The Hotel Times - September 2008 - (Page 23)

INSURANCE REPORT operator in that country. At that point, Lowhurst continued, it’s standard for a hotel chain’s parent company to invoke the corporate “separateness” of the parent company from its overseas hotel affiliate. This forces the injured guest to pursue a doctrine called alter ego liability, also known as “piercing the corporate veil,” to get at the parent company’s assets. Under this doctrine, the guest faces the hurdle of proving that, in reality, the parent company and subsidiary are one and the same. A plaintiff must show that the overseas property didn’t act like a true separate corporation by virtue of, for example, co-mingling its funds with the parent company, failing to respect corporate formalities (such as holding annual shareholder meetings), or lacking adequate capitalization. “It’s not an easy sell,” Lowhurst said. Dan Harris, a lawyer specializing in international law with HarrisMoure in Seattle, said it’s not impossible to trump degree of separation. However, he said “unless it’s a really good case, it’s [financially] not worth it.” State, national, global Still, any property with ties to the U.S. through ownership, franchise or management may be subject to being sued in U.S. courts, noted Richard Clark, managing director of real estate and hospitality at Arthur J. Gallagher Risk Management Services in Houston. The awards can be large and the U.S. courts more liberal than the country where their property is located. Occasionally, U.S. guests injured abroad attempt to bring suits in their home state, said Bradley Wood, SVP of risk management at Marriott International in Bethesda, Maryland. Marriott operates more than 300 hotels outside the U.S. in almost 70 countries. Wood said that while U.S. courts may consider accepting jurisdiction if they find sufficient business connection between the international property and the U.S. parent company, the courts often will apply the local law of the international hotel where the injury occurred. Among the most significant trends identified by the “2008 Trends and Developments in International Legal Practice” report by the Proskauer Rose International Practice Group, is increased litigation of international controversies in the U.S. According to the report, there has been an increased number of attempts by parties operating in international commerce to gain access to U.S. courts to resolve disputes over the last five years. The IPG forecasts and analyzes the most significant legal issues facing businesses operating globally, focuses on the practical implications of these trends and discusses best practices for dealing with them over the coming year. The group predicts that this trend will continue, particularly in relation to forum-related issues such as personal and subject matter, venue and choice of law. The trends report concludes that it is imperative that companies operating internationally consider the complex challenges and opportunities of simultaneously managing litigation in the U.S. and elsewhere, including issues of privilege, evidence-gathering and taking, going to trial in the U.S. and how to structure legal relations and deals and to manage disputes with a keen eye to enforcing, or successfully resisting enforcement of, awards and judgments. If a claim is submitted by one of its two international franchisees in Mexico, Omni Hotels immediately reviews its contract to confirm it’s the type of case covered by its indemnity, said Mel Bangs, Omni’s director of risk management & benefits. If so, the Irving, Texas-based chain turns the claim back to the hotel ownership in Mexico, informing them “that not only should they defend it, but our expectation is that they’ll defend Omni as well.” Vicarious liability A common risk within the franchised hotels industry is vicarious liability. Under vicarious liability, an injured party argues that not only is the franchisee responsible, but that the franchisor should have controlled the franchisee, therefore preventing the injures, said Laurie Fraser, a practice leader for Willis Global Market Leisure, an advisor and professional risk and insurance consultant to the leisure industry in London. He said franchisees now are commonly required to indemnify the franchisor from claims and liability asserted against the franchisor within the structure of franchise contracts, and that the contract also will expressly direct the franchisee to carry adequate limits of insurance. Fraser noted the creation in Germany of a general third-party liability, which is a risk insurance against losses suffered by the third persons. Its impetus, he suggested, is a greater level of awareness among resi- www.TheHotelTimes.com September 2008 The Hotel Times 23 http://www.TheHotelTimes.com

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The Hotel Times - September 2008 Business Outlook Editorial Outlook Contents In The News Transactional Facts Hurry Up and Wait Capital Outlook Development Outlook Brokerage Outlook International Litigation: Who gets sued? Insurance Outlook Economic Crisis: Stress or Opportunity for Franchisees? Franchise Outlook Ad/Edit Index In Closing

The Hotel Times - September 2008

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