The Hotel Times - September 2008 - (Page 24)

INSURANCE REPORT dents there, more so than in other European countries, of the burgeoning number of claims in Germany. However, he added a large market that exists for legal expenses insurance may encourage “the man on the street” to seek recourse for damages since access to the courts can be costly. Just about every hotel operator in every country carries some form of insurance that typically is tailored and priced for their legal system, said Paul Rosenlund, a partner in the San Francisco office of Duane Morris. Otherwise, he said, things could get pretty dicey, at least for that franchisee. For instance, if Greek hotel operators suddenly were exposed to American court liability, the pricing model for their insurance and risk management would be “completely out of whack and they’d be out of business,” he said. If a chain’s insurance is insufficient or for whatever reason wouldn’t respond to a particular claim, the hotel then would assume the liability itself, but typically not its franchisees, Lowhurst said. In the event of a slip and fall, another key issue is whether the hotel is owned, franchised or operated, Fraser added. Typically, he explained, a franchised hotel will obtain separate insurance for the assets and liability of the hotel. “But if we look at, for example, a slip-and-fall incident, a U.S. court can interpret the situation differently,” he said. Consequently, it must be proven that the situation was dangerous and therefore likely to cause injury or that evidence exists of repeated incidents of customers slipping and falling. While he said it’s difficult to identify instances in which a corporate entity might experience fallout from an incident such as a fall at one of its overseas franchise hotels, Rosenlund noted that it could happen if officials with the corporate entity failed to keep its corporate housekeeping in order. “I’ve not seen that happen, but it could,” he said. He noted there could be circumstances if the overarching corporate entity played a direct role in some feature of the management or operation of the foreign property at issue. However, he said it’s unlikely. On the other hand, if a guest suffered a fall in a smaller U.S. hotel chain based in China, which it owned through a Chinese company, the story might be different, Harris said. In that case, a plaintiff might stand a better chance of suing the chain in the U.S. even though the chain likely would claim that China, not the U.S., was the ideal forum for the lawsuit. While noting it’s unclear who would prevail in such an argument, he suspects that, most of the time, the suit would remain in the U.S. That’s because it could successfully be argued that the U.S company advertised in the U.S. and “sort of drew in [the guest].” Promoting foreign travel All this leads to the impact of tools like the Internet and its ability to reach guests worldwide. As a result, Rosenlund said, the near-universal access of the Internet is heightening the potential risk for U.S.based hotel chains, particularly as far as raising their degree of accountability when it comes to incidents like falls. Unlike newspaper and magazine advertising, which aren’t considered as global, the web has created “a new game.” Consequently, he emphasized that hotel chains must be careful and conscious not to convey the appearance that they have a presence in or are operating anywhere that they don’t. Otherwise, he said, they could be placing themselves in a position of culpability, especially in terms of marketing activities and corporate statements. To help attempt circumvent the issue, he said, U.S.-based companies could require guests to sign a statement when they register agreeing that any such matter must be brought in the part of the world where the hotel is located. Then again, he noted, it’s not guaranteed a court would enforce such a document. Wood said U.S. hotel companies operating abroad commonly purchase U.S. defense coverage, readily available from global insurers, to protect against international claims brought in the U.S. Since Omni operates in the U.S., Bangs believes it might be somewhat easier for a guest who is a U.S. resident to successfully litigate a slip-and-fall case against one of its two internationally based franchisees in Mexico in a U.S. court than it would be for a non-resident. “A claimant might see that it would be easier to bring the claim to the U.S. versus having to go back to Mexico to file the claim,” she said. Furthermore, she said that although it doesn’t operate either of its Mexico franchisees, because Omni’s name is on the door, the chain could be liable for an injury at one of the locations. This is because those in the U.S. who stay at an Omni in Cancun usually don’t differentiate between Omni’s operating company out of Texas and the franchisee who is operating the hotel in Mexico. hmm@questex.com 24 The Hotel Times September 2008 www.TheHotelTimes.com 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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