General Liability Basics for Sports/Recreation Associations

Understanding what’s covered under General Liability

General Liability is perhaps the most important insurance policy for sports and recreation organizations due to the frequency of spectator and participant injury claims. However, it’s the most difficult policy to place. This is due to the limited number of insurance carriers in the marketplace that offer quality forms of coverage. There is a perception in the insurance industry that sports and recreation organizations generate a higher-than-normal risk of severity claims and are difficult to underwrite. However, in recent years, several new carriers have entered the marketplace resulting in more options than in past years.

General Liability policies cover certain lawsuits alleging “bodily injury” (of spectators or participants) or “property damage” caused by an occurrence. These are not subject to the standard policy exclusions or non-standard exclusions that may be added by policy endorsements. In addition, the policy responds to certain lawsuits alleging “personal injury” (such as slander, libel, invasion of privacy, false imprisonment, etc.) and “advertising injury” (such as disparagement of a third party in advertising material). The policy provides an attorney for legal defense and will pay up to the policy limits in the event of settlement or adverse jury verdict.

Occurrence vs. Claims Made

A sports/recreation organization should always purchase an “occurrence” policy form instead of a “claims made” policy form whenever possible.

The superior occurrence policy pays covered claims as long as the policy is in force when the injury occurs. It does not matter if the policy is later cancelled or if a claim is filed after the policy expiration date.

On the other hand, the inferior claims made policy pays covered claims only if 1) the policy is in force when the injury occurs and 2) the same policy, a renewal policy with a properly set retroactive date or an expired policy with an extended reporting period is in effect when the claim is filed. A claims made policy is risky for a sports/recreation organization because a participant who is a minor can wait until the age of majority (usually 18 in most states) plus two years for the statute of limitations to run out before filing a lawsuit. In some cases, this could be 15 years. Claims made policies provide too many opportunities for problems to arise if a new carrier is selected upon renewal or if the policy is non-renewed or cancelled.

Please read Occurrence vs Claims-made Insurance for Sports Organizations for more information on this topic.

Definition of Bodily Injury

The standard definition of “bodily injury” is “…bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”

Some carriers offer an important General Liability endorsement to broaden the definition of bodily injury to include mental anguish, mental injury, shock, fright, humiliation, or emotional distress or death resulting from bodily injury, sickness or disease.

Common Policy Limits

A General Liability policy should include the following minimum basic limits of coverage:

Each Occurrence:  $1 million
General Aggregate: $2 million
Products/Completed Operations Aggregate: $1 million
Personal/Advertising Injury: $1 million
Damage to Premises Rented to You: $300,000 (also known as Fire Damage Legal Liability on older policy forms)
Premises Medical Expense Payments: $5,000 (does not apply to injury to athletic participants)

The following additional limits may appear on some policies:

Participants Legal Liability: $1 million
Sex Abuse/Molestation Each Claim: $1 million
Sex Abuse/Molestation Aggregate:   $1 million
Non-Owned and Hired Auto Liability:  $1 million
Employee Benefits Liability: $1million