Posts Tagged ‘sports general liability insurance’

Participants Legal Liability Coverage

Beware of hidden exclusions

One of the most common coverage problems in the sports and recreation industry is the existence of the Athletic or Sports Participants Exclusion on General Liability policies. This exclusion is all too common and can have a devastating impact on an insured organization and others who rely on the coverage if they are not aware of its existence.

The dangerous Athletic or SpParticipant Liability Insuranceorts Participants Exclusion (excludes lawsuits arising out of injuries to athletic participants) can be hidden deep in the policy exclusions with no disclosure requirement on a certificate of insurance. Some insurance carriers specializing in sports and recreation risks choose to distinguish themselves from the competition by adding an affirmative grant of coverage called Participants Legal Liability (covers lawsuits arising out of injuries to sports participants). This grant of coverage allows the carrier to show the existence of such coverage on a certificate of insurance that provides evidence that the Athletic or Sports Participants Exclusion does not exist.

Participants are generally defined under a Participants Legal Liability Endorsement. This refers to people who are granted access to restricted areas of the sports facility that are generally off limits to the general public. These could be athletes, coaches, managers, umpires, etc.

However, a General Liability policy that is silent on the issue automatically includes coverage for Participants Legal Liability, even without affirmatively showing a limit.. The endorsement that grants coverage for Participants Legal Liability may actually include some exclusions that restrict coverage (ex: Participant vs. Participant, Player vs. Player, Warranty of Waiver/Release) that may not be found on a policy without a separate endorsement for Participants Legal Liability. Therefore, the existence of a Participants Legal Liability limit and corresponding endorsement may not necessarily be advantageous if these other exclusions are found within the endorsement.

An advantage to having a separate limit for Participants Legal Liability includes injury scenarios such as lightning strikes, where multiple spectators and participants may be injured at the same time. Such situations are considered to be a single occurrence and as such the Each Occurrence limit may be exhausted. However, the Participants Legal Liability limit allows coverage for injury to participants to be segregated under a separate limit that frees up the Each Occurrence limit to be allocated to spectators.

Insurance Terminology for Sports/Recreation Organizations

Each Occurrence vs General Aggregate Limit

The difference between the Each Occurrence and General Aggregate limits is often a point of confusion for sports/recreation sanctioning governing associations and their members. If the General Aggregate limit is larger, it is tempting to think that’s the actual amount of coverage for any one lawsuit. However, that is not the case. Also, some carriers may quote a policy showing “none” under the General Aggregate limit. In this case, none is actually a good thing.

The Each Occurrence limit caps the payout of losses from any one occurrence or accident. A single occurrence could involve injuries to a single claimant or to multiple claimants (ex: lightning strike, bleacher collapse). The General Aggregate caps the payout of losses that arise throughout the policy year from multiple occurrences. The General Aggregate limit should be twice the Each Occurrence limit, per insurance industry standards.

How these limits work:

Assume that the Each Occurrence limit is $1 million, the General Aggregate limit is $2 million, and three claims occur sequentially in the policy year with total liabilities of $1.2 million, $600,000, and $800,000 respectively. The carrier would only pay $1 million for the $1.2 million claim because of the Each Occurrence limit. The sports organization would pay out of pocket the balance of $200,000. The $600,000 claim would be paid falling under the Each Occurrence limit and not having tripped the General Aggregate limit. The carrier would only be responsible for paying $400,000 of the $800,000 claim, since any amounts in excess of $400,000 would trip the General Aggregate limit of $2 million for all claims during the policy period.

Putting this into practice

Sports organizations with large numbers of participants or teams would be better served by not having a General Aggregate on their policy (designated by “NONE” on the policy) or by having a special endorsement that reinstates the General Aggregate per team, league, or event.

It is also common to see a single master General Liability policy covering an entire sports association or sanctioning body and its member teams/leagues under a single General Aggregate limit. This is dangerous since those filing claims later in the policy year may find that they have no General Aggregate limits left to pay their claims.

It is critical to understand the difference between the Each Occurrence vs General Aggregate limits when designing a protection program. We encourage you to read General Aggregate Limit for General Liability for more information.

General Liability Basics for Sports/Recreation Associations

Understanding what’s covered under General Liability

General Liability is perhaps the most important insurance policy for sports and recreation organizations due to the frequency of spectator and participant injury claims. However, it’s the most difficult policy to place. This is due to the limited number of insurance carriers in the marketplace that offer quality forms of coverage. There is a perception in the insurance industry that sports and recreation organizations generate a higher-than-normal risk of severity claims and are difficult to underwrite. However, in recent years, several new carriers have entered the marketplace resulting in more options than in past years.

General Liability policies cover certain lawsuits alleging “bodily injury” (of spectators or participants) or “property damage” caused by an occurrence. These are not subject to the standard policy exclusions or non-standard exclusions that may be added by policy endorsements. In addition, the policy responds to certain lawsuits alleging “personal injury” (such as slander, libel, invasion of privacy, false imprisonment, etc.) and “advertising injury” (such as disparagement of a third party in advertising material). The policy provides an attorney for legal defense and will pay up to the policy limits in the event of settlement or adverse jury verdict.

Occurrence vs. Claims Made

A sports/recreation organization should always purchase an “occurrence” policy form instead of a “claims made” policy form whenever possible.

The superior occurrence policy pays covered claims as long as the policy is in force when the injury occurs. It does not matter if the policy is later cancelled or if a claim is filed after the policy expiration date.

On the other hand, the inferior claims made policy pays covered claims only if 1) the policy is in force when the injury occurs and 2) the same policy, a renewal policy with a properly set retroactive date or an expired policy with an extended reporting period is in effect when the claim is filed. A claims made policy is risky for a sports/recreation organization because a participant who is a minor can wait until the age of majority (usually 18 in most states) plus two years for the statute of limitations to run out before filing a lawsuit. In some cases, this could be 15 years. Claims made policies provide too many opportunities for problems to arise if a new carrier is selected upon renewal or if the policy is non-renewed or cancelled.

Please read Occurrence vs Claims-made Insurance for Sports Organizations for more information on this topic.

Definition of Bodily Injury

The standard definition of “bodily injury” is “…bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”

Some carriers offer an important General Liability endorsement to broaden the definition of bodily injury to include mental anguish, mental injury, shock, fright, humiliation, or emotional distress or death resulting from bodily injury, sickness or disease.

Common Policy Limits

A General Liability policy should include the following minimum basic limits of coverage:

Each Occurrence:  $1 million
General Aggregate: $2 million
Products/Completed Operations Aggregate: $1 million
Personal/Advertising Injury: $1 million
Damage to Premises Rented to You: $300,000 (also known as Fire Damage Legal Liability on older policy forms)
Premises Medical Expense Payments: $5,000 (does not apply to injury to athletic participants)

The following additional limits may appear on some policies:

Participants Legal Liability: $1 million
Sex Abuse/Molestation Each Claim: $1 million
Sex Abuse/Molestation Aggregate:   $1 million
Non-Owned and Hired Auto Liability:  $1 million
Employee Benefits Liability: $1million

Sports Non-profit Immunity Law

Basis for dismissal of soccer goal lawsuit

The Massachusetts Supreme Court upheld a lower court decision that dismissed a lawsuit against a non-profit sports organization due to a state immunity statute. This lawsuit involved the 1998 tipping over of a soccer goal and resulting leg injury to a 12-year-old boy. The boy sued the local association which was a member of the  Massachusetts Youth Soccer Association.

The allegation was negligence on the part of the association for failure to properly secure the goal.

Even though the immunity statute was ultimately upheld in this case, the litigation dragged on for over 10 years and was undoubtedly very expensive. This is why sports organizations can’t rely on immunity statutes and need General Liability insurance.