Protecting your company in the eye of the storm.
By James R. Waite, Esq.
The United States has suffered a recent spike of severe weather events. According to the National Oceanic and Atmospheric Administration (NOAA), the U.S. has experienced an average of 4.8 “billion dollar” weather events per year since 1980 (in 2012 adjusted dollars). A remarkable 25 of those events occurred between 2011 and 2012, nearly tripling the historic average.
For tent and event rental operators, the impact is obvious. Not only are they facing more (and more severe) weather events, they must also deal with an expanding array of requirements regarding everything from how to set up and secure tents to how and when they should be evacuated.
Of course, as the list of requirements grows, so does the range of lawsuits that can be filed against the rental company for “negligence,” “failure to instruct,” “failure to warn,” “misrepresentation,” “breach of contract,” “strict liability” and others (not to mention the suit that might be filed by the angry customer when you decide to delay or cancel an event). These claims can result not only in enormous judgments, they can be ruinously expensive in terms of the time, effort and resources required to defend them. (Insurance often pays the attorneys’ fees, but it doesn’t compensate for the management time and internal resources devoted to things like responding to discovery requests, participating in depositions or testifying at trial.)
Every rental operator should take these fours steps to protect him- or herself:
1. Incorporate. A corporation or limited liability company provides a “limited liability shield” for personal assets. Separately, consider setting separate entities for other business assets and real estate. Doing so can save substantial tax dollars and provide valuable additional liability protection.
2. Buy insurance. Maintaining adequate liability and property damage insurance is critical (now more than ever). I recommend finding a provider that specializes in the rental industry. Make certain to have adequate coverage for severe weather events, and consider “umbrella” liability coverage (which can substantially expand your coverage in exchange for a limited premium increase).
3. Update your rental contract. As evidenced by the above statistics, things have changed. New requirements for digging, staking, placement, signage and evacuations (to name a few) have rendered most rental contracts in use obsolete (and in some cases, illegal).
- Does your current rental contract advise the customer/lessee that tents are temporary structures, and may move, leak or collapse, particularly during severe weather events?
- Does it give you the right to delay or cancel an event if severe weather occurs or threatens?
- Does it require the customer to
create and post an evacuation plan?
- Does it require the customer to
identify an emergency shelter?
- Does it require the customer to evacuate the tent(s) if severe weather occurs?
- Do you know if your contract is out of date in some other way(s)?
These problems can be resolved fairly quickly, but doing so starts with knowing what your contract does
and doesn’t say. If you’re not sure, seek professional counsel to find whether it’s compliant or needs revision.
4. Create an evacuation plan. NFPA (National Fire Protection Association, Rule 101), IFC (International Fire Code 2012), and OSHA (Occupational Safety and Health Administration at 29 C.F.R., Part 1910.38) require the creation and publication of a legally compliant evacuation plan. Additionally, the lack of an evacuation plan has become a commonly cited reason for filing lawsuits against event coordinators and rental operators after weather-related tent collapses, despite the fact that few rental operators (and no customers) I’ve spoken with are even aware of the requirement. This is one dramatic example of how things have changed just in the past year or two. If you don’t have a ready-made form of evacuation plan available, you would do well to create one immediately. The customer is responsible for posting it, but you are legally responsible for providing “adequate instructions and warnings,” meaning you need to do so if you want to avoid a lawsuit.