How To Avoid The 7 Deadly Sins When Buying Sports Insurance
Insurance Insider Reveals Little Known Secrets:
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7 Deadly Sins To Avoid When Buying Sports InsuranceBy John SadlerSports Insurance Expert, Risk Manager, and Attorney |
Sports Insurance "Expert" Reveals Little Known Secrets Of How Your League Can Save Money And Better Protect Your Kids, Your Volunteers And Yourself...
I have dedicated my life to the study of sports insurance and sports risk management since graduating from law school in 1986. It is my passion to protect sports and recreation organizations and their directors, officers, employees, and volunteers against losing everything in a lawsuit.
I have decided to reveal the little known secrets of how to buy the broadest insurance coverages for the absolute lowest cost. Along the way, I would like to "demystify" the confusing world of sports insurance.
For more information on my background and qualifications visit www.sadlersports.com and click on "About Sadler".
Does This Seem Familiar?
You volunteer to help manage a local sports organization because you love kids. But you know that running a sports organization has lots of responsibilities -- and they don't all have to do with sports! Like buying insurance!
You perceive insurance as a necessary evil full of confusing terms and an expense that few can afford.
How exactly do you decide what to do? Let the municipality provide it? Don't buy it? Buy it cheap? Buy good coverage? What is good coverage anyway?
Deadly Sin #1: Not Buying All Of The Policies That You Need
Typically, a sports organization should purchase five different insurance policies!
Let's take a quick look at what they are:
- Accident Insurance -- Pays for medical bills on behalf of injured participants. This policy assures that your kids and volunteers will receive the type of medical treatment that they deserve. Also, the threat of a lawsuit being filed by an injured kid is minimized if his medical bills are taken care of by Accident Insurance. Don't be fooled -- a lot of people don't have their own coverage. In fact, one in four kids has no form of medical insurance. If the medical bills aren't paid, the lawyers might come after you! Read on.
- General Liability Insurance -- Covers certain types of lawsuits alleging that a spectator or player has suffered bodily injury or property damage due to the negligence of your league. This policy provides an attorney for your defense and pays for costs of settlement or jury verdict. Covered persons should include the sports organization itself, directors, officers, and volunteers. Lawsuits are filed every day for injuries that occur at games/practices and during off premises nonsport activities. Even if you prove that you were not negligent, the attorney's fees must be paid. Those fees can easily run upwards of $50,000!
- Directors & Officers Liability -- Covers certain types of lawsuits (not covered by the General Liability policy) alleging that your sports organization's mismanagement has resulted in economic injury to another party or that another party's rights under state or federal law have been violated. Examples of types of lawsuits commonly covered include discrimination, violation of Americans With Disabilities Act, wrongful termination or suspension of your league personnel or players, or failure to follow your own rules or bylaws. This policy also provides an attorney for your defense and pays for costs of settlement or jury verdict. Covered persons should include the sports organization itself, directors, officers, and volunteers. Again, even if you are totally innocent, the attorney's fees must be paid!
- Crime Insurance -- Covers a financial loss suffered by your sports organization as a result of embezzlement of money by your own volunteers. Also, this policy should cover theft of money by outsiders. It's hard to think that your own volunteers would steal but it does happen. Who pays the bills if the money's gone?
- Equipment Insurance -- Covers loss to your sports equipment (ex: uniforms, playing equipment, concession equipment, scoreboards, fences, bleachers, and small buildings) against the perils of fire, lightning, wind, theft and vandalism.
If you fail to purchase any of these critical policies and if there is a significant claim that is not covered, you could be sued for managerial negligence.
Under some circumstances, some sports organizations may need additional policies such as Property, Auto, or Workers' Compensation. For purposes of our discussion, we will concentrate on Accident and General Liability Insurance.
Deadly Sin #2: Believing Untrue Myths About Sports Lawsuits And Insurance That You Heard From Your Friends
You're tempted to say "the heck with it -- I'll take my chances and not buy insurance because...":
Excuse #1: We've never had a serious injury or lawsuit in our sports organization. Besides, we're extremely safety conscious.
Excuse #2: Our volunteers are "bullet proof" against lawsuits because of state and federal legislation providing immunity for volunteers.
Reality #2: While definitely a step in the right direction, the state and federal immunity laws don't prevent the lawsuits from being filed and it may cost over $10,000 in legal fees to attempt to prove that you are protected. Furthermore, these immunity laws are full of loopholes and don’t protect the sports organization itself which can have tens of thousands of dollars of assets at risk.
Excuse #3: Our sports organization is protected against lawsuits because we require our players and their parents to sign waiver/release forms.
Excuse #4: Our sports organization doesn't need to buy a General Liability policy to protect against lawsuits because each volunteer can provide his/her own protection through Homeowner's Liability, Personal Umbrella Policy, or a Coach Certification Policy.
Reality #4: Many Homeowner's Liability and Personal Umbrella Policies don't cover lawsuits arising out of your actions as a sports volunteer -- read the fine print! Most Coach Certification policies only protect the coach while undertaking coaching duties -- this can still leave the coach exposed to lawsuits arising out of injuries to spectators and to players while on non-sport team outings. Also, even if these policies were to provide total protection for the individual, not all volunteers will carry one! Further more, none of these policies protect the league itself which may have tens of thousands of $$$ in funds and property that can be lost in a lawsuit.
Excuse #5: Our sports organization and our directors, officers, and volunteers are automatically covered through the insurance offered by the recreation department or municipality.
Reality #5: The standard General Liability policy carried by a rec. dept. or municipality only covers the rec. dept. and its directors, officers, and employees. It may or may not cover sports volunteers working directly on behalf of the recreation department. In addition, individual leagues using the facilities are definitely not covered.
Even if sports volunteers are covered under the recreation department’s General Liability policy there may be limitations. For example, there may be no coverage for off premises practice, games, and non sports outings.
In addition, many General Liability policies carried by municipal recreation departments have dangerous loopholes such as Athletic Participants Exclusion, Punitive Damages Exclusion, and Sex Abuse / Molestation Exclusion.
Our online risk management library includes a checklist entitled “Municipal Recreation Department Insurance Checklist.” Ask the risk manager at your recreation department to complete this form so that you will know the extent of your protection provided by the municipal recreation department. Based on our past experience, over 50% have a major problem.
Excuse #6: Our sports organization doesn't need to buy Accident Insurance to pay for medical bills on its participants since they are all already covered under their parent's health insurance.
Reality #6: National statistics indicate that up to 25% of all children in the U.S. aren't covered by health insurance. Most of these uninsured children come from middle class backgrounds where their parents are self employed and don't have access to affordable group plans. Even in affluent neighborhoods, parent's health policies are subject to cancellation due to layoffs. Even if health insurance is in force, it may be subject to large deductibles of up to $5,000 and coinsurance penalties that require payment of up to 40% of all medical bills. Remember, unpaid medical bills often result in a lawsuit being filed by the injured participant.
We're just getting started -- read on for the good stuff!
Deadly Sin #3: Not Understanding The 15 Most Common Ways Sports Volunteers Can Be Sued!
(And One Very Powerful Secret)
Don't Be Negligent In These Areas...
Spectator Injury:
1. Slip/trip/fall around playing field due to hazards such as holes, slippery surfaces, or uneven surfaces.
2. Slip/trip/fall off of bleachers.
3. Contact with ball caused by lack of barriers or defective barriers. Also, caused by improper positioning of players during warm ups.
Participant Injury:
4. Failure of supervisor to stop participant rowdiness.
5. Failure of supervisor to be located closely enough to activities in order to prevent injuries.
6. Improper ratio of supervisors to participants.
7. Supervisor incompetence or lack of training (certification) that results in participant injury.
8. Improper instruction of participants on sport specific techniques and skills, game rules, and safety rules.
9. Improper layout and design of the playing facility.
10. Lack of facility maintenance and repair that leads to injuries caused by holes, depressions, or slippery spots.
11. Improper decision to play under inclement weather conditions.
12. Lack of emergency planning and coordination with local medical care providers and ambulance services.
13. Failure to select, properly fit, and inspect quality equipment that is to be used for its intended purpose as prescribed by the manufacturer.
14. Failure to engage in pre-participation screening for medical risks.
15. Failure to warn participants/parents of the dangers inherent in sports participation (Waiver/Release Form)
Important Secret: You can do all you can to prevent these injuries, and they still might happen to you. Read on about what you can do about it.
Deadly Sin #4: Not Understanding The 5 Ways Your League Can Save Money On Insurance
You're nobody's fool! You always want to get the best deal when you buy sports organization insurance on your limited budget. But, how do you know if your insurance agent is charging you too much? Wouldn't you like to save money on insurance and spend your savings on fun stuff like cool looking uniforms and new equipment?
Sports insurance is a highly specialized field where very few agents have the buying power to negotiate the prices that you must have! Your agent may not be one of the lucky few that has access the Big Boys!
Now Let's Look At Some Of The Tricks For How You Can Save Money On Sports Insurance!
Money Saving Tip #1) Buy From A Sports Insurance Specialist. Listen, insurance is a huge industry. There's insurance for everything. Anything you can have, do, own, manage or whatever -- there's insurance for it. And nobody can specialize in all of it. In fact, a professional insurance agent can only specialize in a few niches -- and really understand them. If someone specializes in insuring homes, auto, and retail stores, it doesn't mean that they know anything about sports leagues.
The sports insurance marketplace is so secretive and hard to access that only a sports insurance specialist will know where to go in order to satisfy the specific needs of a particular league. This specialized knowledge results in knowing which program or insurance company is offering the most competitive rates for a particular type of league. This knowledge can result in big savings!
Money Saving Tip #2) Tap Into Group Purchasing Power. Only the very largest sports organizations or leagues that operate on a statewide, regional, or national basis have the buying power to establish their own programs with their own special rates. (We have customized insurance programs for associations such as Dixie Youth, Dixie Boys, Dixie Softball, Dizzy Dean, American Youth Football, NYSCA and SODA) On the other hand, the average sports league will never have the clout to get the attention of an individual insurance carrier.
The solution for the average sports organization is to join forces with other organizations in order to form a buying cooperative that can have enough clout to get the attention of the insurance carriers. These buying cooperatives are know as either “association programs” or "risk purchasing groups" and allow for significant rate reductions. Quite simply, a larger group can negotiate lower prices and better coverages because the carriers that specialize in sports insurance are hungry for large accounts.
Money Saving Tip #3) Raise Your Deductible On Your Accident Policy. Your "deductible" is the amount that you pay when you make a claim before your insurance "kicks in". In other words, if you have a $1,000 claim and a $100 deductible, you pay the first $100 and your insurance company pays the next $900. The disadvantage of raising your deductible is that when you do have a claim you will pay more. The advantage of raising your deductible is that your premium will go down, sometimes by as much as 25%.
Money Savings Tip #4) Buy All Your Policies From The Same Insurance Company. Many insurance companies offer built-in discounts for sports organizations that purchase both Accident and General Liability policies from the same company.
Money Saving Tip #5) Don't Get Nickeled and Dimed To Death. Avoid insurance carriers that make additional charges for providing coverage for special nonsport activities, volunteers such as coaches and umpires, and adding field owners and sponsors as additional insureds.
Deadly Sin #5: Falling Victim To Dangerous Coverage Loopholes
Let's Pray This Kind Of Thing Never Happens To You...
So, you decide to go ahead and bite the bullet (without reading this special report first) and buy insurance from the local agent who sponsors a team. Now, at least your worries are over -- right? After all, you're the first league president who was smart enough to buy coverage for your league.
Two Months Later...
You get a phone call late one night from one of your coaches. You can tell from his voice that something must have gone wrong at the ballpark. His voice begins to crack as he says, "little Johnny Andrews got hurt real bad after the ball game. He was roughhousing and fell off the top of the bleachers." Your heart sinks.
You rush to the hospital and talk to Johnny's parents. They are distraught because Johnny has not regained full consciousness and may require surgery and an extended hospital stay...not to mention the possibility of permanent damage. Johnny's father mentions that things are slow at his auto garage and he dropped his health coverage last month. Johnny's mother is furious because she had given strict instructions that Johnny was to be closely supervised at all times because of his short attention span.
One Week Later...
Johnny's recovery is slow and steady. But, the doctors still aren't sure if his recovery will ever be complete.
One Month Later...
Johnny leaves the hospital and goes home. Johnny's father gets his first hospital bill in the mail and hits the roof when he reads the amount -- over $100,000 bucks!
Two months later, your doorbell rings around dinner time. A strange man is standing at the door and tosses a thick piece of paper into your hands that reads "Summons And Complaint". Suddenly, you don't feel like eating and pop several Alka Seltzers. The lawsuit papers say that both you and your coach were "grossly negligent and showed wilful, wanton, and reckless disregard for the safety of Johnny".
The attorney is asking for $400,000 in actual damages plus an unspecified amount of punitive damages.
This Couldn't Mean Losing Your Home, Bank Account And Savings. Or Could It?
What would you tell your wife and children? Imagine having to start all over again from scratch to build that nest egg. How will you afford to retire or send your children to college? Then you remember your league insurance. You wonder what's covered? What's not?
After playing phone tag, you finally get in touch with the local agent who sold you the league insurance. After explaining the situation from A to Z, you finally pop the big question -- "Am I Fully Covered?" There's a dead silence at the end of the line and then your agent finally says "I'm afraid we might have some problems." Your heart sinks.
You volunteered your services for free because you love kids. But now, you have to worry every day about your future because of the lawsuit and the coverage problems. Sometimes, things just aren't fair. But, that's life.
I've worked with sports organizations for a long time. I've heard every horror story in the book.
If they are my clients, more often than not, we took care of their problems. Quickly and easily.
Better yet, you can go to our online risk management library and print off the report entitled “Sports Organization Insurance Coverage Checklist.” Require your agent to complete this checklist and disclose if your policies meet the minimum standards for sports insurance. Over 95% will fail this test!
Dangerous Coverage Problems That Your Sports Organization Must Avoid
Buy The Right Insurance!
All insurance policies aren't created equal. Actually, the majority of sports insurance policies sold are totally inadequate when it comes to protecting against certain types of injuries and lawsuits. Don't learn this painfully true lesson the hard way. Incredibly, you probably won't even be aware that these dangerous coverage problems exist since they are usually not disclosed in the insurance brochure. Heck, your local agent might not even be aware of them! The only way to know the coverages that you are really getting is to request a copy of every page of the insurance policies and to read them thoroughly.
But, since insurance can be so technical and complicated, we will gladly perform a no obligation review of any of your policies and will make recommendations.
Deadly Sin #6: Buying Inadequate Accident Insurance
Minimum Recommendatons
1. Maximum Medical Limit -- Avoid any policy with a limit less than $25,000 as it won't be enough to pay the medical bills for a moderate to serious injury. You may even want to consider raising your limit to $100,000 or more as it is incredibly inexpensive to do so.
2. Internal Payout Schedules -- Avoid any policy that limits surgeon's fees, hospital room and board, doctor's visits, etc. under a separate schedule as they often result in an underpayment of medical bills and lead to parent dissatisfaction and frustration on the part of league administrators.
3. Excess vs. Primary -- Primary insurance pays whether or not there is any existing coverage (such as parent's health insurance) and may even allow a double recovery. On the other hand, Excess insurance only pays what medical bills aren't already covered by existing coverage (such as parent's health insurance). When there is no existing insurance in force, Excess Insurance becomes Primary and pays up to the policy limit. If there is existing insurance in force that does not pay for all of the bills due to its own deductible or coinsurance, Excess Insurance will fill in the gaps and pay for such deductible or coinsurance.
Excess insurance is better because it allows a league to purchase affordable coverage with a limit high enough to cover a moderate to serious injury. Primary insurance is so expensive that it results in a Maximum Medical Limit that is either too low or that is eroded by restrictive Internal Payout Schedules -- see above.
4. Deductible -- A deductible is the amount that the injured person pays out of pocket before the insurance "kicks in". In other words, if there is a $100 deductible and $1,000 in medical bills, the injured party (or parent) pays $100 and the insurance company pays $900.
In amateur sports, deductibles commonly range from $0 to $500 per claim and can result in substantial premium reductions. A "Corridor Deductible" applies both when there is existing insurance in force (parent's health coverage) and when there is no existing insurance. On the other hand, a "Disappearing Deductible" only applies when there is no existing insurance in force.
5. Covered Persons -- Your policy should cover all athletes and staff whether paid or unpaid. Avoid policies that limit coverage to players and coaches only as there are other volunteers and league officials that deserve this important protection.
6. Covers While -- Your policy should cover while participating in all sports organization authorized activities under adult supervision including games, practice, tournaments, nonsport activities, and group travel to and from. Avoid policies that limit coverage to games and practice only as most amateur teams engage in group travel and numerous other nonsport activities such as awards banquets, picnics, cookouts, attendance at professional ballgames, etc.
Deadly Sin #7: Buying Inadequate General Liability Insurance
Minimum Recommendations
1. Limits -- Your policy should contain the following limits for bodily injury and property damage liability:
| Each Occurrence Limit | $1,000,000 |
| General Aggregate Limit | $2,000,000 or None |
| Products / Completed Operations Aggregate Limit | $1,000,000 |
| Personal / Advertising Injury Limit | $1,000,000 |
| Damage To Premises Rented To You Limit | $100,000 |
| Medical Expense Limit | $5,000 |
| Non Owned And Hired Auto Liability Limit | $1,000,000 |
2. Occurrence vs. Claims Made -- The distinction is important because in youth sports, it is possible that a child who is injured at age 6 could wait until age 20 before filing a lawsuit. If your league purchased an "Occurrence" policy during the year of the injury, you would have protection even if the policy is not renewed in later years. On the other hand, avoid a "Claims Made" policy which may only protect if the same policy (or a renewal thereof) was in force both when the injury occurred and when the claim or lawsuit was filed (which could be 14 years later). A coverage gap can occur under “Claims Made” if the policy is not renewed with the proper “retro date” or if “tail coverage” is not purchased when switching back to an “Occurrence” policy form.
3. Participant Injury Liability -- Avoid policies that don't cover lawsuits arising out of injury to your sports participants. Believe it or not, some policies only cover lawsuits arising out of injuries to spectators. This is suicide! Beware the Athletic Participant Exclusion!
4. Punitive Damages -- Almost every lawsuit that is ever filed will allege that your volunteers have engaged in "grossly negligent behavior that is willful, wanton, and reckless" and will ask for punitive damages in order to provide extra punishment (not to mention extra fees for the plaintiff's attorney). Avoid policies that don't cover punitive damages. Why should you have to worry about losing everything that you have worked so hard for?
5. Abuse/Molestation -- The vast majority of Sports Liability Policies now exclude Abuse/Molestation (or offer ridiculously low sublimits). You should at least request a policy that does not specifically exclude or limit coverage for Abuse/Molestation. These types of lawsuits usually result in settlements or jury verdicts in excess of $300,000. Even the innocent board members are usually sued for failure to screen out sexual offenders with a criminal background.
Check out our articles and programs on abuse / molestation risk management and background checks at our online risk management library.
6. Financial Strength -- Your insurance company is no good if its out of business when it comes time to pay a claim! Avoid any insurance company that has a rating of less than A- in Best's Key Rating Guide and that is not admitted (licensed) in your state. I know what you're thinking, you would have been happy to have gotten a B+ in high school. Believe me, there can be a big difference in the likelihood of an A- rated insurance company going under as opposed to a B+ rated company.
7. Covered Persons -- Your policy should cover your sports organization, its directors, officers, employees, and all volunteers. Also, you should be able to provide Additional Insured status for field owners and sponsors in the event that they request it. Avoid policies that don't cover all persons and entities mentioned above.
8. Special Coverge For Sports Organizations That Own Their Own Facilities Or Are Under A Long Term Lease -- Sports Organizations that fall under this situation are responsible for what happens on their fields/facilities 24 hours a day, 365 days a year. Unfortunately, most General Liability policies only cover lawsuits arising out of sanctioned and supervised activities. Such policies would not cover lawsuits arising out of injuries that occur on your premises after hours or during the off season. This loophole should be closed by paying an additional charge to have this coverage added to your policy.
Find out if your current policies meet the minimum standards for sports insurance by going to our online risk management library and printing the report entitled “Sports Insurance Coverage Checklist.” Submit this form to your insurance agent for completion. Over 95% will fail this test!
Why Would I Give Away My Inside Secrets?
Sincerely,
John Sadler
P.S. The insurance programs that are outlined on our website offer superior protection at an incredibly low price. Most of our programs allow you to get an online quote in seconds and to actually apply for your coverage, pay with a check on our website, and print your final proof of coverage documents within minutes. Don't delay -- you may be at risk today. How much are you willing to lose? If you have any questions, pick up the phone and call our Sports Department at 1(800)622-7370. Call right now -- don't worry if it's after hours -- just leave a message. We will get back to you as soon as your message is received. Or you can send an email to info@sadlersports.com.
Visit our online risk management library at www.sadlerpsports.com/riskmanagement for the following reports, articles, and forms:
Emergency Information / Consent FormImage Release Form
Sample Waiver / Release Form – Minor
Sample Waiver / Release Form – Adult
Are Waiver / Release Forms Worth The Paper Are Written On?
Before You Sign The Facility Lease Agreement...
Collect Certificates Of Insurance From Vendors
15 Passenger Vans And 12 Passenger Vans
Child Abuse / Molestation Protection Program – Administrators
(Includes Volunteer Application and Disqualification Criteria)
Child Abuse / Molestation Handout For Parents
Types Of Criminal Background Checks
Criminal Background Checks Vendors
Heat Illness: Avoidance And Prevention
Lightning Safety
Horror Stories About What Can Go Wrong
Sports Organization Insurance Coverage Checklist
Municipal Recreation Department Insurance Checklist
Risk Management Program For Sports Organizations
Liquor Liability For Sportsplexes
General Liability Concerns For Sportsplexes