Insurance limits increase sparks complaints
The U.S. National Parks Service recently increased their required General Liability limits for outfitters and guides from $500,000 to $5 million. The requirements were first implemented in 2010 for rafting companies operating in Grand Teton National Park. However, NPS may begin implementing these requirements nationwide. Nationally, the NPS manages some 515 small business operators at 130 parks with the majority generating less than $250,000 in annual revenues.
Outfitters and guides are typically small businesses that specialize in taking customers on outdoor adventure trips, including rafting, kayaking, canoeing, fishing, biking, hiking, and mountain climbing.
Small commercial outfitters and guides are upset at these new insurance requirements. Their complaints are being heard before Congress and the subcommittee on National Parks, Forests and Public Lands, which recently held an inquiry to determine if the increased requirements are justified. Below are the points made by the NPS and their experts from Price Waterhouse and AON Insurance:
- NPS hired Price Waterhouse and AON to review their minimum insurance requirements in order to professionalize their business practices.
- NPS consultants stated that $1 million is appropriate for low risk businesses. However, high risk businesses such as outfitters and guides conducting back country operations should carry a limit of $5 million.
- According to an AON report, business operations that simultaneously expose multiple persons to serious injuries should carry a limit of at least $5 million. Such a limit is appropriate for most river rafting guide businesses.
Below are the points made by complaining small commercial outfitters and guides and their experts including the America Outdoors Association, an independent actuary and insurance executive:
- The new liability levels required by the NPS will restrict the activities in the parks and the people enjoying such activities.
- According to Jim Lynch, an independent actuary hired by AOA, the insurance requirements of other federal organizations, including the Bureau of Land Management and the U.S. Forest Service only require limits in the $500,000 to $1 million range. Claims that reach the $1 million limit are rare.
- The new NPS requirements could reduce the number of commercial outfitters and guides or increase their cost of doing business to a level which may cause adventure seekers to “go it alone” without the help of professionals and thus increase the risk of injury.
- Rick Lindsey, an insurance executive who insures outfitters and guides said his company has yet to see a claim that approached $500,000 and that in his 30 years of experience a $500,000 limit has been more than adequate. He stated that the expense of carrying the higher limit would drive some outfitters and guides out of business.
Several insurance experts and insurance carrier representatives were interviewed on market availability and cost of the $5 million limit. Contradictory testimony was presented to the committee. Some stated that such limits were unavailable from insurance carriers and others said they were available but very expensive. One insurance agent stated that it was extremely difficult to find a carrier willing to write outfitters and guides operating on rivers rated above class 3.
Concerns were also expressed that only the larger commercial outfitters and guides could afford the higher limits and that the smaller operations would be forced out of business. In addition, one expert stated that a hard insurance market could result in extreme rate hikes and the inability to purchase $5 million limits.
The subcommittee recessed and will take up the matter at a future meeting.