Why Hotels Should Have High Umbrella Limits
The massive verdicts making headline news during the last several years have been a wake-up call for many hotel clients to ensure they carry enough Excess/Umbrella Liability coverage to protect against catastrophic losses. But the reality is that most large hotel liability losses are not the result of headline-making events or incidents, like the mass shooting at the Mandalay Bay in 2017 or the invasion of privacy lawsuit against Nashville Marriott Hotel in the case of sportscaster Erin Andrews. On the contrary, most large losses originate from innocuous exposures, according to Sean Young, VP, Distinguished Hospitality Umbrella Product Manager.
Everyday Exposures Behind Most Large Losses
“For the more than 25 years we have been writing Umbrella insurance for all types of hotels – from limited service to amenity-intense resorts – we have found that each one of our large losses comes from everyday operational risks,” said Sean. “For example, every hotel has an elevator that can cause guest injuries – from bruising to lacerations, and fractures, up to head injuries, amputations of fingers and toes, or even to arms and legs. Slips and falls occur in hotel bathrooms, even with non-slip surfaces.”
Sean also explained that large claims come from third-party amenities offered by hotels. “You may think a hotel isn’t exposed to a third-party’s operation but the hotel can be brought into a lawsuit as a result of a reference to the third-party’s amenity featured on the hotel’s website or in its brochure.”
High Umbrella limits are required even if the operation isn’t a resort offering many services and amenities. “Even if it’s a box hotel, high limits are needed. Every operation is exposed to large losses,” noted Sean.
Nuclear Verdicts: Single-Person Claims Go from $1M to $5M to $100M
“We are seeing nuclear verdicts in unexpected situations,” explained Sean. “In the past, a single-person claim rendered a $1 million to $2 million settlement or verdict. This amount then rose to $5 million, and today we could easily see a single-person claim reach more than $100 million. The incident doesn’t have to affect a large number of people in order for it to trigger a large loss. There are many factors that go into these massive verdicts, including the jurisdiction’s location, an aggressive plaintiff bar, and litigation funding, and the make-up of the jury, its sympathy toward the defendant and anti-corporate sentiment, among others.”
Sean also noted that today’s civil unrest across cities around the country raises the liability risk for hotels, particularly in urban areas. “Historically, urban-based hotels didn’t have a lot going for them in terms of amenities. Events in the streets can easily spill into a hotel lobby, escalating the potential for additional exposures for an insured.”
Today’s litigation environment calls for hotels to carry high Umbrella limits. Distinguished offers up to $180 million in coverage with our program. For more information about our program and how to properly protect your clients, please contact us.