The first line of defense against lawsuits
Sports Accident insurance pays covered medical expenses of injured participants such as players, coaches, managers, umpires, etc. The coverage is normally excess or secondary, which requires other insurance such as family health insurance to respond first.
How Excess Accident Insurance coordinates with family health insurance
There are three basic scenarios that can arise under excess Accident insurance:
- When existing family insurance pays for 100 percent of all medical bills, the excess Accident policy will not make payment for any benefits.
- If existing family insurance pays for only 80 percent of all medical bills (due to deductibles or coinsurance provisions), the excess Accident policy will pay for the remaining 20 percent less any deductible or other policy limitations.
- If no family insurance exists, the excess Accident policy becomes primary and pays covered benefits less any deductible or other policy limitations.
The existence of Excess Accident insurance on all participants is the first line of defense against lawsuits arising from injuries to sports participants. Much of the incentive for an injured participant or parent to file a lawsuit is removed if either existing family health insurance or the excess Accident policy will guarantee that no out-of-pocket medical bills will be incurred.
Uncovered medical bills = lawsuits looking for deep pocket
Uncovered medical bills will ultimately result in nasty dunning letters and collection phone calls to the responsible party. This usually leads to consultation with an attorney. Of course, the attorney will recommend filing a lawsuit against a deep pocket. That’s the sports organization and its directors, officers, and volunteers.
Why General Liability carriers in the sports niche insist on Excess Accident as the first line of defense
This is why the few General Liability carriers willing to insure sports organizations require Accident insurance as a precondition of coverage. Most General Liability policies include a warranty provision. This means coverage is voided unless a minimum amount of Accident insurance is in force (usually $25,000). For higher-risk sports, some General Liability carriers may require a $100,000 limit.
What if Excess Accident insurance is too expensive?
In these situations, there is really no way around purchasing Accident insurance if it is a requirement of General Liability coverage. However, one solution is to seek a high-deductible Excess Accident policy. Accident insurance is discounted highly at certain deductible points, such as $500, $1,000, or $2,500. And some General Liability carriers will accept Accident insurance with these higher deductibles.
Different types of deductibles: corridor and disappearing
Most Accident policies have what is called a corridor deductible. This means the deductible is owed regardless of the existence and contribution of other collectible insurance, such as family health insurance. However, some Accident polices have a disappearing deductible. This means the deductible is satisfied to the extent that other existing insurance has paid medical bills.
Has the Affordable Care Act had an impact on Accident Insurance?
Excess Accident policies pay claims both on an excess and primary basis. If no existing family health insurance is in force, the Excess Accident claim becomes primary. The extent to which the Affordable Care Act increases the percentage of participants covered under family health insurance decreases claim payouts under Excess Accident. However, the high cost of health insurance under the Affordable care act results in higher deductibles and coinsurance. As a result, Excess Accident insurance takes a higher hit than in the past. The two forces tend to balance each other out. However, most of my clients, overall, experienced fewer claims on their Accident loss history. This resulted in premium discounts on some larger experience-rated accounts.