Tips for negotiating common problem exclusions in General Liability policies
Sports and recreation organizations and related sanctioning/governing associations often purchase General Liability insurance policies that include dangerous exclusions that could result in lack of legal defense and coverage to pay for settlements or adverse jury verdicts. This is why it is essential for a qualified and experienced insurance expert to actively negotiate with the carriers to remove or modify such exclusions.
All General Liability policies grant broad coverage for bodily injury and property damage caused by an occurrence under the insuring agreement that is found in the beginning of the policy. In addition, all General Liability policies use exclusions to remove coverage for certain situations that are deemed uninsurable for various reasons (ex: too risky, moral hazard, against public policy) or that should be insured under a different type of policy (ex: Workers’ Compensation, Auto, Property). The exclusions include both standard exclusions that are found in the exclusion section of the General Liability policy as well as exclusions that are found in endorsements (i.e. policy amendments) that are attached as pages near the end of the policy.
Below is a list of some of the most common problem exclusions for sports and recreation organizations that are found on General Liability policies. Every attempt should be made to negotiate the removal or modification of these exclusions to a more acceptable version. If negotiation does not yield acceptable results, serious consideration should be given to finding a new insurance carrier. However, this list is not all-inclusive as there are a number of other problem exclusions that are found less frequently.
Athletic or Sports Participants Exclusion
This exclusion takes away coverage for bodily injury to any person while practicing for or participating in any sports or athletic contest or exhibition that is sponsored by the insured.
Insurance carriers that don’t specialize in insuring sports organizations commonly use this exclusion to control what they perceive to be as an unacceptably high risk. Its existence often slips by insurance agents and risk managers who don’t carefully review the policy form or who aren’t aware that quality sports insurance coverages can be obtained through multiple sources.
The use of this exclusion for most sports and recreation organizations is totally unacceptable since athlete injuries and lawsuits are a common occurrence. Furthermore, sports and recreations organizations represent a severity risk since damages from catastrophic sports injuries can be high. The existence of this exclusion reduces an organization’s General Liability policy to what is commonly known as a spectator liability policy.
Knowledgeable underwriters lower the risk of paying General Liability claims for athletic participant injury lawsuits by mandating the existence of Accident Insurance (amateur sports), Workers’ Compensation Insurance (professional sports), and waiver/release forms. Please see our article “Are Waivers Worth the Paper They Are Written On?”
Participant vs. Participant Exclusion
This exclusion takes away coverage for instances when one participant sues another participant. Since participants are broadly defined, this could player vs. player, coach vs. coach, or player vs. coach. It’s important to note that most versions of this exclusion don’t penalize other parties that could be dragged into the lawsuit, such as the sport organization as an entity or the directors, officers, or other staff members.
Non-coverage for the all-too-common player vs. coach situations is a totally ridiculous exclusion that must be avoided. One negotiation strategy is to narrow the context of the Participant vs. Participant exclusion by changing it to a Player vs Player (or Athlete vs. Athlete) exclusion.
An argument can be made for the existence of a Player vs. Player exclusion as a disincentive in adult sports situations where one adult athlete recklessly endangers the safety of another adult athlete. However, it is becoming increasingly common for carriers to remove the Player vs. Player exclusion in youth sports. On the other hand, it could be argued that the Player vs. Player exclusion is not a problem in youth sports since youth players aren’t normally targets in lawsuits because they lack assets to satisfy judgments.
Volunteer vs. Volunteer Exclusion
The 2001 and later editions of the standard Insurance Services Office (ISO) General Liability policy form added what is commonly referred to as the Volunteer vs. Volunteer exclusion, which can have a detrimental and unexpected impact in the sports context. Lawsuits that may fall under the scope of this exclusion include coach vs. coach, umpire vs. coach, manager vs. coach, etc. It’s not uncommon for one coach to accidentally (but negligently) injure another coach during skills demonstrations or drills. For example, one of our youth baseball clients recently filed a claim for a lawsuit arising from batting practice where the head coach hit a ball that struck an assistant coach who was not paying attention. It’s possible to negotiate the removal or modification of this exclusion with many carriers.
Assault and Battery Exclusion
The standard ISO General Liability policy form has an exclusion for bodily injury or property damage expected or intended from the standpoint of the insured. However, this exclusion does not apply to bodily injury resulting from the use of reasonable force to protect persons or property.
When the Assaultand Battery exclusion is added to the policy, the exception is removed for the use of reasonable force to protect persons or property. This can result in some unexpected denials of coverage in the sports context. For example, a coach or umpire could be denied coverage for engaging in self-defense against an aggressor who is injured and files a lawsuit. Also, lawsuits have been filed against coaches who accidentally injured a participant while trying to break up a fight.
In addition, most versions of the Assault and Battery Exclusion specify that coverage does not apply to the insured (sports / recreation organization) for incidents committed by its employees, volunteers, or any other person; for failure to suppress or prevent an incident; or for negligent hiring, supervision, or training.
It’s common for the sports and recreation organization and its officers and board of directors to be named as defendants along with the staff member who allegedly committed the assault and battery. The most common theory of recovery is for negligent hiring when the accused staff member is found to have a criminal background that should have been an indication of a propensity for violence. This is another reason (other than the concern over sexual offender crimes) why staff members should be screened with background checks for suitability.
Warranty of Waiver/Release
Some General Liability policies may have a warranty provision that voids coverage in the event of a participant injury lawsuit if the sports or recreation organization can’t produce a signed and dated waiver/release agreement on behalf of the injured participant filing the lawsuit. Waiver/release agreements are to be strongly encouraged; however, many organizations don’t have strong administrative and record keeping procedures and it’s possible for a single document to slip between the cracks despite the best intentions of the administrators.
A less severe version of this warranty provision requires the organization merely to have a procedure in place for the collection of signed and dated waiver/release agreements on behalf of all participants. Such wording may not result in coverage denial in the event that a single waiver/release can’t be produced so long as there is evidence that a procedure was in place and there was a good faith attempt to administer such procedure. However, the wording of such warranty provisions must be carefully reviewed to gain a clear understanding of the requirements for coverage.
Punitive Damages Exclusion
Most summons and complaints (lawsuit papers) in the sports and recreation context for bodily injury incidents request punitive damages and refer to the lack of care by the negligent party as being grossly negligent, willful, wanton, and reckless. Proof of such extreme misconduct is necessary to support a claim for punitive damages. Punitive damages are damages over and above the regular compensatory damages such as medical expenses, lost income, pain and suffering, etc. Punitive damages are meant to punish and make an example of the grossly negligent party. Even though punitive damages are often difficult to prove, it does not makes sense for a General Liability policy to exclude punitive damages and subject the covered parties to needless worry.
Some states have case law or statutes that may not allow insurance carriers to insure punitive damages since it may be considered to be against public policy.
Sex Abuse/Molestation Exclusion
The Sex Abuse/Molestation exclusion endorsement is commonly used by underwriters for youth sports and recreation risks due to the difficulty in implementing adequate loss controls, the severity risk, and the risk of multiple claimants and incidents. This endorsement is usually attached near the end of the policy.
Other forms of child abuse are often included within the scope of this exclusion including physical abuse and emotional abuse. These often take the form of excessive exercise as punishment and verbal insults.
Sports and recreation organizations should always attempt to negotiate a buyback of this coverage and should stand ready to adopt and implement required loss controls. For more information on the abuse/molestation risk including specific risk management programs and training videos, please visit our risk management library.
Contractual Liability Limitation
Sports and recreation organizations frequently enter into contracts that include indemnification and hold harmless provisions where they assume the tort liability that would ordinarily belong to the other party to the contract. Such assumption of contractual liability can be covered under General Liability policies (depending on the exact wording of the provisions). However, General Liability policies that include the Contractual Liability Limitation Endorsement can take away this needed protection.
An example of the application of this exclusion would occur when a sports organization sends a travel team to play in a tournament and as part of the registration process, the sports organization signs an agreement with the tournament host that includes an unfavorable hold harmless/indemnification provision in favor of the tournament host. Such a provision may require the sports organization to assume all liability for injury to its players, even if arising out of the sole negligence of the tournament host. In the event that a player drowns during a tournament host sponsored and supervised swimming party, the sports organization may be legally responsible due to the contractual assumption of such liability. In such a circumstance, the Contractual Liability Limitation Endorsement could result in a claim denial that could have a devastating impact on the sports organization and its administrators and staff.
Collapse of Temporary Structure
Some General Liability policies may have a Collapse Of Temporary Structure Exclusion that can have the impact of removing coverage in the event of certain bleacher collapses. Bleacher collapses often involve multiple claimants with serious injuries. Whether or not a particular bleacher is temporary or permanent can be subject to debate. The insurance carrier may argue that any bleacher that is not permanently anchored or affixed is temporary.
Ownership/Maintenance/Management of Athletic Fields or Facilities Exclusion
This exclusion if often used by insurance carriers to limit their responsibility to pay for claims that arise out of incidents that occur during sanctioned and supervised operations or activities such as practices, games, tournaments, banquets, meetings, field work days, etc.
Such an exclusion would preclude coverage that arises out of the mere ownership, maintenance, or management of the athletic field or facility. Many serious injuries occur on property at times other than during sanctioned and supervised events. Athletic fields, if not properly secured, often draw members of the public who may participate in pick up games or who may play on playground equipment such as swings and slides. Property owners, lessors, and managers are often found to be liable when a premises related condition is the cause of the injury.
Field / facility owners and lessors (that are responsible for what happens 24/7 under the provisions of a lease agreement) need to verify that their General Liability policy covers the 24/7 ownership or management risk exposure.
Note: The coverage form referenced is ISO CG 00 01 12 07
The above list of problem exclusions is not all inclusive. Each General Liability policy must be carefully reviewed from cover to cover at every renewal to make sure that the underwriters have not slipped in an unacceptable exclusion.