Managing Your Risk
If you rent facilities, stop and smell a TULIP

A TULIP (Tenant Users Liability Insurance Protection) can save counties a lot of grief

by Michael Kelly
NCACC Risk Management

Does your parks and recreation department have facilities that it rents to the public for a small fee? If so, often the normal protocol is to have the county attorney draft a simple one-page, short-term lease agreement that is executed each time the facility is used by a member of the public.

In that lease, the user agrees to be responsible for any liability that might arise out of their actions while using the facility and to hold the county harmless from responsibility. Some agreements will go further and require that the user provide some evidence of insurance in force, usually in the form of a certificate.

Depending upon the specifics, it is possible that an individual's personal liability coverage, which normally is a part of their homeowner's policy, may in fact provide the coverage needed, but it is difficult to get a certificate of insurance for personal lines of insurance, especially issued to a county. If your lease agreement requires naming the county as an additional insured, it is even less likely that a personal lines insurance company's underwriter will be willing to do so.

The lack of a certificate of insurance will put you in a difficult position if someone is seriously hurt while at your facility. Securing someone's insurance information after a significant bodily injury occurrence is almost always more difficult than if it is requested before it happens.

So how do you, as the risk manager for your county, address the problem of being sued by an individual attending an event at your facility? The degree of risk is often difficult to establish, since normally it is a function that you have little or no control over and you are not present while it is taking place. Unfortunately the county often ends up being the only party involved that has any insurance in the event of an occurrence.

A simple and affordable solution is to require evidence of proper insurance through the renter's mandated purchase of a Tenant Users Liability Insurance Protection policy, commonly called a TULIP. This short-term liability coverage is designed for an event that cannot be covered by the tenant's current insurance or if the tenant has no other insurance. A TULIP policy can meet the contractual responsibility of the premise lease agreement, be specific in its design to cover the exposures of the event and is far less expensive than purchasing a standalone special event policy in the county's name.

The per event cost should be borne by the individual using your facility. The average minimum premium is $100 to $150 per event for a $1 million per occurrence liability limit. Examples of events include weddings, festivals, club meetings, class reunions, concerts, arts and craft fairs, festivals and other similar events. The county is normally automatically included as an additional insured, and host liquor liability coverage is available if alcohol is being served.

If you are a member of the NCACC Liability & Property Pool, your county or entity is automatically provided coverage for such events. The intention of this article is to illuminate a potential exposure that can be significant from the tenant's perspective. If properly addressed, the utilization of a TULIP policy can insulate your own loss experience from being negatively impacted through the actions of a member of the public by affording coverage for the tenant. If the tenant has their own TULIP insurance coverage for their event, there should be dollars available in front of yours providing protection at no additional cost to you.

If you are not in the Pool, we recommend asking your insurance carrier how they would respond in the event a loss arises out of the use of one of your facilities. If you are self-insured or utilize a large self-insured retention (similar to a very large per occurrence deductible), the use of a TULIP is potentially crucial. Regardless, a TULIP is a great, cost-effective tool to make sure the tenant using your property has the insurance coverage they need. It may not keep you out of the courthouse, but at least you will have company should the unfortunate occur.

Michael Kelly serves as Property and Casualty Program Specialist for the NCACC's Risk Management Pools.