Higher Education

Recipe for Claims: Frats and Booze

The stubborn embrace of alcohol by fraternities remains a prime source of expensive and potentially avoidable higher education claims.
By: | June 19, 2017 • 6 min read
Topics: Claims | Education | Liability

The insurance industry can and should exert its considerable financial influence to inhibit campus binge drinking, said Doug Fierberg, a Washington, D.C. attorney who represents victims of campus malfeasance.

Schools and their insurers could impose a single policy change — banning alcohol in fraternity housing — that would reduce, without cost, the risk of on-campus injury and death by 75 percent, and severity by more than 90 percent, said Fierberg, author of To End Fraternity Hazing, End Boozing First, published in 2012 in the Chronicle of Higher Education.

Doug Fierberg, partner, The Fierberg National Law Group

Most schools have written alcohol policies that abide by applicable laws, distributed to freshmen at orientation and thereafter ignored, Fierberg said.

That’s reasonably manageable in on-campus dormitories, which are usually owned by the institution, supervised by resident advisors and subject to campus and municipal policing.

Fraternity houses, however, are usually owned by their respective Greek organizations, often have no supervisory adult on the premises and are off-limits to campus police except under exigent circumstances.

Managing frats isn’t so easy, said Leta Finch, national leader, higher education practice, Aon Risk Solutions. “When an institution has a close relationship with a fraternity and can manage what goes on in its house, the insurer has greater leeway in terms of coverage, premiums and exclusions.”

“We suggest administrators ask, ‘Where are your reports coming from on Saturday night? A concert? A Greek house?’ Those are where risk managers need to focus.” — Mike Krackov, senior claims counsel, United Educators

In the absence of a close relationship between school and frat, however, the school creates an arms-length relationship with the fraternity, especially with regard to the liability associated with alcohol consumption, she said.

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A 1993 Harvard study found that 44 percent of college students binge drink, defined by the National Institute on Alcohol Abuse and Alcoholism as five or more drinks in about two hours for men, four or more for women.

Recent studies find that more students are partying harder now, “pre-gaming” and choosing hard liquor over beer. Many drink to the point of blacking out.

The Harvard study found students drank more on campuses with a strong drinking culture, few alcohol control policies on campus or in the surrounding community, weak enforcement, and easy accessibility through low prices, heavy marketing and special promotions.

Frats and Booze

According to a more recent Harvard study, fraternity residence or membership is the strongest predictor of binge drinking, and four of five students who live in fraternities are binge drinkers. Sororities no longer permit drinking on their premises.

Leta Finch, national leader, higher education practice, Aon Risk Solutions

The NIAAA reports more than 1,800 alcohol-related student deaths every year, another 600, 000 injuries and nearly 100,000 sexual assaults. One quarter of students say their academic performance has suffered from drinking.

Still, by tradition and articles of incorporation, “fraternities demand and colleges allow the model of self management by 18- to 22-year-olds who are unsupervised, mostly exempt from campus security, completely incapacitated, clouded by allegiance to their fraternity and brotherhood, or simply untrained in identifying and managing risk,” Fierberg said.

This model of risk management, or lack thereof, doesn’t exist in any other industry, he said.

Attempts to make fraternities dry, including those by the Greek industry, have been stymied by a student culture that sees drinking as a “basic right,” according to the Chronicle of Higher Education. Fraternities’ articles of incorporation grant self-management, and a change would require a supermajority vote.

Alcohol is deeply implicated in sexual assault cases; a 2015 United Educators study of its own claims found that 78 percent of sexual assaults involved alcohol.

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In one-third of all sexual assault claims UE studied, the victims were incapacitated, defined as drunk, passed out or asleep. Within that group, both the victim and the perpetrator had been drinking in 89 percent of cases.

The fact that most victims — overwhelmingly women — were under the influence when they were assaulted puts a chilling effect on colleges’ willingness to talk about alcohol in sexual assault cases, said George Dowdall, adjunct fellow, Center for Public Health Initiatives, University of Pennsylvania.

“That’s the third rail, the potential for victim blaming.”

Intractable Problem

Why haven’t insurance companies already advocated for dry fraternities and other mechanisms to limit access to alcohol?

It’s complicated.

Binge drinking ranks lower in the larger catalog of social problems because it’s legal at the age of 21, and alcohol is “totally acceptable” in American culture, said Greg Hunter, area managing director, Arthur J. Gallagher Risk Management Services Inc.

Mike Krackov, senior claims counsel, United Educators

While some carriers may decline to cover fraternities — or increase premiums or deductibles or exclude the risk from their policies — many carriers don’t see their role as heavy-handed influencers of social change. “Insurers are not the alcohol police,” he said.

Premiums have kept pace with risk, said Fierberg, and fraternities have passed through higher premiums in higher dues, which members are willing to pay, in part because they have no basis of comparison.

Ironically, he said, “parents’ homeowner’s insurance policies will likely pay for any litigation involving their sons because of exclusions in the fraternity policies, so it’s really the parents and homeowners’ insurers that are bearing the economic weight.”

Quantifying the problem is itself a problem, said Mike Krackov, senior claims counsel, United Educators, because binge drinking “crops up in unrelated claims,” including sexual assault, premises liability claims, travel abroad claims and personal injury claims.

However, said Hunter, “a large percentage of claims come from incidents on Friday or Saturday nights — party time.”

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The insurance industry doesn’t focus on drinking-related claims, said Hunter, in part because claims payments disguise the underlying cause of the claim.

For example, he said, “a hospital visit related to binge drinking will be paid by the health insurer. A drunk driving accident will be paid by the auto insurer.”

General liability and property insurance liability will kick in if there’s a fight in a dorm room, and workers’ compensation will pay for injury to an employee. None clearly relate back to excess alcohol consumption.

Educate the Educators

The reversal of any self-destructive social issue requires attacks from multiple communities — medical, law enforcement, administrative, educational — said Krackov. “To make an impact, we need training on culture change and bystander intervention. We start with incoming freshman and continue for the next four years.”

Greg Hunter, area managing director, Arthur J. Gallagher Risk Management Services

However, education on responsible drinking should start even younger, said Krackov. By the time students have reached the legal drinking age, it’s already too late. Better to start in middle school, when most students start health-ed classes. This lays the groundwork for later training in high school and college.

Carriers could sponsor some of this, divert some of their advertising spend to middle school alcohol education, Hunter said, but they “don’t see revenue generation as the result of educating people about binge drinking.”

United Educators’ mission includes educating its member-owners, two-thirds of which are institutions of higher education, said Krackov. Its risk management programs include a widely viewed “Know Your Limit” online alcohol usage assessment for college students and “Alcohol and You” for middle and high school students.

United Educators also provides risk management analytic tools, such as checklists for planning campus events, blogs, podcasts and claims studies. “We suggest administrators ask, ‘Where are your reports coming from on Saturday night? A concert? A Greek house?’ Those are where risk managers need to focus.”

But education alone isn’t enough, according to the Journal of Higher Education, as the binge drinking crisis deepens in spite of earnest attempts to curb it.

“The message isn’t what changes behavior,” said Robert F. Saltz, a senior research scientist at the Prevention Research Center. “Enforcement changes behavior.”

Susannah Levine writes about health care, education and technology. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2018 Most Dangerous Emerging Risks

Emerging Multipliers

It’s not that these risks are new; it’s that they’re coming at you at a volume and rate you never imagined before.
By: | April 9, 2018 • 3 min read

Underwriters have plenty to worry about, but there is one word that perhaps rattles them more than any other word. That word is aggregation.

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Aggregation, in the transferred or covered risk usage, represents the multiplying potential of a risk. For examples, we can look back to the asbestos claims that did so much damage to Lloyds’ of London names and syndicates in the mid-1990s.

More recently, underwriters expressed fears about the aggregation of risk from lawsuits by football players at various levels of the sport. Players, from Pee Wee on up to the NFL, claim to have suffered irreversible brain damage from hits to the head.

That risk scenario has yet to fully play out — it will be decades in doing so — but it is already producing claims in the billions.

This year’s edition of our national-award winning coverage of the Most Dangerous Emerging Risks focuses on risks that have always existed. The emergent — and more dangerous — piece to the puzzle is that these risks are now super-charged with risk multipliers.

Take reputational risk, for example. Businesses and individuals that were sharply managed have always protected their reputations fiercely. In days past, a lapse in ethics or morals could be extremely damaging to one’s reputation, but it might take days, weeks, even years of work by newspaper reporters, idle gossips or political enemies to dig it out and make it public.

Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

These days, the speed at which Internet connectedness and social media can spread information makes reputational risk an existential threat. Information that can stop a glittering career dead in its tracks can be shared by millions with a casual, thoughtless tap or swipe on their smartphones.

Aggregation of uninsured risk is another area of focus of our Most Dangerous Emerging Risks (MDER) coverage.

The beauty of the insurance model is that the business expands to cover personal and commercial risks as the world expands. The more cars on the planet, the more car insurance to sell.

The more people, the more life insurance. Brand new technologies, brand new commercial covers. It all works well; until it doesn’t.

As Risk & Insurance® associate editor Michelle Kerr and her sources point out, growing populations and rising property values, combined with an increase in high-severity catastrophes, threaten to push the insurance coverage gap to critical levels.

This aggregation of uninsured value got a recent proof in CAT-filled 2017. The global tally for natural disaster losses in 2017 was $330 billion; 60 percent of it was uninsured.

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This uninsured gap threatens to place unsustainable pressure on public resources and hamstring society’s ability to respond to natural disasters, which show no sign of slowing down or tempering.

A related threat, the combination of a failing infrastructure and increasing storm severity, marks our third MDER. This MDER looks at the largely uninsurable risk of business interruption that results not from damage to your property or your suppliers’ property, but to publicly maintained infrastructure that provides ingress and egress to your property. It’s a danger coming into shape more and more frequently.

As always, our goal in writing about these threats is not to engage in fear mongering. It’s to initiate and expand a dialogue that can hopefully result in better planning and mitigation, saving the lives and limbs of businesses here and around the world.

2018 Most Dangerous Emerging Risks

Critical Coverage Gap

Growing populations and rising property values, combined with an increase in high-severity catastrophes, are pushing the insurance protection gap to a critical level.

Climate Change as a Business Interruption Multiplier

Crumbling roads and bridges isolate companies and trigger business interruption losses.

 

Reputation’s Existential Threat

Social media — the very tool used to connect people in an instant — can threaten a business’s reputation just as quickly.

 

AI as a Risk Multiplier

AI has potential, but it comes with risks. Mitigating these risks helps insurers and insureds alike, enabling advances in almost every field.

 

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]