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Insurance – Duty to Defend & Indemnify – Fraternity Party – Policy Violation

Liberty Corporate Capital, Ltd. v. Delta Pi Chapter (Lawyers Weekly No. 12-03-0916, 9 pp.) (Catherine C. Eagles, J.) 1:09-cv-00765; M.D.N.C.

Holding: Even if defendant Cassady was acting within the scope of his duties as chapter vice-president and on behalf of his fraternity when he hosted an off-campus party, since the party violated the fraternity’s policies, Mr. Cassady was not an “insured” within the meaning of the insurance policy issued by plaintiff to the national fraternity.

Plaintiff has no duty to defend or indemnify the chapter or Mr. Cassady in the underlying lawsuit by a guest who was injured at the party.

Plaintiff’s policy extends coverage to local chapters and individual fraternity members only when they act (1) in accordance with the procedures outlined by the policy and the national fraternity, (2) within the scope of their duties, and (3) on behalf of the national fraternity or the chapter. Plaintiff has shown that the chapter and Mr. Cassady do not satisfy the first requirement.

The events forming the basis for defendant Mynhardt’s claims in the underlying action all occurred at a party which was not held in accordance with the national fraternity’s policies and procedures. The fraternity’s official policies explicitly prohibit bulk distribution of alcohol, underage drinking, and sponsorship of “any activity that is classified as an ‘open party’ that is characterized by unrestricted and/or public access to alcoholic beverages.” The fraternity also requires that members provide adequate professional security or sober party monitors. None of these policies were followed by those hosting the party in question.

The removal of Mr. Mynhardt from the party unequivocally conflicted with the fraternity’s security policy, which provides, “Adequate professional security should be provided to collect car keys at the door, deal with uninvited guests, and monitor any other potential problems.

Since Mr. Cassady and the chapter were not acting in accordance with the fraternity’s policies and procedures when they held the party, they do not qualify as “insureds” under the policy.

Plaintiff’s motion for a declaratory judgment is granted.

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