Risk Management and the Holiday Full House

Even if you're still doing fairly well in today's tough economy, this is not the season to be too jolly about it. Americans of every income level are experiencing harder times, and many of the rich are less rich than they were just two New Years ago.

Among the affluent, this new reality may mean fewer big nights out on the town and a lot more home entertaining in the weeks ahead. The year-end holidays traditionally have been a time when people open their house to merrymakers in ways that they might not during the rest of the year. None of us wants to advise clients to be a humbug, but it's important to counsel them about the danger of offering up one's home and hospitality too freely.

Before inviting people into their homes, there's a list of potential exposures clients should consider. A client's home will never be more vulnerable than it is during the holidays. Between houseguests and caterers, foot traffic will be at its most congested. In addition, the mixture of elegant entertaining and gift giving is likely to put the best of everything the clients own, or have bought for others, on front-and-center display.

Protecting property from damage or theft--and people from injury that can bring a liability suit--is an involved undertaking. Basically, it boils down to clients "guest proofing" their home. Guests include not just invitees but any professionals who may have been temporarily retained to work on the grounds through the holidays. Does the specialty-lighting company stringing bulbs on the roof have adequate insurance? Has the catering staff been properly bonded? And, if the answers to those questions are "no," how is your client's personal insurance coverage equipped to address the resulting exposures?

The official guest list can be as problematic as the stream of seasonal workers filing in and out. That's particularly true for fundraisers, which tend to occur with the greatest frequency during the year-end holidays.

A security firm can be retained to do background checks on the guest list in advance. Still, no amount of screening can fully insulate a home from all the wrong elements; therefore, extra effort must be taken to remove opportunity from a would-be perpetrator's path. Locking up the jewelry is a start. Properly securing documents and digitally-stored information is even better. Also, the only wrapped gift boxes left on decorative display should be empty ones.

The biggest threat may not be that of a guest stealing from the host family, but of him or her getting inebriated. Now is the one time of year where raising a glass (or three) and wishing all good cheer is not only accepted, but often expected. As hosts, clients must keep in mind their liquor liability.

From a social propriety and legal liability perspective, the line that needs to be walked is delicate but clear: Give guests every chance to indulge responsibly, and to behave responsibly should they overindulge. Offering cab service or a driver--or overnight accommodations--is reasonable. So is offering a wide assortment of popular nonalcoholic cocktails, and instructing bartenders to more actively recommend them as festivities wind down.

Politely asking a guest to slow down or stop drinking calls for social grace. At the same time, to the extent intoxicated guests can be dissuaded from driving off, their hosts must make every reasonable effort to do so.

Saving a guest from making the mistake of a lifetime could be the best gift of all.

Andrew McElwee is EVP of Chubb & Son and COO of Chubb Personal Insurance.

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