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Our Co-op's Call to Action

Below (and attached) is a letter that went out to the entire membership explaining the BSC's current situation regarding substance abuse incidents in our houses, and encouraging members to share their opinions in council and at the annual General Membership Meeting, scheduled for February 26th.

Co-opers,

Every once in a while our co-op is faced with an issue that really challenges our values and forces us to look inward and evaluate what we think this organization is supposed to represent. We’re at a time like that now--the question is substance abuse--and we need to have a conversation about where you want us to go. This is our mission statement:

The mission of the Berkeley Student Cooperative is to provide a quality, low-cost, cooperative housing community to university students, thereby providing an educational opportunity for students who might not otherwise be able to afford a university education.


On top of that, our co-op is guided by the seven Rochdale Principles of Cooperation. Of particular relevance to the topic at hand is the first principle, “Voluntary and Open Membership: Co-operatives are voluntary organizations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination,” and the seventh principle, “Concern for Community: “Co-operatives work for the sustainable development of their communities through policies approved by their members.”

The issue of substance abuse is one that we’ve had to address from time to time over our 77-year history.  Our co-op has been under incredible pressure this semester to respond to the terrible exposure caused by a much-publicized overdose on our property.  We need to engage our entire membership in the discussion of whether members who abuse drugs on our property have failed to uphold “the responsibilities of membership,” and therefore have forfeited the benefits of membership, or whether, in pursuit of  “the sustainable development of our communities”, we can feasibly offer the benefits of the BSC membership to those who are pursuing resources for their recovery.

This letter is a call to action for everyone in our community to come together to discuss our current difficulties and, together, identify a solution which works for the whole BSC.

To make sure that everyone can participate fully, we want to give you as much information as we can about the legal and fiscal situation that we face. The Community Harm Reduction platform adopted at the most recent board meeting is a first step forward in the continuing process of making sure we are dealing effectively with substance abuse and other harmful behaviors. Exercising “Concern for the Community” means showing our compassion towards people in distress, while protecting the security of every person who lives in one of our houses and apartments. The board is not in a position to confront these problems on its own, nor is it in keeping with our goals as an inclusive, cooperative, intentional community to do so. We need the whole collective to determine the scale on which we weigh these hugely important yet sometimes conflicting priorities.

This discussion has been prompted by a claim for damages submitted to the BSC’s liability insurance carrier by the family of a member who was permanently brain-damaged as a result of a well-publicized drug overdose on our property.  As a member who accepts responsibility for your own actions, you may ask,  “Why in the world should the BSC be held responsible for the harm this member suffered as a result of his own illegal acts?” The member’s family claims that the BSC knew about and tolerated this kind of conduct on our property and, by doing so, placed the member at increased risk of abusing drugs and harming himself.  While we vigorously dispute this allegation, it will be up to our insurance company to investigate the claim and decide whether we are responsible for the injury and, if so, whether the claim against us will be covered by our insurance.  

In the history of our organization, drug use by individual members has always been synonymous with risk for the entire cooperative. Problems related to drug use have historically caused the BSC to suffer higher rates due to liability insurance, attorney fees, lawsuits, increased vacancies, and the closure of certain houses.  In the late 1980s, Barrington faced serious problems due to large-scale drug dealing, violence, riots, and safety issues. The neighbors of Barrington filed legal claims for triple damages against the organization under the federal RICO Act (Racketeer Influenced Corrupt Organizations Act). Such issues led to the closing of Barrington in 1989. The organization paid $200,000 in legal fees from the Barrington lawsuit and, when these expenses were added to the loss of 150 paying members, the result caused room and board rates to increase 25.1% from 1989-1990 to 1990-1991.

A similar fiasco surrounding drugs occurred at Le Chateau in 2004 when a group of neighbors sued the USCA claiming the house was a neighborhood nuisance. One major element that contributed to the problem in Le Chateau was that non-members (aka squatters) took over and began to exert more control over the direction of the house (one of the reasons the organizational “fishing” policy is so important). There was no accountability, financial or otherwise, towards these non-residents who made their way into the house to participate in such activities. The legal claim against the USCA resulted in $200,000 in legal fees and a $32,000 settlement. The membership rates jumped another 12.6% from 2004-2005 to 2005-2006 in large part due to the costs associated with the Le Chateau fallout, which included legal fees, remodeling, and vacancies.  The house finally re-opened as Hillegass-Parker House, but the lawsuit was settled by an agreement that HIP House would only house graduate/re-entry students in single rooms, thus reducing by one-third the number of rate-paying members living in the property and thus increasing the cost for everyone else to live in the BSC forever after.  

Even greater than the financial burden of closing a property are the long-lasting community effects. It takes years for the BSC to recover its good standing with the University, public officials, neighbors, insurance companies, alumni and even future members.  The result is that when we fail to intervene early and take a clear stand against individual behavior that harms the BSC, we compromise our mission to provide low cost quality housing for students.   

Thus, the present situation that the BSC faces should utilize the lessons learned from the troubles caused by Barrington and Le Chateau, not only for the sake of our current members and our financial sustainability, but also to strengthen our relations with the UC and the public to ensure the longevity of the BSC.

Because of the claim currently being filed against us by the family of a member who overdosed on our property, both our lawyer and our insurance broker have told the BSC to consider ourselves “on notice” that any other claims of heroin use or illegal activities can have significant and lasting consequences for the organization.  Our insurance broker writes:
“Specifically our concern centers around the liability exposure the BSC faces as a result of the presence of risk, whether or not injury or death occurs, and then more critical, what happens if injury or death occurs where the BSC could have (or from a plaintiff’s position should have) reduced the likelihood of the injury or death occurring in the first place. The current dynamic causing us all concern is the perception...that Cloyne Ct [sic] has a publicly known culture that might be overly tolerant to the use of illicit drugs...and the risk this brings to the future viability of the BSC.”

As landlords, the BSC has a responsibility to protect the security of its members. Our lawyer drew the board’s attention to Frances T v. Village Green Owners’ Association, a major precedent-setting case with regards to premises liability. In this case, a member told the condominium association of her building that there were illegal activities occurring in the building, and asked for better lighting to increase the members’ security. The lighting was not installed. When the member was later assaulted, she sued the condominium association and its board of directors. The Supreme Court of California found the condominium association and individual board members potentially liable for damages. Our lawyer pointed out:
“The Supreme Court ruled that the Board has a ‘duty to exercise due care for the residents’ safety in those areas under their control.’ One of the facts to be considered in evaluating whether this duty had been violated was that the association ‘was on notice that crimes were being committed’.”

Such claims drive up the cost of insurance in the future.  Furthermore, the BSC and its individual directors must pay any damages not covered by our insurance. Our current director and officer liability coverage under our insurance policy is $1 million, which is actually less than a judge might reasonably award to a plaintiff in a lawsuit seeking damages. Moreover, as individual board members can be held liable for damages under certain circumstances, your house’s board rep could end up personally owing thousands of dollars for years in the future.  (Obviously this is hair-raising for the board members.)

Insurance coverage is a major expense for the BSC that costs, for all of our properties, more than $350,000 annually. Our insurance costs will definitely rise next year for the following reasons: (a) the pending claim against us, notwithstanding its complete lack of merit in our opinion, makes our organization seem like a greater risk than the normal premises liability risk and (b) due to fluctuations in the insurance market, the price of insurance is generally rising. We can plan for these increased insurance costs, but there are three circumstances which we cannot plan for. The first is the pending claim against us, discussed above, and whether it will result in organizational or board member liability not covered by insurance. The second is the possibility that someone will file a suit against us, which will be extremely costly to defend even if we win. The third is the additional risk we assume (which requires additional types of insurance coverage) should we decide to make it possible for people with known substance abuse problems to remain in the co-ops as long as they avail themselves of treatment. This is how our insurance broker describes the implications of the third risk:  
“If the BSC attempts to demonstrate a reasonable effort to mitigate this risk by requiring specialized treatment [i.e. rehab], it may be creating more of a “professional” exposure for itself, not dissimilar to a substance abuse counseling center... Please know that this will come at additional expense.”

Finally, the recent, highly publicized overdose has jeopardized our relationship with the University. We are on written notice from the Vice Chancellor (VC) of Facilities that if there is another drug incident at Cloyne, the University will pursue any and all remedies available to it, including terminating the lease of Cloyne Court. Harry Le Grande, the VC for Student Affairs and a long-time supporter of the BSC who stood by us through Barrington and Le Chateau, has told us that we have forfeited his support and that, in the event of another drug overdose on our property, he would advocate terminating not just the Cloyne lease, but severing any formal collaboration with the BSC by terminating all four UC leases (Cloyne, Fenwick, Rochdale, and Convent). This is a very real threat.

It is easy to assume that, if the BSC could weather such a drastic financial shock in earlier decades, we should be able to do so now.  Unfortunately, we are in a very different financial position than we were during the Barrington and Le Chateau days.  The stakes are much higher because, in order to provide our members with safer living environments, we borrowed 20 million dollars in 2007 to seismically retrofit our houses, and as a result we must service $1.4 million dollars in bond repayment for 30 years. With our current membership of 1,250 members, this means that $560 of each member’s payments every semester are exclusively used to service the bonds-- nearly 17%! These bond repayment requirements have significantly reduced our organization’s ability to withstand a one-time financial hit from legal expenses and liability claims.  

But even more important is that the University has put us on notice that one more individual drug overdose at any of the co-ops owned by the University could result in the collective loss of one or all of those units. When we lose a property, members lose their housing, and we lose the members who share the burden of making the loan payments and our other fixed costs.  Assuming a loss of just the 150 members at Cloyne, for example, each member would have to pay $637 each semester just to pay the loans we have incurred.  If we were to lose all of the UC properties, the share of debt service that each of the remaining members must pay would jump to $982/semester! And that doesn’t take into account that we have many other fixed expenses that we will still have to cover, in addition to debt service, even when the number of our members goes down.  

In other words, because of the debt we’ve incurred to make our properties safer, an individual member’s substance abuse poses a greater threat to our organizational survival than we’ve ever known.

We are already on notice that our insurance rates are like to go up simply because the claim was filed. If the insurance company does pay out on the claim, it will affect every single member of this organization. If our insurance company refuses to pay the pending claim on the basis that the BSC’s conduct is not within the scope of our policy coverage, the picture gets even worse.  Not only will our insurance rates still go up but the member’s family may well look to the BSC for damages if the insurance company refuses to pay.  The claim could result in millions of dollars in damages if it were successful, and even if it were not, the legal fees would be at least in the six figures.  And we live with the constant threat that another overdose on BSC property will cause the University to terminate one or more of our leases.  If we lose all the University-owned properties, the BSC as we know it would cease to exist.  We must respond.

Hopefully by now you have a sense of the very real urgency of our current situation and why it calls for the engagement of all of our members.   Ultimately, the Board will have to vote on the actions we take. As a representative government, however, our decisions are only as powerful as the support of the people who will put them into action on a day-to-day basis. You all need to be a part of the conversation if we’re going to do what’s right.

Why do we have to act? Because we have to prove to the world that we haven’t ignored what happened and that we’re doing what we can to prevent it from happening again. But this is more than a moral imperative or a public relations tactic--we need to demonstrate that we are acting to strengthen our response to substance abuse, because if we don’t, it will be difficult for us to obtain the affordable insurance coverage we need next year and in the years ahead. And our co-op depends on all of our houses and apartments to run--losing any of them would be apocalyptic. It would be the end of the BSC if another overdose caused us to lose our University-owned properties. That’s the worst-case scenario, and the University had better be ready for a fight if they try. Hopefully it won’t come to that. But the rise in rates is real, and could potentially be much worse if we don’t demonstrate that we are taking preventative measures now.

So ask yourself: to what extent does this kind of harmful behavior affect you? Is it creating the kind of home that you want? We have the ability to offer support to our members, but at a cost and not without risk that, despite our best efforts to help, the member’s recovery will fail--causing harm not just to them and their housemates but also to the entire organization. What do we want to be able to offer? Is it worth higher rates for everyone to secure helpful benefits to a few?

What responsibility does a community have for the well-being of its members?

The answers won’t be found with the staff, or with the Board. It may seem cliché but the truth is, we work for you. We need your guidance in making decisions to ensure that this co-op lasts through the year and for decades to follow. Nothing that’s decided at the central level means anything if it isn’t what you will live by.  Nothing that Board can adopt or resolve is half as powerful as what could happen if you met the issue head-on and made your feelings clear from the start. Board can respond to claims, but it takes the commitment of all the members to prevent claims from occurring at all.

Organizationally, there are two general directions that things can go, each with their own consequences. We can decide that, as much as we care about all of our members, it isn’t feasible or realistic to help those suffering from substance abuse to recover--they have lost their right to membership.  Or we can decide that these members still belong to our community, and that, as long as they are actively seeking recovery from substance abuse, the last thing we want to do is displace them from their community. The first option--terminating all members with substance abuse problems--would cost nothing, would reduce the risk of catastrophic financial loss, and would help bring rates down for everyone. The second option would require us to obtain professional advice to evaluate each case and make a reasonable judgment as to whether we truly have the capacity to mitigate the risk of the member harming himself or others.  We could only pursue the second option if we were willing to secure additional insurance coverage and greatly enhance the professional substance abuse evaluation and treatment resources we have to offer our members. This second option would cost more money and rates would go up for the long-term to reflect this ongoing change in our organizational budget.  And fundamentally the second option involves risk because there’s simply no guarantee that we would make the right judgment in every case.  Even if we made the right judgment based on professional advice, there might still be an incident on University-owned property.

I think we can agree: we want to create a community where we can thrive. But how?

On February 19th, we are calling a meeting of the entire membership of the BSC to talk about this issue and how we want to respond to it. In this letter we’ve outlined the general directions that things can go. On the 19th, we’re going to give you our research on exactly what’s possible and ask you to decide what kind of co-op you want to create. This decision will strike deep into the soul of the BSC. It will affect how much you pay, our viability into the future, and the experience of the co-op itself. This is a turning point in our history, which stretches back over 75 years.

Until then, please think about what this co-op has meant to you and what you want it to mean to the students who will come after us. We only run it for a few years. What can we leave behind?

Cooperatively,

The Community Harm Reduction Outreach Committee, on behalf of the Board:
Christopher Diamond, Board Member, Euclid Hall
Erin Condit-Bergren, Board Member, HiP House
Erin Hartman, Board Member, Hoyt Hall
Tom Sutak, Board Member Alumni Association
Daniel Kronovet, BSC President
Jan Stokley, Executive Director
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BSC President,
Jan 17, 2011, 6:04 PM
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