[Dixielandjazz] Fw: Musician Injuries - Large Liability Risks.

Ed Bideau bideaulw at chanuteks.com
Mon Mar 31 00:16:06 PST 2003

I read the email on injuries with a lot of interest and wanted to point out
some legal issues that most band members and leaders probably do not
consider and may not even think of.  These are the issuew of liability
exposure and worker's compensation exposure for band activities.  Please
bear in mind that I am a defense lawyer that ordinarily defends small
business owners, and am not a plaintiff's injury lawyer who chases
ambulances.  Most small band leaders dont know it but they may be exposed
to liability for worker's compensation to band members if they sustain an
injury during a gig or even practice. Most states have payroll limits under
which you are not required to carry work comp but in some states that can
be pretty low. Kansas is 20,000 per year, but a few states go on number of
employees instead of payroll.  If your state requires work comp for more
than 5 employees then if you have that many total then you might be subject
to the law. Beyond that, even if you are not subject to Work Comp laws you
can be held liable for negligence if an employee gets injured.  You have
the potential defense of assumption of risk if an employee is injured but
someone tripping over a mike chord and breaking their neck can be a problem
that might take years of litigation to resolve and is an expensive pain
even if you win.  You might think it will never happen to you and that good
old Fred and good old Joe would never sue you for a band related injury.
Bottom line is they may not want to but they might not have any choice or
their family might over-rule them and sue you anyway.  In 30 years of law
practice I have seen people do a lot of things when backed to the financial
wall that they might not do otherwise.

A band also brings exposure for third party liability to others. In most
states if a third party gets hurt, for instance a band member bumps into a
little old lady and she falls and breaks her hip or runs over her on the
way to a gig or on band business, the band leader can be held responsible.
If the band is organized like a club and is an unincorporated association
then in the majority of the states every single individual member can be
held liable even though another member caused the injury, with joint and
several liability imposed on all members.  What this means is that an
injured plaintiff can come after the savings and assets of every single
member of an unincorporated association.

Bottom line is the only way to protect yourself is to make a decision as to
whether you are going to be a business or not. If you are going to be a
business and charge then you better act like a business and get
incorporated or at least form an LLC and carry liability insurance for the
band activities on top of that.  In many states a single band leader can
form a one person LLC that the IRS will not require to file a separate tax
return for the business.  Just having a corp or an LLC is not enough
although it provides some protection and is a lot better than nothing, you
should have insurance on top of that.

All of these wrinkles is one reason why our little band is stricly amateur
and does not directly charge the customer.  If it is not a business pursuit
then our personal insurance, liability under our homeowners and auto
policies, covers us. If its a business it has to be insured separately and
is often excluded from our personal insurance.  

I am sure a lot of you think all this may be a bunch of hooey and its a
pain in the ass to consider, but let me tell you a true story about a
little women's club that split off from the Beta Sigma Phi group and
started their own little local sorority here in Kansas.  There were twenty
ladies in the group including a doctor, banker's wife and some fairly
wealthy people.  They had never bothered to incorporate the club as a
non-profit corporation. In January of 1999 a new member prospect who came
to a club meeting slipped on the ice on the front porch, hit her head and
it ended up killing her.  The owner of the home where the club meeting was
held had only $50,000 in premises liability on her home. The decedent's
executor sued all twenty ladies as an unincorporated association and
recovered a judgment in excess of one million dollars against all of them
jointly and severally.  Imagine the attitude of the spouses when they
realized their entire savings, including home and business assets they had
their wives names on, were subject to a judgment lien.  Bottom line is it
is serious stuff and has to be considered.

My recommendation?  If you have a band either go completely amateur and
form it as a non-profit corp and make sure you all have personal insurance,
 or run it as a business, file it as a for profit corp or an LLC and also
buy the insurance.  Either that or be judgment proof and dont have anything
to collect a judgment on.  By the way, under the bankruptcy laws your
musical instruments are not exempt from judgment execution, they are
considered toys or luxuries and can be the first to go.

If you run it like a business you are also subject to paying witholding
income tax, social security tax and unemployment tax.  Most band members
will not stand up to audit scrutiny as an "independent contractor" or
"contract labor" and dont meet the test for that type of treatment, so if
you dont do withholding and get audited, be prepared to go into major
pucker factor.  They can go back six years and assess all the taxes against
you with penalties and interest. When that IRS agent flashes that badge at
you it has a way ruining your appetite for a few days.  

What this all boils down to is unless you are willing to run it as a true
business, you might want to do what we did and forget charging for services
because the risk, particularly to band members or leaders with substantial
assets, is just flat not worth it. I hate to be the bearer of bad news, but
its better to hear it than have to wake up to it after something bad
happens and you have to go home and tell the wife you put the family
fortune at risk. On the other hand if you want to charge and are going to
produce revenue, you should get either an LLC or a corporation formed and
be prepared to comply with all the tax laws and buy the insurance.  Yet
another option would be to try to put the burden on the person hiring you
and have them retain or hire all the band members individually instead of
the group. I doubt this is workable for most situations but would be a
possibility. I would imagine that band leaders would hear their players
raise hell if they started to do withholding but perhaps a remedy is to
elect them band leader and let them take the risk.  Finally, there might be
some type of association that could get insurance coverage for bands on a
group basis at a cheaper rate.  For instance gun clubs can get liability
insurance from the NRA if a certain percentage of the members are NRA
members. I dont know if there is any association for music groups that has
this service, but if so it would certainly be a benefit.

Once again, I am sorry to bring what might be bad news but its better if
everyone considered this up front.  If you are doing some serious gigs and
have a serious band then I would recommend that you sit down with your tax
guy and legal guy and get some straight dope for your state.

A banjo playing, crabby ass lawyer.
Ed Bideau

Edwin H. Bideau III
Bideau Law Offices, LLC
18 North Forest
P. O. Box 945
Chanute, Kansas 66720
Voice - 620-431-2720 
Fax -    620-431-2742

Email:   ehb at bideaulaw.com

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