Summer Party Time: Are You Protected?
June 30, 2023
Welcome to summer, when warmer weather ushers in all kinds of fun events — pool parties, barbeques, boating, and of course the more formal gatherings like birthday parties and weddings. After a period of pandemic precautions, we are all eager to enjoy the company of friends and family without restrictions. But before you party like it is 2019 again, you may want to take one more precaution: evaluate your personal liability exposure.
Understanding and Minimizing Liability Risks When Hosting Parties
What are the risks?
The point of parties is to be free of stress and focus on the fun, such as games, refreshments, and great company. Unfortunately, parties can also be prime situations for accidents that can lead to injuries, insurance claims, and even lawsuits.
Even with a friendly social gathering on your own property, some unexpected things could go wrong. Here are a few examples:
You invited friends on your boat for a day cruise. During the course of the day, you had one too many drinks which led to an accident. Unfortunately, one of the attendees fell overboard without a life jacket and was injured. (In 2022, the U.S. Coast Guard counted 4,040 accidents that involved 2,222 injuries and 636 deaths due to recreational boating accidents.1)
July 4th comes along and what is a Fourth of July party without fireworks? Instead of leaving the fireworks display to the professionals, you decided to set off your own fireworks on your property. Unfortunately, the unlikely, yet still possible, scenario happened; a firework went astray and ignited a fire that caused property damage. (In 2022, fireworks were involved with an estimated 10,200 injuries treated in U.S. hospital emergency departments.2)
You hosted friends and family for a laid-back summer barbeque and some fun lawn games. Your famous summer rum punch was a hit as usual. Unfortunately, one of your guests got into a car accident after leaving your party. It was determined that he was driving under the influence of alcohol that was served at your event. The other sober driver in the accident was injured. His insurance company sought full property and medical payments recovery from your party guest, whose auto insurance company is now coming after you (because you served him alcohol).
Some of these scenarios may seem unlikely at first blush. But while low probability, they also can be high severity risks, which could wreak havoc on even the most well-designed and executed financial plans.
Even if your guests are as forgiving as you would have hoped, when accidents occur, their insurance company’s primary concern is about who is at fault and the financial considerations. Insurance claims related to an event that you host can easily jump well into six figures, especially when medical or property liability of a third party comes into play.
How do I protect myself?
Risk management via insurance is a core component of every strong financial plan. Our philosophy is to put measures in place to protect against unlikely, yet severely damaging occurrences. There are several steps you can take to reduce potential financial liability risk when hosting an event. Luckily, these protective measures are generally easy and simple to implement:
Alert your insurance company about the existence or addition of potential hazards on your property, such as swimming pools, trampolines, or swings.
Clear unnecessary clutter from all outdoor walkways, steps, and patios, as well as interior congregation areas of your home.
Ensure all walkways leading to and from your home are evenly paved and well lit to help prevent guests from stumbling or falling.
Provide guests with plenty of food and non-alcoholic beverage options when hosting a party. If you serve alcohol, be as mindful as you can about consumption. If necessary, offer to drive people to their next destination, pay for an Uber, or allow them to stay overnight.
Review your homeowner’s insurance policy in advance of a large gathering at your home. Depending on your policy’s current coverage limits, you may wish to increase your personal liability and medical payments coverage limits to further protect against potential large claims. Increasing your coverage limits will most likely result in higher premiums, but you can consider increasing your deductible amount to mitigate this increase. Ask your agent for an updated quote before making any changes to your policy.
Obtain an “umbrella” liability insurance policy. An umbrella policy is separate from your homeowner’s and auto insurance policies and can significantly increase the amount of protection against major claims and lawsuits. This is a relatively low-cost type of liability insurance that most high-net-worth individuals should consider to help shield their assets from low-probability/high-severity risks related to their home or cars. Auto and homeowner’s insurance policies alone may provide limited coverage that is well below the value of your net worth.
Consider event liability insurance when hosting a crowd. Large offsite events like weddings with tents and caterers as well as a significant number of guests make it difficult to monitor activity and can increase the risk of something going wrong. Even if the event is not held on your personal property, you can still be found personally liable for accidents that occur during or after your event. For this reason, you may have more peace of mind having an additional layer of specific coverage for the venue and the event.
Understand your state and local laws. Not every state will legally treat the circumstances of an accident in the same way, which can affect resulting insurance claim activity.
Party smart:
Many of us want to celebrate this summer with friends, family, and fresh enthusiasm. The simple steps above can help you enjoy yourself while providing an extra level of protection against unlikely, but potentially large financial risks that you cannot underestimate when it comes to your hard-earned wealth.
1 https://www.usatoday.com/story/news/nation/2023/07/31/boating-accidents-in-us-result-in-many-children-dying-getting-hurt/70495919007/
2 https://www.cpsc.gov/s3fs-public/2022-Fireworks-Annual-Report.pdf
Modera Wealth Management, LLC (“Modera”) is an SEC registered investment adviser. SEC registration does not imply any level of skill or training. Modera may only transact business in those states in which it is notice filed or qualifies for an exemption or exclusion from notice filing requirements. For information pertaining to Modera’s registration status, its fees and services please contact Modera or refer to the Investment Adviser Public Disclosure Web site (www.adviserinfo.sec.gov) for a copy of our Disclosure Brochure which appears as Part 2A of Form ADV. Please read the Disclosure Brochure carefully before you invest or send money.
This article is limited to the dissemination of general information about Modera’s investment advisory and financial planning services that is not suitable for everyone. Nothing herein should be interpreted or construed as investment advice nor as legal, tax or accounting advice nor as personalized financial planning, tax planning or wealth management advice. For legal, tax and accounting-related matters, we recommend you seek the advice of a qualified attorney or accountant. This article is not a substitute for personalized investment or financial planning from Modera. There is no guarantee that the views and opinions expressed herein will come to pass, and the information herein should not be considered a solicitation to engage in a particular investment or financial planning strategy. The statements and opinions expressed in this article are subject to change without notice based on changes in the law and other conditions.
Investing in the markets involves gains and losses and may not be suitable for all investors. Information herein is subject to change without notice and should not be considered a solicitation to buy or sell any security or to engage in a particular investment or financial planning strategy. Individual client asset allocations and investment strategies differ based on varying degrees of diversification and other factors. Diversification does not guarantee a profit or guarantee against a loss.
Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® (with plaque design) in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.