When Charity Invites Liability, a Simple Contract Can Help

In Business Law by Coolidge Wall

If you are a small business owner, you may often consider how you can give back to the community or make a charitable use of your commercial property. Picture this: A local nonprofit is hosting a 5K race and asks to use your business’s parking lot as a pre-race staging area. While you would like to help out the nonprofit (and get some good PR in the process), you are concerned about liability. If someone gets hurt at the race, could your business be sued for its involvement? The old saying is that “no good deed goes unpunished,” but, with a little planning and foresight, your business can sidestep liability while still meeting its charitable goals.

When your business is approached about assisting in a charitable event, a simple contract is often the best way to protect you and your company. Of course, the simple contract should prescribe when the event begins, when it ends, and what types of activities are permitted on your business’s property. In addition, well-drafted insurance and indemnification clauses can close any gaps in liability coverage.

At a minimum, you should give serious thought to requiring the entity requesting use of your space to carry commercial general liability insurance. On that policy, you should consider requiring that you and your business be listed as additional insureds (which extends the policy’s protection to you and your company too), and that the policy include a waiver of subrogation (which, in the event that the insurance company pays a claim under the policy, would prevent the insurance company from seeking reimbursement from you, your company, or your company’s insurer and possibly causing your premiums to increase).

Likewise, a well-crafted indemnification clause can protect you from dangers that are out of your company’s control. Under our 5K race hypothetical above, such dangers could include negligent or intentional actions or omissions committed by the nonprofit or third-parties such as race competitors, bystanders, or automobile drivers.

This blog entry is not intended to be an exhaustive list of precautions your business should take when considering involvement in a charitable event. Rather, it provides a good starting point for a simple contract to protect your business and its charitable aspirations. Companies are advised to consider these issues and seek counsel from their attorney to ensure their acts of charity do not invite liability.

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