Archive for the ‘Recreation Departments’ Category

Why Do Field/Facility Owners Require Being Named on Sports Insurance Policies?

Field / facility owners such as recreation departments, school districts, schools, and municipalities often allow outside user groups to use their premises under a lease or permit. These relationships are beneficial to all parties involved. However, field / facility owners expose themselves and their insurance carriers to liability arising from injuries that may occur on the premises arising out of the lease or permit. This is true even though the injury may be due to the 100% negligence of the outside user group.

Field / facility owners are almost always shot gunned into these lawsuits as a deep pocket even if they are 0% at fault. The defense costs and possibility of settlement or adverse jury verdict can be very expensive. This can result in unbudgeted out of pocket expenses (in event of self insurance or large deductible insurance program) or in a large loss that is paid by their insurance carrier. When these losses are paid by insurance carriers, such insurance carriers may non renew or may ask for large rate increases. Therefore, field / facility owners have a lot to lose when they make their premises available to outside user groups.

It makes sense that the group that is responsible for the injury and resulting lawsuit should be financially responsible for paying the damages. Therefore, prudent field / facility owners require outside users to carry their own insurance that meets certain minimum standards that are drafted by risk managers or attorneys employed by the field / facility owner.  Such insurance requirements specify the types of policies to be carried, minimum limits of coverage, and special coverage endorsements such as “Additional Insured” status for the premises owner.

Requiring outside user groups to be financially responsible for their own injuries and lawsuits is a good business practice. Even high limit insurance is surprisingly affordable and easy to obtain when reputable sports insurance and event insurance specialists are contacted.

Ownership and Management of Athletic Fields

An exclusion to avoid

It is clear that all sports and recreation organizations have liability for incidents that occur during scheduled, sanctioned and supervised activities such as tryouts, practices, and play.

However, some sports organizations that own or are long term lessees of athletic facilities are also legally responsible for injuries that occur on a 24/7 basis for 365 days a year. Ownership triggers the liability for premises owners. Lease agreements with hold harmless and indemnification provisions trigger the liability for long term lessees.

If your sports organization has 24/7 liability as described above, you should avoid the endorsement entitled “Ownership, Maintenance, Management of Athletic Fields or Facilities Exclusion” and any similar exclusion. As an alternative to removing this exclusion, some sports General Liability carriers allow a buy back that is commonly called “24 Hour Premises Liability.”

Collapse of Temporary Structure Exclusion

General Liability insurance policies for sports and recreation organizations sometimes contain a potentially dangerous “Collapse of Temporary Structure Exclusion.”

The purpose of this exclusion is presumably to protect the General Liability carrier against paying a claim in the event of collapse of bleachers, tents, signs, billboards, fences or other temporary structures.

Unfortunately, the exclusion does not define “temporary.” Does temporary refer to a one-time event? A season? A year? Are any bleachers that can be moved considered temporary?

A bleacher collapse can be a serious event in terms of both the number of spectators that can be injured and the potential severity of injuries. Because of the seriousness of these bleacher collapse incidents, sports organizations can’t afford to have this ambiguous exclusion on their General Liability policy.

Beware the Athletic Participant Exclusion

It renders many sports and recreation policies next to useless

The existence of the exclusion of “Athletic or Sports Participants” is by far the most troubling exclusion that is commonly found in General Liability policies of sports and recreation organizations. The applicable language of this exclusion reads: “With respect to any operations shown in the schedule, this insurance does not apply to “bodily injury” to any person while practicing for or participating in any sports or athletic contest or exhibition that you sponsor.”

Obviously, sports and recreation organizations frequently face these types of lawsuit risks and the damages tend to be severe in nature. Therefore, it is unconscionable for this type of exclusion to appear in the General Liability policy of a sports organization if such coverage is readily available in the market place. In the current market, such coverage is readily available and with the exception of certain semi-pro adult sports or high risk sports.

Sports and recreation organizations that have the Athletic Participant Exclusion have their coverage reduced to nothing more than a policy that covers lawsuits arising out of spectator injuries.

If the General Liability policy makes no mention of the Athletic Participant Exclusion, it can be safely assumed that coverage automatically exists, even if it is not expressly stated. However, some carriers provide an affirmative coverage grant by creating a coverage called Participant Legal Liability (even though this is not necessary and is primarily a marketing ploy). It is important to note that most carriers that specialize in writing General Liability for sports and recreation organizations do provide the affirmative coverage grant of Participant Legal Liability on a special endorsement. But, the special endorsement may actually introduce certain new exclusions, such as Player vs Player or Participant vs Participant, which would not be found if the policy were silent.

It’s amazing how many sports and recreation organizations are apparently unaware of the Athletic Participant Exclusion on their policy even though they presumably have knowledgeable insurance agents and risk managers looking after their interests. I teach classes to recreation department administrators and I have found that the Athletic Participant Exclusion exists on roughly 25% of the General Liability policies brought to class to be reviewed.

Read our other article on this topic related to special events an competitions.

Covered Activities Under Sports General Liability Policies

General Liability policies for sports and recreation organizations should cover the following activities that are supervised by adults and sanctioned by the sports organization:

  • Tryouts
  • Games
  • Practices
  • Tournament
  • Non-sport Outing

It is critical that coverage is included for non-sport outings such as swimming parties, backyard cookouts, trips to restaurants, etc.  Some of the most serious injuries and largest lawsuits that I have witnessed over the past 20 years have come from non-sport outings – particularly swimming parties.

Some General Liability policies that are deficient may restrict coverage to owned and leased premises that are scheduled on the policy.  This could be a big problem if the sports organization has travel teams or if non-sporting outings occur away from the premises.

Some General Liability policies include endorsements that restrict coverage to the time periods when officially sanctioned events take place.  This is a big problem if a sports organization owns its field or facility or is responsible under the terms of a lease on a 24/7 basis.

Named Insureds Under Sports General Liability Policies

The named insureds under a sports organization’s General Liability policy should include the legal entity itself and its directors, officers, managers, employees, and volunteers.

All of the above mentioned parties are covered by most late edition General Liability policy forms.  However, many prior policy forms that are still in use neglect to add coverage for volunteers.

It is of critical importance to correctly list the name of the legal entity for the sports or recreation organization.  For example, if the organization is incorporated or is a limited liability company, Inc. or LLC should appear in the name.  In other words, the name should be listed exactly as the entity was chartered with the appropriate state governmental office.  Failure to correctly list the name of the legal entity could result in coverage denial based on a technicality.

Independent contractors who perform services for your sports organization and are paid on 1099s are not covered under the standard policy forms unless specifically endorsed. However, the sports or recreation organization and other insured persons are covered if the negligent acts of the independent contractor result in a lawsuit against any named insured.

Occurrence vs Claims-made Insurance for Sports Organizations

An occurrence policy form is superior to claims-made coverage under a General Liability policy for a sports or recreation organization such as a team, league, camp or recreation department.

Claims-made coverage is far more complicated to administer as opposed to an occurrence coverage form for the following reasons:

  • When renewing a claims-made policy, the agent must be careful to set the retroactive date back to the original inception date for the first claims made policy.
  • If a claims-made policy has been canceled or non-renewed due to neglect, the retroactive date must be properly set upon renewal.
  • When changing from a claims made policy form to an occurrence policy form, “tail coverage” or an “Expended Reporting period” must be purchased so that coverage will remain in force for delayed reaction lawsuits that are filed for covered injuries that occurred during the claims made policy period(s) but that are not reported until after the last claims made policy has expired.
  • When a sports organization is going to shut down its operations, the same “tail coverage” or “Extended Reporting Period” must be purchased to protect the past administrators and volunteers against future delayed reaction lawsuits.

Sports organizations present the perfect opportunity for delayed reaction lawsuits that can be extremely dangerous under claims made policy forms.  For example, a minor who is injured at age 5 can wait until the age of 18 plus 2 years for the statute of limitations to run out, which is age 20, before filing a lawsuit.  During this 15-year time span there is too great a chance that a technical mistake will be made under the claims-made policy form which could void the coverage.

Always buy the occurrence policy form instead of the claims-made policy form under General Liability for a sports or recreation organization.


Sports Insurance for Sexual Abuse and Molestation

Check if you’re covered under General Liability

Insurance carriers that write General Liability insurance for sports and recreation organizations take two approaches to covering lawsuits alleging sexual abuse and molestation.  Some carriers’ policy forms remain silent on the issue under the theory that it is covered if it is not excluded.  This is usually true, but some state case law may reach a contrary conclusion.  However, most policy forms provide an affirmative grant of coverage for sexual abuse and molestation through a special endorsement.

For example, many carriers provide an endorsement that provides sex abuse and molestation coverage in the amount of $1 million Each Occurrence and $1 million Aggregate.  Furthermore, the endorsement will usually include a laundry list of exclusions. An example of an exclusions would the perpetrator for remaining passive after an incident has come to the attention of management, etc.

Some policy forms may void sexual abuse and molestation coverage if the sports organization has not implemented a written procedure requiring a background check on all staff with access to youth. program or separately to each individual named insured, such as a league or club.  It’s obviously best if the Aggregate applies separately to each league or club.

Hired Car Physical Damage Insurance

What is and isn’t covered

Sports organizations occasionally rent vehicles for transporting athletes to out-of-town games and tournaments or officers to travel out of state on business. If a Non-owned and Hired Auto Liability policy is in place, it will not respond to damage to the rented vehicle itself.

There are three options available for insuring damage to the rental vehicle:

  • Purchase Collision Damage Waiver from the rental car company. This is the safest course of action to follow as it will often pay for 100 percent of the damages. The cost of this coverage typically ranges from $15 to $30 a day.
  • Purchase Hired Car Physical Damage from the sports organization’s insurance agent. Coverage typically costs $250 per year. However, this policy will not pay the following damages that are triggered by many rental car contracts:
  1.  The difference between actual cash value and replacement cost in the event the vehicle is totaled.
  2. Loss of profits to the rental car company while the vehicle is out of the fleet being repaired.
  3. Diminution in resale value.
  • Rely on credit card benefits for physical damage. The terms of credit card benefits vary greatly.

This is a complex area and consultation with an insurance professional is recommended prior to vehicle rental.

Non-owned and Hired Auto Liability for Sports Organizations

What’s covered and what’s not

When vehicles in use for business pertaining to a sports organization are involved in an accident where the passengers or other third parties are injured, the sports organization may be vicariously liable. This means they can be included in any lawsuits arising out of the accident.  Injured parties often seek out the sports organization as a deep pocket when the owner of the vehicle is uninsured or underinsured.

This is why sports organizations need Non-owned and Hired Auto Liability to cover their liability arising out of the use of vehicles that are not titled to the sports organization.

A non-owned auto is an auto that is not owned by the sports organization but is instead owned by an employee or volunteer who runs errands or transports participants at the direction of an authorized league official.  Sports organizations benefit from the use of non-owned vehicles.

Non-owned Auto Liability covers the sports organization itself but does not normally cover the individual vehicle owner or driver. Individual vehicle owners or drivers must look towards their own Personal Auto Policy for coverage.

A hired auto is either borrowed (ex: church van or school bus) or leased from a rental car company.  Hired Auto Liability protects both the sports organization and driver from liability arising from an auto accident when a vehicle is borrowed or leased. It is important to note that Hired Auto Liability does not provide any coverage for damage to the rental vehicle itself.

Non-owned and Hired Auto Liability can be obtained on either a Business Auto policy or a General Liability policy. However, the insurance carriers are reluctant to write these coverages for sports organizations due to the potential for high severity and the fact that sports organizations typically don’t implement loss control protections.

Basic loss control protections include driver screening by obtaining acceptable Motor Vehicle Reports and requiring that employees provide evidence that they carry a Personal Auto Policy with limits of at least $300,000 combined single limits. In addition, many insurance carriers are reluctant to extend coverage on the rental of 15-passenger vans due to their documented propensity for tipping over.

The actual policy language must be carefully reviewed for these restrictions.