Facility Use Agreements Protect Your Agency

By Toni Consolo, Senior Risk Manager, and Jim Thyden, Insurance Programs Manager

Throughout the year, members’ facilities, including community centers, are popular locations by external parties for use such as celebrations, art festivals, recreational activities, meetings, and other events. If someone from the external party gets injured on the premises, the member can be held liable as the property owner. Potential liability can be minimized through a facility use agreement (FUA).

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Such an agreement should be used each time a third party uses a member’s facilities, and outlines responsibilities, conditions, and rules for use of the facility. Most important, the FUA should include indemnity language that runs in favor of the member by requiring the facility user to release the member from liability for injuries to any person(s), or damage to property arising at any time during, or in any way connected with, the use or occupancy of the facility and adjoining property.

Additionally, the FUA should include indemnity language that releases the member from liability for communicable diseases, illnesses, or viruses, and requires the renter to abide by all local, state, and federal health, and any other applicable ordinances that may be in effect at the time of the rental.

However, without insurance, there is no guarantee that the facility user will be able to financially meet the indemnity obligations outlined in the agreement. This means that the insurance requirements should not be waived under any circumstance. Otherwise, the renter may be unable to meet its financial obligations, therefore providing an opportunity for the injured party to pursue damages against the member. The Authority also recommends consistency in FUA insurance requirements, to ensure that members do not encounter allegations of preferential treatment of certain groups over the other.

When considering the insurance requirements, a risk analysis should be conducted to determine appropriate coverage and limits. General liability insurance should always be required. At a minimum, limits of $1 million per occurrence/$2 million general aggregate is recommended, including endorsing the member to the policy as an additional insured. Based on the risks associated with the facility rental, higher general liability limits or additional insurance coverage may be needed, such as sexual abuse/molestation coverage if minors are in attendance. When verifying the user’s coverage, a member must obtain an evidence of insurance and additional insured endorsement prior to the facility rental date, otherwise the member is exposing itself to liability for the facility rental’s activities.

Members should always ensure that written agreements are in place for any facility uses, and that agreements do not lapse. Handshake or verbal agreements will not hold up in court, and disagreements over responsibility and coverage can erode previously long-standing relationships.

Members are advised to consult with legal counsel when drafting/revising their agency’s FUA. A facility use agreement template and the Authority’s Contractual Risk Transfer Manual are available to members on the Authority’s website cjpia.org. The Contractual Risk Transfer Manual includes a risk analysis questionnaire, recommended insurance coverage and limits, indemnity language, and techniques for allocating risk using risk transfer principles. Members are encouraged to consult with their assigned Risk Manager.

Additionally, the Alliant Special Events Program is available for members to use and assist facility users with purchasing required insurance. Members administer the program, accept funds, and issue certificates of insurance online with Alliant Insurance Services. There is no deductible, and the member is added as an additional insured, if entered on the certificate. Because it is automatic, members do not need to obtain an additional insured endorsement. Liability limits are purchased in $1,000,000 per occurrence increments. Medical payments are also available with limits of $5,000, with the option to purchase $5,000 in additional limits.

For questions and additional details on the special events program, please contact Penny Dewitt-Holdren at (949) 660-8142 or pdewitt@alliant.com.

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