The responsibility to respond to our members' coverage questions and provide coverage interpretation primary falls on OMAG’s Underwriting and Member Services Departments with support provided by OMAG’s Legal and Risk Management Departments. Providing a clear and consistent response to these inquiries is always our goal.
Our members occasionally ask “Are we covered for special events that take place in our municipalities? What if someone is injured in our park or one of our buildings when these special events take place? What if we lease our park or a building to a private group?
OMAG has prepared a loss bulletin to assist our municipalities in identifying the various areas of liability created under these circumstances and to provide suggested ways to avoid the risk entirely or to shift the risk primarily to more appropriate persons or entities. Please take a moment to review the loss bulletin attached and share it with your municipal administrator and board.
Special Events and Use of Facilities Exposure Loss Bulletin
OMAG frequently receives inquiries from its member cities and towns (“municipalities”) concerning liability for special events. Questions arise regarding city/town liability to someone injured while on the premises of municipal facilities, such as parks, auditoriums, or fairgrounds. Is a municipality’s liability any different when the municipal facilities are leased to third parties for special events such as firework displays, arts, and crafts festivals, rodeos or carnivals? The purpose of this bulletin is to assist member municipalities in identifying the various areas of liability created under these circumstances and to provide suggested ways to avoid the risk entirely or to shift the primary risk to more appropriate persons or entities.
Hold Harmless Agreements and Certificates of Insurance
Many municipalities require every group that exclusively uses a public facility, to provide a Certificate of Insurance and Hold Harmless Agreement as a method of protecting the municipality from future claims or lawsuits. In the event the group has an insurance policy, the city or town should require that it be named as an “Additional Insured” under the Certificate of Insurance.
The purpose of requiring the Certificate of Insurance is to make certain that the group has the financial means available to compensate an injured person. Naming the municipality as an additional insured gives the municipality the ability to seek coverage under the policy should the primary insured fail to do so. If the injured person can recover for his injuries from the group through the separate insurance policy, the injured person is less likely to look to the municipality for compensation. Conversely, if the group has no means of compensating the injured person through its own insurance policy or otherwise, then the injured person will likely look to the municipality for the payment of its costs and expenses arising from their participation in the event.
A Hold Harmless Agreement executed by a group alone, while helpful, may prove to be of little value if the group has no financial resources to pay for defense costs or a judgment. For this reason, it is important that the group also provide a Certificate of Insurance demonstrating its ability to defend and pay for any injuries. OMAG can provide sample language of a Hold Harmless Agreement on request. (See the publication - Hold Harmless Agreements and Certificates of Insurance).
Lease of Municipal Facilities
The municipality may be asked to lease its facilities to a private group so that it can hold its own activities such as a rodeo, stock car race, or a baseball tournament. What duty of care is owed to the participants of these special events? Does it matter whether the private group is for-profit, not-for-profit, incorporated or non-incorporated?
If the municipality’s participation is limited to leasing or provided the location owned by the municipality, then absent a defective condition in the leased premises existing at the time of the lease and knowledge of that defect by the municipality, the municipality acting as a lessor of the premises is not liable for injuries to third parties.
A municipality can limit its liability exposure by leasing its municipal facilities to private groups when the municipality gives up its control over the premises. The only liability exposure would come from the municipality’s knowledge of a dangerous condition which it failed to make known to the lessee.
The legal status of the private group that leases the facilities from the municipality, whether it be a not-for-profit group, a corporation or association, makes no difference and is irrelevant when it comes to the issue of liability. Liability will attach to a municipality if its negligence can be shown to have directly caused injuries to another. It is important that a municipality adequately insulate itself from liability by using the methods discussed herein.
City and Town-Sponsored Special Events
If a person is injured at a special event which the city or town-sponsored, they will be looking for someone to pay for related costs and expenses arising from their participation in the event. Will the city or town, or the local service club which promoted the special event be liable or legally responsible for the person’s injuries? There is no clear answer. The facts of each situation are going to determine who is liable. Whether the city or town is liable will depend upon various factors such as: did the municipality exercise control over the event; did municipality support the event with public funds or in-kind services by volunteering its employees; did the municipality own, maintain or operate any of the equipment or amusement devices.
Due to the inability of service clubs or organizations to get liability insurance coverage today, many municipalities are being asked to take over the special events so that the municipalities’ insurance coverage will be available to pay for any injuries which may occur during the event. In particular, some municipalities have been asked to take over the set-up and discharge of fireworks or the operation of carnival rides. Most municipalities probably have no experience whatsoever in assuming these duties, their associated risks, or safety requirements. Asserting that a municipality only agreed to sponsor a special event is no defense to a damage suit where it can be shown that the municipality was negligent in its involvement. OMAG recommends that member municipalities not accept this added exposure to sponsor special events due to the extraordinary nature of the risk involved.
Summary
There are several ways in which to protect your municipality from liability when groups or organizations want to use your public facilities. It is suggested that Hold Harmless Agreements and Certificates of Insurance be required of such organizations. Another way to protect the municipality is to lease the premises to the group for its intended purpose and then step away from further involvement with the event.
It is certainly not recommended that municipalities volunteer to sponsor or operate special events in an effort to lend its liability coverage to private organizations that previously sponsored, operated or held special events. Often times, the municipal employees are inadequately trained or experienced to take on additional responsibilities. Then, if people are injured, the inadequate training of employees may itself be argued to be a violation of a duty of care owed to the injured parties.
Special Events and Use of Facilities Exposure revised by OMAG Associate Counsel. The information in this bulletin is intended solely for general informational purposes and should not be construed as or used as a substitute for legal advice or legal opinions with respect to specific situations since such advice requires an evaluation of precise factual circumstances by an attorney. OMAG does not represent or endorse any group, site or product that may be mentioned in this article.
March 2020
