Archive for the ‘Accident Insurance’ Category

Accident Insurance Overview for Sports/Recreation

Understanding your policy

Accident insurance is commonly purchased by sports and recreation organizations and is a requirement of most General Liability insurance carriers. Accident insurance is also commonly referred to as medical expense insurance.

Accident insurance pays covered medical expenses on behalf of participants who are injured during covered activities. Coverage is normally designed tobe “excess” or Sports accident insurance“secondary” so that it only pays after existing family health insurance has already responded to a claim. Excess Accident coverage is more affordable than Primary Accident coverage since it does not duplicate benefits.

The first line of defense

Accident insurance has two primary purposes in the sports context:

  1. It satisfies a moral obligation the sports organization has to make sure that injured participants get quality medical treatment; and
  2. It meets the required General Liability carrier pre-condition for covering a participant injury lawsuit claim.

From the insurance carrier’s point of view, an Accident policy is the first line of defense against lawsuits resulting from participant injury. If there is no Accident insurance in force and if the injured party is uninsured (no family health insurance) or inadequately insured (high deductible, coinsurance, or unfavorable exclusions under family health insurance), significant medical bills will likely be incurred. After receiving collection notices and phone calls from unpaid medical services providers, the injured participant or his/her parents will likely consult an attorney who will recommend a negligence-based lawsuit against the sports organization and its administrators and staff. On the other hand, if the Accident policy guarantees that the injured participant or parent will not incur significant out-of-pocket medical expenses, it takes away much of the incentive for them to file a lawsuit against the sports organization as a “deep pocket.”

Recommended minimum coverage standards

  • Medical Limit: The medical limit should be at least $25,000 per person per accident. A policy with a lower medical limit won’t be enough to cover even a moderate injury. For example, ACL injuries, which are common in sports, can easily exceed $20,000 after surgery and rehabilitation. Furthermore, most General Liability carriers require an Accident policy with a medical limit of at least $25,000 as a pre-condition of covering a participant injury lawsuit claim. Higher limits such as $100,000 or $250,000 should be strongly considered due to the additional protection offered at rate that can be surprisingly affordable.
  • No Internal Payout Limitations:– Many Accident policies have internal payout limitations, which are also known as sublimits or allocations.  Examples include limits on certain categories of medical expenses such as surgeon’s fees, daily hospital room and board, doctor’s visits, physiotherapy, etc. Some plans include so many internal payout limitations that it would be impossible for the policy to ever get close to paying even 50% of the overall medical limit. Plan designs that result in significant unpaid medical bills increase the chances of litigation against the sports organization in an effort to find a “deep pocket.” Better Accident plans don’t have these internal payout limitations (with the common exception of dental benefits).
  • Excess vs. Primary: Excess Accident insurance requires other collectible insurance, such as family health insurance, to respond first. There are three scenarios that can arise with high quality Excess Accident coverage: 1) if the existing family health insurance pays 100% of the bills, the Excess Accident policy will not respond to the claim, 2) if the existing family health insurance only pays 80% of the bills (due to its own deductible or coinsurance), the Excess Accident policy should pay the remaining 20% less any deductible, 3) if there is no existing insurance, the Excess Accident policy becomes primary and pays for 100% of the bills, less any deductible.

Primary Accident insurance can be purchased that will pay without regard to other collectible insurance. However, in order to make it affordable, most carriers will “water down” the benefits by inserting an oppressive schedule of internal payout limitations (see section above). If such internal payout limitations are present, they can result in extreme dissatisfaction if the payout does not come close to covering the medical bills.

Therefore, in most cases, high quality Excess Accident insurance is superior to Primary Accident insurance since high quality Excess Accident insurance will guarantee that the injured participant (or parent) does not incur significant out of pocket medical expenses. The fact that the payout is excess to any existing family health insurance does not diminish the important role that is played by Excess Accident insurance.

  • Mandatory vs. Optional Participation: Participation in an Accident plan should always be mandatory instead of optional. Mandatory plans require coverage for all participants and a premium to be paid on behalf of all participants by the sports organization. On the other hand, optional plans allow individual participants to choose whether or not they want to pay to be covered. Optional participation plans are unacceptable for two reasons:
    • Not every participant who needs coverage will purchase it. As a result, some will be uninsured; and
    • The General Liability policy will likely have a warranty provision that requires Accident insurance to be carried on an injured participant as a pre-condition of coverage for a resulting lawsuit.
  • Deductibles: Deductibles commonly range from $0 to $1000. Deductibles can result in significant premium savings. For example, increasing a deductible from $0 to $100 may result in a premium savings of 20%. From the point of view of the injured participant (and parent), deductibles in excess of $500 may result in financial hardship. However, sports organizations that only carry Accident insurance to satisfy the requirements of the General Liability carrier (and don’t perceive it as a member benefit) may want to investigate higher deductibles such as $1,000 or $2,500.
  • Corridor vs. Disappearing Deductibles: A disappearing deductible is more favorable to the claimant as compared to a corridor deductible. A disappearing deductible is satisfied by payments made by other primary collectible insurance, such as family health insurance. On the other hand, a corridor deductible is not satisfied by the payment of other primary collectible insurance.
  • Payout Period: The payout period is the time period for which incurred medical bills will be paid from the date of the injury. The payout period should always be at least one year. However, in cases where the medical limit is $100,000 or more, the payout period should be extended to two or three years. The insurance carrier will require a small additional premium for this enhancement. Any injury that approaches $100,000 in medical bills will likely result in the performance of medical services after one year.
  • Covered Activities: The Accident policy should cover all sports organization approved and adult supervised activities including tryouts, practices, games, tournaments, non-sport outings, and travel to and from. In youth sports, many of the more serious claims arise from non-sport outings such as awards banquets, backyard cookouts, swimming parities, and celebration trips to restaurants, etc. As a result, coverage should extend to these activities unless they are not approved by the sports organization’s policies and procedures. As concerns coverage for travel to and from, some Accident policies cover only supervised group travel to and from whereas others cover individual travel to and from that is provided by a licensed driver.
  • Covered Persons: All players and staff (paid and volunteer) should be covered. Staff normally includes but is not limited to coaches, assistant coaches, managers, umpires, referees, scorekeepers, concession workers, field maintenance workers, and administrators such as directors and officers. The definition of covered persons under the Accident policy should always be at least as broad as the General Liability carrier’s requirement to cover certain persons under an Accident policy.

Other Accident Coverages

  • Accidental Death & Dismemberment (AD&D): AD&D offers a death benefit commonly ranging from $5000 to $25,000 payable in the event of accidental death. It also provides a dismemberment principle sum limit that matches the accidental death limit in the event of certain paralysis or loss-of-use accidents. The payout for these types of accidents is based on a percentage of the principle sum, depending on the severity of the loss.
  • Disability/Loss of Wages: Some Accident policies offer a limited disability limit to reimburse certain compensated staff members, such as umpires, in the event that a covered accident results in loss of compensation.

Notable Accident Insurance Exclusions

All Accident policies contain a long list of expected exclusions, such as injuries suffered while committing a felony, under the influence of drugs, etc. However, some exclusions are notable because they can be removed for an additional premium.

  • Heart & Circulatory Malfunction: Heart attacks and strokes are generally considered sicknesses instead of accidents.
  • Heat Illness: Some insurance carriers consider heat illness or heat stroke to be a sickness, whereas others consider it to be a covered accident.
  • Previously Existing Injuries:  Some Accident policy forms exclude previously existing injuries, whereas others do not.

Sadler Sports & Recreation insurance has many existing Accident Insurance programs with pre-published rates that are listed on our program webpages. We can also customize an Accident insurance program for any organization.

8-Year Old Sues Over Hard Softball

The eight-year-old claimant had joined a softball team for girls of her age group. While playing the infield, she was struck in the face by a ball thrown by a teammate, resulting in a fractured nose. The claimant’s parents filed suit against the softball league, the coach and the child who threw the ball. The main allegation in the suit was that the plaintiff and her parents were deceived by the defendants because the softball wasn’t soft and actually was quite hard.

Source: Liable to Laugh, Copyright 2004 American Specialty Companies, Inc.

Premises Medical Payments for Sports Organizations

Premises Medical Payments (or simply Medical Expense) can be an important coverage for sports organizations to have on their General Liability policy.  Normally, a General Liability policy does not respond unless there is a threat of a lawsuit. However, Premises Medical Payments allows the carrier’s claims department to respond and pay benefits without the threat of a lawsuit.

Premises Medical PaymentsThe purpose of Premises Medical Payments is to appease the injured party by quickly offering to pay their medical bills in an effort to convince them not to hire an attorney.

The normal policy limit for Premise Medical Payments is $5,000.  In the event that damages exceed $5,000, the fallback position is to revert back to the Each Occurrence limit for bodily injury liability.

Premises Medical Payments is typically used for minor spectator injury claims.  Most policy forms exclude Premises Medical Payment coverage for athletic activities which are defined as practicing, instructing, or participating in any physical exercises or games, sports, or athletic contests.  However, this exclusion is not a problem since athletic activities should be covered by an Excess Accident policy.

Who’s Covered Under Sports Accident Insurance?

It depends on who is considered a participant

An Accident policy customized for sports and recreation organization should cover all players and staff, whether paid or volunteer.

Staff typically includes all head coaches, assistant coaches, managers, umpires, referees, concession workers, scorekeepers, field Youth football accident insurancemaintenance workers, and league officials such as directors and officers.  Our statistics indicate that approximately 6% of Accident claims occur to non-player staff.

Your General Liability carrier may require that Excess Accident insurance is carried on all “participants.” Otherwise, General Liability coverage may be voided in the event that the injured participant files a lawsuit.  The definition of participant must be included in the General Liability policy.  Typically, the definition will include all persons who are granted access to restricted areas where the public is normally not permitted.  Therefore, your Accident insurance policy must cover all players and staff.

Some may argue that paid staff should be covered by Workers’ Compensation. However, Workers’ Compensation laws vary from state to state and most state laws exempt certain employments where payment is less than a certain threshold.  In addition, very few private sports organizations carry Workers’ Compensation.


Covered Activities Under Sports Accident Insurance

An Accident insurance policy customized for sports and recreation organizations such as teams, leagues, camps, and recreation departments should cover all activities sanctioned by the organization, including tryouts, practices, games, tournaments, non-sport outings and authorized group travel to and from the above events.

It is also important for an Accident insurance policy to cover non-sport outings such as awards banquets, celebration trips for ice cream, backyard cookouts, swimming parties, trips to see college or pro ballgame, etc.  Some of the most serious injuries in youth sports can arise out of these non-sport activities.Sports tournament

Coverage for travel to and from covered activities is a controversial subject.  At a minimum, coverage should be provided for authorized group travel to and from these events.  Examples of group travel would be in single vehicles such as a bus, mini van, or a caravan of vehicles.

Some sports organizations would like to see coverage extended to individual travel to and from the covered events.  However, many Accident insurance carriers will balk at providing this coverage due to the high severity exposure as they argue that the sports organization is not responsible for injuries arising from individual travel for which it does not direct, control or supervise.

Sports Accident Insurance Deductibles

Understand your choices

Accident insurance deductibles for sports and recreation organizations commonly range from $0 to $500 per claim.

Accident Deductibles can result in significant premium savings.  For example, going from a $0 to $100 deductible may result in a 20% discount on many Accident policies.

Reasonable deductibles on Accident policies can be beneficial to sports organizations. However, it should be explained to participants and/or parents that they are responsible for paying the deductible out of their pocket.

There are two types of common Accident deductibles under an Excess Accident policy: corridor and disappearing.  A corridor deductible applies even if existing family health insurance has made payments on a primary basis.  On the other hand, a disappearing deductible is satisfied to the extent that existing family health insurance has made payments.


Sports Accident Insurance Payout Period

Understanding the details of your policy

Under an Accident insurance policy for a sports or recreation organization, the payout period is the time period for which incurred medical bills will be paid from the date of the injury.

The most common payout period under an Accident policy is one year.  However, for a small additional premium, the payout period may be extended to two or three years.

If the medical limit is $100,000 or higher, it is recommended that the payout period be amended to a period of two or three years. This is because if the bills are greater than $100, 000, it is more likely that bills will continue to be incurred for more than one year.

In addition, there are other situations where medical surgeries and treatments to injured minors may be delayed until they reach certain growth or developmental benchmarks.  Such delays can result in no coverage if the surgery or procedure occurs after the expiration of the payout period.  This is another reason for extending the payout period to two or three years.

Participation n Sports Accident Insurance

Mandatory vs Optional

Mandatory participation by all participants under an Accident policy is superior to optional participation by some participants.

Most Accident policies covering sports and recreation organizations require a premium to be paid on behalf of and coverage to be extended to all participants.  Since most Accident coverages are excess or secondary, mandatory participation by all participants results in a representative spread of participants whether or not they are covered by family health insurance.

On the other hand, some Accident policies covering sports and recreation organizations allow each participant or his or her parent to elect whether or not they want coverage.  Optional participation results in adverse selection against the insurance carrier since only those who don’t have existing family health insurance will normally opt to purchase Accident coverage.

Because most of the participants purchasing coverage under an optional participation plan don’t have existing family health insurance, the Accident policy will be paying most claims on a primary basis, which will be very expensive for the insurance carrier.

As a result, optional participation Accident policies tend to be very expensive and often unaffordable.  In order to make them more affordable, the insurance carrier will water down the benefits by either lowering the medical limit or inserting internal payout limitations or sublimits.

Watered-down benefits under Optional participation Accident policies don’t adequately cover medical bills in the event of a moderate to serious injury.  If all the medical bills of the injured party are not paid, the result can be a lawsuit against the sports organization in search of a deep pocket.

In addition, many General Liability carriers that cover sports organizations require that Excess Accident Insurance is carried on all participants on a mandatory participation basis.  Otherwise, General Liability coverage can be voided in the event of a participant injury lawsuit.

Excess Coverage For Sports Accident Insurance

The difference between excess and primary insurance

Excess Accident insurance is superior to primary insurance for Accident insurance policies for sports and recreation organizations such as teams, leagues, camps, and recreation departments.  This is especially true if the purpose of the Accident policy is to cover moderate to  serious injuries.

Excess Accident insurance is also known as secondary insurance.  Excess Accident insurance requires other collectible insurance such as family health insurance to respond first.  As a result, the typical case involves initial payment by the family health carrier less any deductible and coinsurance.  The Excess Accident policy should provide payment for such deductible or coinsurance so that the injured participant or parent incurs no out of pocket expenses.

There should be a coordination of benefits between the two policies so that the injured party does not owe a debt to the medical service providers.  If a debt is not owed, there will be no dunning letters or calls from collection agencies and as a result there will be little need for the injured party to visit an attorney.

Also, due to the coordination with existing family health insurance, an Excess Accident policy will be much less expensive than a Primary Accident policy.

On the other hand, Primary Accident insurance pays without regard to other collectible insurance.  For this reason, Primary Accident insurance is generally unaffordable.  In order to make it more affordable, the insurance carriers that sell Primary Accident insurance will water down the payout by either selling medical limits less than $25,000 or by inserting internal payout limitations which are also known as allocated benefits or sublimits.  See prior blog posting on Internal Payout Limitations under Accident Insurance for a description of how they significantly reduce payouts.

The use of either reduced medical limits under $25,000 or internal payout limitations under Primary Accident insurance will result in only a partial payment in the event of a moderate to serious injury.

Partial payouts can result in lawsuits by injured parties in search of a deep pocket.  This is bad news for sports organizations and their directors, officers, employees and volunteers.  Therefore, high limit Excess Accident insurance that does not contain internal payout limitations is far superior to low limit Primary Accident insurance that contains internal payout limitations.

Internal Payout Limitations

Accident insurance policies that cover sports and recreation organizations such as teams, leagues, camps or recreation departments should not include internal payout limitations which are also known as allocated benefits or sublimits.
Examples of these unacceptable internal payout limitations, allocated benefits, or sublimits include:
  • Limiting surgeons’ fees to $2500
  • Limiting daily hospital room and board to $100
  • Limiting doctors’ visits to $20
  • Limiting physiotherapy to $10
These internal payout limitations effectively reduce the payout for moderate to serious injuries to 50%  of total medical bills in many cases.  A reduced payout leads to unpaid medical bills which can result in a lawsuit against a sports organization and its administrators, employees, and volunteers in an effort to find a deep pocket.
These internal payout limitations should always be avoided for normal sports and recreation activities.  However, in the case of high risk adult sports and activities, it may not be possible to negotiate affordable terms with an Accident carrier without such provisions.