In 1992, four fraternities created what was first called the Fraternity Risk Management Trust, a vast sum of money used for reinsurance
For fraternities to survive, they needed to do four separate but related things: take the task of acquiring insurance out of the hands of the local chapters and place it in the hands of the vast national organizations; develop procedures and policies that would transfer as much of their liability as possible to outside parties; find new and creative means of protecting their massive assets from juries; and-perhaps most important of all-find a way of indemnifying the national and local organizations from the dangerous and illegal behavior of some of their undergraduate members. The way fraternities accomplished all of this is the underlying story in the lawsuits they face, and it is something that few members-and, I would wager, even fewer parents of members-grasp completely, comprising a set of realities you should absolutely understand in detail if your son ever decides to join a fraternity.
About half of American fraternities are not equipped with fire sprinklers. (Christine Peterson/Worcester Telebram Gazette/AP; Bill Wolf/AP; Keith Muccilli/Home News Tribune/AP)
In 2006, a group of seven other fraternities bought their own insurance broker, James R
Self-insurance was an obvious means for combating prohibitive insurance pricing and the widening reluctance to insure fraternities. Today, 32 fraternities belong to this trust. Favor, which now insures many others. More important than self-insurance, however, was the development of a risk-management policy that would become-across these huge national outfits and their hundreds of individual chapters-the industry standard. This was accomplished by the creation of something called the Fraternal Information and Programming Group (FIPG), which in the mid-1980s developed a comprehensive risk-management policy for fraternities that is regularly updated. Currently 32 fraternities are members of the FIPG and adhere to this policy, or to their own even more rigorous versions. One fraternity expert told me that even non-FIPG frats have similar policies, many based in large measure on FIPG’s, which is seen as something of a blueprint. In a certain sense, you may think you belong to Tau Kappa Epsilon or Sigma Nu or Delta Tau Delta-but if you find yourself a part of life-changing litigation involving one of those outfits, what you really belong to is FIPG, because its risk-management policy (and your adherence to or violation of it) will determine your fate far more than the vows you made during your initiation ritual-vows composed by long-dead men who had never even heard of the concept of fraternity insurance.
FIPG regularly produces a risk-management manual-the current version is 50 pages-that lays out a wide range of (optional) best practices. If the manual were Anna Karenina, alcohol policy would be its farming reform: the buzz-killing subplot that quickly reveals itself to be an authorial obsession. For good reason: the majority of all fraternity insurance claims involve booze-I have read hundreds of fraternity incident reports 
, not one of which describes an event where massive amounts of alcohol weren’t part of the problem-and the need to manage or transfer risk presented by alcohol is perhaps the most important factor in protecting the system’s longevity. Any plaintiff’s attorney worth his salt knows how to use relevant social-host and dramshop laws against a fraternity; to avoid this kind of liability, the fraternity needs to establish that the young men being charged were not acting within the scope of their status as fraternity members. Once they violated their frat’s alcohol policy, they parted company with the frat. It’s a neat piece of logic: the very fact that a young man finds himself in need of insurance coverage is often grounds for denying it to him.