The first time I was elected to serve on the Board of Directors of a local community theatre, we were asked if we would be willing to rent our theatre to a local business owner who wanted to use our theatre for a one-day training seminar for his employees. Great, I thought. The local businessman gets a nice facility in which to meet and we get a quick and easy $300 for our treasury. Whereas the harm in that?

This all took place before I became an insurance agent, so my naiveté was forgivable, and fortunately, more knowledgeable board members prevented any serious mistake on my part.

As the AACT Insurance Program Manager, I often receive phone calls from theatre clients asking if their insurance covers them if they loan or lease their theatre facility to outside groups. The answer is NO!! The insurance that your group has through AACT will defend your group and your volunteers. It is not intended to cover any other group. Allowing others to use your facility without insurance and without a Hold Harmless contract in place, exposes your group to serious liabilities.

Concerning the use of your facility by outside groups, I strongly advise the following:

WHEN AN OUTSIDE GROUP USES YOUR FACILITY A CONTRACT SHOULD BE DRAWN UP, WITH THE ADVICE OF A LAWYER, WHICH CONTAINS A HOLD HARMLESS CLAUSE AND THE STIPULATION THAT ANY PARTY USING YOUR FACILITY PROVIDE YOU WITH A CERTIFICATE OF INSURANCE, WITH APPROPRIATE LIMITS, NAMING YOUR ORGANIZATION AS AN ADDITIONAL INSURED.

Hold Harmless agreements are contractual promises, usually incorporated into the provisions of another contract such as a lease or construction agreement, whereby the outside group (Indemnitor) agrees to "save harmless" your theatre group (Indemnitee) from risks of loss which could arise out of the course of your mutual dealings.

The purpose of these agreements is to shift the economic loss to the party chiefly responsible for the loss. With a Hold Harmless clause in place and the "other guy" naming you as an Additional Insured on their insurance policy, you may still get sued but the "other guys" insurance will defend you on any covered allegation. If there is a judgment against you, the "other guy" pays.

This transfer of risk idea applies whether it is a General Liability loss or a Property loss as the following examples illustrate:

Example A: Your theatre group agrees to lease your theatre facility to The Peanut Munsters (TPM), a local children's theatre group, for five consecutive Saturday performances of their original children's musical. The information printed on the back of the ticket clearly tells parents that they are not to leave their children unattended and unsupervised. During a performance, one of the kids in the audience runs up the aisle, trips and falls; causing some cuts, bruises and a broken tooth. The parents are nowhere to be found. Contrary to the ticket information, the parents of the injured child had dropped their kid off and then left to "do lunch with friends". The parents, of course, sue for damages. If you required TPM to sign a lease containing a Hold Harmless clause and required TPM to provide their own liability insurance naming your group as an Additional Insured, then TPM assumes responsibility for the loss; your group escapes the lawsuit because your group was Held Harmless under the terms of your lease with TPM. If your group is included in the lawsuit, TPM’s insurance will provide your defense and TPM’s insurance pays any judgment against you up to the limit of their insurance on any covered situation. Without these contractual protections, the parents could (probably successfully) sue your group as well as TPM.

Example B: Assuming the same circumstances described above, only this time, not one kid in the audience misbehaves or gets injured--anything is possible in the make believe world of the theatre. However, during one of the performances, TPM’s stage manager accidentally breaks a $300 microphone that TPM had borrowed from a local business. Again, if your lease with TPM contains a Hold Harmless clause and you required them to provide their own property insurance, then TPM assumes responsibility for the economic loss of the broken microphone.

No matter what the example may be, the bottom line is self-protection. Whenever you consider allowing others to rent our use your theatre facility, secure a proper leasing agreement with a Hold Harmless clause and require the outside group to provide their own insurance that names your group as an Additional Insured. It is recommended that you do this with the advice and counsel of an attorney.

Note: These same recommendations apply whenever you hire a contractor or sub-contractor
        to do work at your theatre. Do not assume responsibility for their potential negligence.
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A more recent article, Renting With an Option to Sue [Oct/98]
also addresses this very important issue

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