownership established in writing?
5. Does the club avoid copying or re-publication of copyrighted works
of others except for excerpts, samples or other portions under the "fair use"
doctrine?
6. When an infringement of the club's copyright is discovered, is the
infringer pursued legally?
7. Does the club avoid libel by assuring that all statements in its
publications which criticize individuals, firms, products or services can be
supported as fair and accurate from clear evidence?
8. Does the club invite individuals or firms whose products or services
are criticized in the club's publications to respond to the criticism
in advance of publication?
9. Is the response published?
10. Does legal counsel review publications in advance that contain potentially
libelous statements?
11. Does the club endorse or recommend particular products or services
in its publications?
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Personnel
1. Does the club avoid discrimination in hiring, firing and other employment-related
decisions?
2. Does the club check all references provided by candidates for employment?
3. Does the club generate and check additional references?
4. Does the club distribute a personnel manual to
all employees?
5.
Are all of the provisions of the manual uniformly applied?
6. Does the manual include job descriptions for all employees, list all employee
benefits and provide for periodic evaluation against specific criteria?
7. Is the manual specific as to vacation benefits and the availability of "carry-forward"
of unused vacation?
8. Are the job evaluation criteria objective, reasonable, and consistently
applied?
9. Does the manual include criteria for determining when an employee is disabled
and what the consequences and benefits are, if any?
10. Does the manual specify whether such conditions as AIDS are considered
disabilities?
11. Does the manual make clear that staff are "employees-at-will" subject to
termination at the discretion of the club?
12. Does the manual specify termination procedures and severance benefits,
if any?
13. Is the manual reviewed on a regular basis by legal counsel to assure compliance
with applicable laws?
14. When an employee's performance is inadequate, are procedures consistently
applied for notification to the employee, establishment of goals and deadlines
for improvement, and recording of the situation in personnel files?
15. Does the club have a plan for quickly confronting and resolving
instances of workplace abuse of alcohol or drugs?
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Finances
1. Does the club obtain an audited financial statement at least annually?
2. Are periodic interim financial reports issued to the governing board of
the club?
3. Is a budget prepared each year, approved by the governing board, used to
measure financial performance of the club, and adjusted when necessary?
4. Is the club's bookkeeper bonded?
5. Are internal financial and bookkeeping procedures in place, approved by
the governing board, and reviewed periodically with weaknesses noted?
6. Is a segregation of duties maintained among those with financial and bookkeeping
responsibilities?
7. Is access to club funds limited to specified individuals and in specified
amounts, with the club's bank notified of the amounts beyond which counter-signatures
are required?
8. When cash is received at the club's office or at conventions, are
special procedures in place to assure control?
9. Are short-term and long-term plans or protocols for investment of association
funds in place, reviewed periodically by the governing board, and revised when
necessary?
10. Are all employee benefit programs reviewed periodically for compliance
with applicable laws?
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Meetings
1. Is each club meeting held according to a notice and agenda distributed in advance to attendees?
2. Are those who preside at club meetings made aware by staff or legal counsel of subjects that must not be discussed because of potentially adverse legal ramifications?
3. Are attendees at club meetings admonished against discussion of subjects with potentially adverse legal ramifications?
4. Are minutes taken of club meeting proceedings?
5. Do the minutes record all or most comments, views, criticisms, considerations or discussions of each subject rather than merely reports, communications and resolutions?
6. Are minutes prepared by staff rather than by volunteers?
7. Are draft versions of minutes removed from the club's records once the final version is approved?
8. Are minutes reviewed by legal counsel before distribution?
9. If audio recordings are maintained of club meeting proceedings, are they destroyed after use in preparing written minutes?
10. Are "rump," "secret" or "off-the-record" meetings by the club or among its leadership or members prohibited and avoided?
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General
1. Is the leadership or membership of the club otherwise routinely advised,
through oral or written communications, regarding avoidance of potential legal
liability?
2. Is the club managed by one or more experienced and knowledgeable professional club executives?
3. Has the executive attended educational programming on
legal liability of clubs?
4. Does the executive receive and review books, periodicals or other
literature covering club law?
5. Is qualified legal counsel available either "inside" (on staff) or "outside"
(on a retained basis) to consult regarding potential legal liability situations?
6. Is legal counsel specially knowledgeable and experienced in
club law because of professional memberships, educational seminars, legal
publications, or representation of other clubs?
7. Does consultation with legal counsel typically occur when potential liability
situations are first identified rather than later when a claim or challenge
is received?
8. Does legal counsel attend meetings of the governing board of the club?
9. Does legal counsel regularly receive and review minutes, communications
and publications of the club?
10. Does the club have governing documents--a corporate charter, bylaws,
and a compilation of policies and procedures--that clearly specify the rights
and obligations of members, directors, officers and staff?
11. Are the governing documents periodically reviewed to make them
current and consistent with present interpretation of club law?
12. Is the purpose of the club stated clearly in its governing documents
with no implication of illegality?
13. Are volunteers or staff indemnified through the governing documents or
otherwise?
14. Is there an established policy as to who among the volunteers and
staff is specifically authorized to communicate outside the club its views,
comments and positions?
15. Are volunteers and staff periodically advised regarding authority to communicate
on behalf of the club?
16. Are volunteers prohibited from using club letterhead except when
authorized for a specific task, project or purpose?
17. Has the club previously carried any form of "errors and omissions,"
"directors" and officers" or "club professional liability insurance"?
18. Were there no claims made under that insurance?
19. Has that insurance been terminated?
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