2006 RCI Hurricane/Disaster Policy

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

RCI has sent out a letter to its resort affiliates from Pat Connolly dated April 20 setting out its hurricane/disaster poliocy for 2006.

It says: ''for 2006, RCI will continue to suspend deposit priveleges until confirmation is received that a resort's units are accessible and habitable. We will also honor all member deposits made prior to a Business Interruption event. However, in order to do so we will require alternate future and usable inventory or monetary reimbursement from our affiliates for impacted member deposits.''

What this means is 1) after the disaster, no more deposits can be made until the resort is back open, and 2) existing deposits that fall while the resort is closed will be returned unless the resort ponies up either future usable weeks or cash.

The first part seems to have been RCI policy for most disasters, with the only exception I know of being for Hurricane Isabel on the Outer Banks in 2003, when they allowed full credit for continuing to deposit even while the resorts were closed (DAE did the same).

The second part seems to be new. Resorts in developer sales would seem to have a ready source of substitute inventory, but a sold out resort would not.
Their suggestion for resorts: ''As Business Interruption Insurance may be availible to resorts, this should not pose a threat to your member deposits.''
The problem is that while business interruption riders are usually availible on Wind policies, they are not on flood policies, and much of the damage to oceanfront resorts comes from the storm surge which is covered under the flood policy. I wonder if there are stand alone Business Interruption policies availible to resorts.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

Where would it all come from

I saw the letter and also had questions about how it would work. I wonder who gets to decide if the deposit gets used or returned? In most cases if there is heavy damage the resort is going to be using any insurance as well as annual fees to get back up and operational. An exchange company coming in and saying they have money coming may not work too well. As you say a sold out resort has no other inventory to offer. Not a good situation to add to a diaster.

[bigfrank Administrator Find all posts View Profile Close bigfrank]

IMO I think a lot of people will be SOL. Insurance might be our only option, Of coarse they now have that covered so all the money goes in there pockets.

[funtime2 Senior Member Find all posts View Profile Close funtime2]

I vote for Bigfrank's SOL.

[Jya-Ning Silver Contributor Find all posts View Profile Close Jya-Ning]

Since RCI change its policy, does it means resort can break its contract with RCI now?

Jya-Ning

[Fern Senior Member Find all posts View Profile Close Fern]

I don't know what II's policy on this is...but if it is more lenient, I think RCI will lose many resorts in the hurricane belt...

Fern

[BoardGirl Senior Member Find all posts View Profile Close BoardGirl]

Yep, this is exactly what I think - Golden Opportunity to scoop up resorts that are now thinking "last straw" with RCI.

Hmmm, wonder how many that "include" RCI membership fee might, um, 'swing the other way', so to speak.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

There have already been inquiries by OBX resorts about stand alone Businees Interruption Insurance, which RCI had said would provide resorts with the ability to cover the cost of providing alternate inventory. Insurance agents are saying that there is no such animal; it is only issued as a rider on another property policy for the perils covered in that policy. The National FLood Insurnace program does NOT offer a business interruption rider. Any loss primarily caused by flood such as storm surge or inland flooding from a hurricane CANNOT be covered for business interruption.

Since resorts are not going to have the spare funds after a disaster to pay RCI for this, it will be the members who will be losing out.

Those resorts in areas where the likely perils that may shut them down are insurable for business interruption, the resorts should certainly be sure they have such a policy rider.

I agree that this creates a real opening to II, DAE, SFX, and others to poach resorts and members from RCI.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

I just spoke with a resort manager who had talked with an RCI account rep on this issue. She was told that rather than cancelling members deposits, RCI would REQUIRE the resorts to either give alternate inventory or make a cash payment.

Rereading the letter, I can see this interpretation of it, which is a much severe potential problem for resorts than just cancelling members deposits.

Resorts need to look at their RCI contracts to see if they have any potential legal liability to RCI for such a claiim. Even if they don't, RCI could well hold their continued affiliation over their heads.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

As someone posted someplace (I lose track of all these posts after awhile) they can't actually come after the resorts unless it was a resort (maybe a bulk bank type) deposit. Otherwise they would have to go to the owner/depositor as the contract is with them for deposits as I see it.

This could be a really messy policy. I have asked our resort management to research it and come back with opinions and options.

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

The part that is of some concern is whether the contract between the resort and RCI may give them some legal claim to demand a monetary contribution. This is also being researched. Otherwise all they could do is hold the resort's affiliation over its head.

If a hurricane strikes, all resorts in the impacted area need to club together and adopt a common policy on this issue. There should be strength in numbers.

[timeos2 Senior Member Find all posts View Profile Close timeos2]

Having signed a few of those agreements I can state that there is nothing in them regarding any payments. If there had been our Board would not have approved the agreement. I think RCI would have a real fight on their hands trying to collect on that. I wonder who came up with this plan. Sounds unenforcable to me but I'm checking with those who would know for sure.

[rsonc Junior Member Find all posts View Profile Close rsonc]

so what do you think would happen if you already used your exchange (dates had passed) or had a reservation for the future booked. Do you think RCI would cancel your bookings?

Susan

[Carolinian Super Moderator Find all posts View Profile Close Carolinian]

You had better have them look at the Owners Association Agreement, paragraph 2 ''Management Duties'', especially the part about operating ''in accordance with the RCI Procedures Manual and other materials'' (does this letter constitute ''other materials''?), paragraph 7 ''Exchange Program'', paragraph 8 ''Denial of Access'', and paragraph 11, ''Indemnification''.

WHile I can see possible defenses to an RCI claim against an HOA, I can also see RCI lawyers using the language in this agreement to lean on resorts to pay these amounts even though the language of the letter doesn't exactly track the language of the agreement. One of the problems is that if there is litigation either way, it has to be in the court of RCI's state, not that of the resort, unless RCI decides otherwise (see paragraph 14).

As someone posted someplace (I lose track of all these posts after awhile) they can't actually come after the resorts unless it was a resort (maybe a bulk bank type) deposit. Otherwise they would have to go to the owner/depositor as the contract is with them for deposits as I see it.

This could be a really messy policy. I have asked our resort management to research it and come back with opinions and options.