Recent headlines about brutal hazings, drinking-related deaths, and sexual assaults have tarnished the image of fraternities but have barely dented their coffers.
Membership in the 74 national and international fraternities that belong to the North-American Interfraternity Conference continues to grow at a steady clip, with 46 percent more students paying dues in 2013-14 than in 2005-6.
The conference represents more than 6,000 chapters on about 800 campuses. Total membership grew from 264,956 in 2005-6 to 387,859 in 2013-14, and early projections show continued growth this year.
At the same time, fraternities face limited financial and legal exposure when mayhem breaks out because of how they’re structured and insured: Many of their assets are insulated by foundations and housing corporations that are harder to tap, and Greek organizations have banded together in group-insurance plans that restrict coverage for their members and chapters.
Students pay hundreds of dollars in premiums for insurance that’s unlikely to cover them if underage drinking, hazing, or other activities prohibited by the fraternity — but ubiquitous in Greek life — are involved. Instead, those liabilities are likely to be passed on to the homeowners’ policies of the students’ parents.
The combination of expanding membership rolls and carefully crafted insurance policies has helped fraternities that are under the gun not only survive but thrive.
A couple of recent cases illustrate how a lawsuit can trigger a game of hot potato.
When Hazing Is Involved
Eric Barnum was president of his fraternity, Sigma Alpha Epsilon, at Cornell University, when a 19-year-old sophomore died in a fraternity hazing ritual. The freshman pledges were the ones doing the hazing; the student who died, George Desdunes, was one of the fraternity members they allegedly tied up and forced to drink vodka each time he missed a trivia question about his fraternity. His mother sued the fraternity and several of its members for $25 million.
Mr. Barnum was named in the lawsuit even though he said he wasn’t present when the abuse occurred, in 2011. Lloyd’s of London, which insures the fraternity and its officers, refused to cover him because hazing was involved.
Instead, the legal costs were passed on to his parents’ homeowners’ insurance, State Farm Fire and Casualty. Last month State Farm and the Barnums sued Lloyd’s of London, saying that Mr. Barnum was neither involved in any hazing activities nor negligent in his training and supervisory duties, as the mother’s suit asserted.
When national fraternities exclude coverage for drinking or hazing-related incidents, “the kid feels like he’s being scammed,” says Douglas E. Fierberg, a Washington-based lawyer who is representing Mr. Desdunes’s mother, Marie Lourdes Andre. “He’s paying the premiums of a policy that’s protecting the national, but not him.”
Most injuries and deaths involve the misuse of alcohol, whether it’s rape, hazing, or students falling out of windows, Mr. Fierberg says. Such exclusions are spelled out in Sigma Alpha Epsilon’s health and safety guide.
“Your personal insurance is always primary and stands ahead of the Sigma Alpha Epsilon insurance,” it states. Chapters and fraternity members won’t be covered under the fraternity’s general liability coverage in cases involving “acts of hazing, sexual abuse/misconduct, assault and battery, and violations of fraternity alcohol policy.”
Fraternities take pains to spell out the consequences of breaking their regulations, and that includes being dropped from insurance, says Peter Smithhisler, president of the North-American Interfraternity Conference. “It illustrates the importance of students’ understanding their obligation to follow the rules,” Mr. Smithhisler says. “Students shouldn’t be surprised when they’re held accountable.”
National fraternities operate chapters like franchises, much the way restaurant chains do. Critics maintain, though, that the controls that allow someone to assume they’ll get the same quality sandwich at a Panera Bread in Boston or Austin are often lacking with fraternities.
That’s because the national organizations set standards for behavior for their chapters but then leave the responsibility for enforcing those policies to inexperienced, underage, and sometimes intoxicated undergraduates. Despite Mr. Smithhisler’s assertion that fraternities’ reactions are “swift and decisive” when violations occur, critics say those actions usually involve suspending, rather than revoking, charters.
A ‘Remote and Tenuous’ Relationship
A ruling last year by the Indiana Supreme Court offers more insight into how liability issues often play out. The court decided that neither Wabash College nor the national Phi Kappa Psi Fraternity was responsible for physical and mental injuries a freshman fraternity pledge, Brian Yost, said he suffered during a 2007 incident that may or may not have been part of a hazing ritual (he says it was; the local chapter, which later reached a settlement with him, says it wasn’t).
Mr. Yost’s fraternity brothers were trying to wrestle him under running water in a tradition known as “showering,” and he fought back, so one of his brothers placed him in a chokehold, according to his family’s lawsuit. When Mr. Yost lost consciousness, the students panicked and dropped him, the lawsuit says, causing his head to slam into the bathroom floor.
The court cleared the college of any liability, saying its duties didn’t include oversight and control of students living in a house the college owns but leases to the fraternity.
The national fraternity, which lacked direct oversight and control of the chapter, couldn’t be held liable either, the court ruled. “The designated evidence indicates that the national fraternity strongly disapproved of hazing and promoted gentlemanly behavior in its printed charters and bylaws through its aspirational enactments and promotional materials,” the ruling stated.
Local chapters receive risk guides from the fraternity’s insurance company, and members complete an online course that spells out the dangers of hazing. If members ignored or violated those rules, the court said, the national fraternity can’t be held legally responsible. The relationship between the national fraternity and the individual student, the ruling said, “was remote and tenuous.”
Fraternities are doing everything in their power to keep it that way.
“The nationals take the position that they can’t go down with all the sinking ships,” says Brett A. Sokolow, president of the Ncherm Group, a consulting and law firm that advises colleges and that was formerly known as the National Center for Higher Education Risk Management.
The goal, typically, is to push liability onto the local chapter, he says.
Chapters, in turn, often deflect responsibility onto parents’ homeowners’ insurance because fraternity members typically still use their parents’ address as their own. But those insurance companies are starting to specifically exempt activities that are illegal or that involve fraternities, Mr. Sokolow says.
In the Wabash case, after clearing the national fraternity and the college, the Indiana Supreme Court left open the question of whether the college chapter was at fault.
Jim Ewbank, a lawyer representing that chapter, says it settled with the student and his family for an undisclosed sum.
He says the insurance companies that represent national fraternities are justified in denying coverage to members who break the law or violate fraternity policies. Most, he says, won’t deny coverage just because underage students were drinking, but they probably will if a pledge is forced to drink alcohol.
“To say the nationals are leaving members out in the cold is just not true,” Mr. Ewbank says.
Over the past six to eight years, the amount fraternities have paid out to settle lawsuits has grown from about $20 million a year to $30 million, Mr. Sokolow estimates. A Bloomberg Business analysis of IRS filings estimated that, in 2010, fraternities took in $170 million in revenue. None of the national groups that represent fraternities keep tabs on revenues, and none of the fraternities contacted by The Chronicle, including Sigma Alpha Epsilon, would divulge those figures.
But many of their accounts are clearly flush with cash as more and more dues-paying students continue to flock to fraternities.
Charles G. Eberly, an emeritus professor of counseling and student development at Eastern Illinois University, says that now, more than ever, students crave connections.
Because of the pressure on faculty members to shift from mentoring students to generating economically valuable research, “time to listen to students has been markedly reduced,” says Mr. Eberly, a former president of the Center for the Study of the College Fraternity, based at Indiana University at Bloomington.
Fraternities provide the social support and encouragement students need as they forge their personal identities, Mr. Eberly says.
They also provide opportunities for leadership training and community service, benefits that too often get overlooked when the focus is on misbehavior, advocates say.
“Sometimes, people rally to the brand when it’s under challenge,” says Peter F. Lake, director of the Center for Excellence in Higher Education Law and Policy at Stetson University. “There may be something to the adage that there’s no such thing as bad publicity.”
But headlines about out-of-control partying and sexual misconduct could turn some students off while “encouraging people with high-risk behaviors to join,” Mr. Lake adds. “By vilifying the Greeks, you might create the monster you’re afraid of.”
Katherine Mangan writes about community colleges, completion efforts, and job training, as well as other topics in daily news. Follow her on Twitter @KatherineMangan, or email her at katherine.mangan@chronicle.com.
