7 Critical Mistakes to Avoid When Buying Sports Insurance
Little Known Secrets of How Your League Can Save Money and Better Protect You, Your Kids and Your Volunteers
I have dedicated my life to the study of sports insurance and sports risk management since graduating from law school in 1986. I’m passionate about protecting sports and recreation organizations and their directors, officers, employees, and volunteers against losing everything in a lawsuit.
I have decided to reveal the little-known secrets of how to buy the broadest insurance coverages for the absolute lowest cost. Along the way, I would like to demystify the confusing world of sports insurance.
Critical Mistake #1: Not Buying All the Policies You Need
Sports organizations typically should purchase five different insurance policies:
- Accident Insurance pays for medical bills of injured participants. This policy assures that your kids and volunteers will receive the type of medical treatment that they deserve. The threat of a lawsuit being filed by an injured kid is minimized if his medical bills are covered by Accident Insurance. Many people don’t have medical insurance; in fact, 5% of kids have no form of medical insurance. Figures vary widely among, though Florida and Texas have significantly higher rates of uninsured kids. Increasing Medicaid enrollments (CHIP) and the Affordable Health Care Act have cut down on the number of uninsured but created a new problem. Rising health insurance costs have resulted in higher deductibles and coinsurance than in the past, which results in more out-of-pocket expenses on moderate injuries. The end result is that unpaid medical bills attract lawyers who file lawsuits.
- General Liability Insurance covers lawsuits alleging that a spectator or player suffered bodily injury or property damage due to league negligence. This policy provides you with a defense attorney and pays for costs of settlement or adverse jury verdict. The policy should cover the sports organization and its directors, officers, employees and volunteers. Lawsuits are filed every day for injuries that occur at games/practices and during off-premises non-sport activities. Even if you prove that you were not negligent, your attorney’s fees must be paid, and those fees can easily run upwards of $50,000.
- Directors & Officers Liability covers lawsuits alleging that your sports organization’s mismanagement resulted in economic injury to another party or that another party’s rights under state or federal law were violated. Typical examples include discrimination, violation of the Americans with Disabilities Act, wrongful termination or suspension of your league personnel or players, and failure to follow your own rules or bylaws. This policy also provides an attorney for your defense and pays for costs of settlement or adverse jury verdict. The policy should cover the sports organization and its directors, officers, employees and volunteers. Again, even if you are proven innocent, the attorney’s fees must be paid.
- Crime Insurance covers financial losses suffered as a result of embezzlement by your own employees or volunteers. This policy should also cover theft of money by outsiders. It’s hard to think that your own volunteers would steal but it happens. Who pays the bills if the money is gone?
- Equipment Insurance covers loss of your sports equipment (ex: uniforms, playing equipment, concession equipment, scoreboards, fences, bleachers, and small buildings) as a result of fire, lightning, wind, theft and vandalism.
Failure to purchase any of these policies could lead to you being sued for managerial negligence if a significant claim is not covered. Some sports organizations may need additional policies, such as Property, Auto, or Workers’ Compensation. For purposes of our discussion, we will concentrate on Accident and General Liability Insurance.
Critical Mistake #2: Making Flimsy Excuses
Excuse #1: “We’ve never had a serious injury or lawsuit in our sports organization. Besides, we’re extremely safety conscious.”
Reality: This short-sighted attitude is dangers. Sports organizations frequently experience serious injuries and lawsuits. If you need proof, see “Horror Stories about What Can Go Wrong,” a report about actual claims paid on behalf of our clients, which is available on our Risk Management page.
Excuse #2: Our volunteers are protected against lawsuits under state and federal legislation providing immunity for volunteers.
Reality: While this is definitely a step in the right direction, state and federal immunity laws don’t prevent the lawsuits from being filed. Just proving you’re protected could cost more than $10,000 in legal fees. Furthermore, the immunity laws are full of loopholes (ex: allegation of gross negligence) and don’t protect the sports organization itself, leaving its assets at risk.
Excuse #3:Our sports organization is protected because we require our players and their parents to sign waiver/release forms.
Reality: Waivers and releases are definitely worth the paper they’re written on. For adult participants, a well-written waiver/release can be effective in dismissing a lawsuit in most states. However, when minors are involved, a parent signed waiver/release is only effective in about 10 states. And even if a waiver/release does result in a lawsuit dismissal, legal defense will cost at least $25,000. Never depend on a waiver or release for in lieu of General Liability insurance.
Excuse #4: Our sports organization doesn’t need to buy a General Liability policy because each volunteer can provide his/her own protection through Homeowners Liability, Personal Umbrella Policy, or a Coach Certification policy.
Reality: Many Homeowners Liability and Personal Umbrella policies don’t cover lawsuits arising out of your actions as a sports volunteer. Read the fine print! Most Coach Certification policies only protect the coach while undertaking coaching duties, which can leave the coach exposed to lawsuits arising out of injuries to players while on non-sport team outings. Even if these policies do provide total protection for the individual, not all volunteers will carry one. More importantly, none of these policies protect the league itself, which leaves its funds and property exposed.
Excuse #5: Our sports organization, directors, officers, and volunteers are automatically covered through the insurance offered by the recreation department or municipality.
Reality: Some General Liability policies carried by recreation departments and municipalities only covers their organization, directors, officers, and employees but may not cover volunteers. Also, individual leagues using the facilities and their boards are definitely not covered.
Even if the rec department or municipal General Liability policy does cover sports volunteers working directly on behalf of the recreation department, there may be limitations. For example, there may be no coverage for off premises practice, games, and non-sports outings. These policies may also have dangerous loopholes such as Athletic Participants Exclusion, Punitive Damages Exclusion, and Sex Abuse/Molestation Exclusion.
Download our online risk management “Municipal Recreation Department Insurance Checklist.” Ask your risk manager to complete this form so that you will know to what extent you’re protected. Based on our past experience, more than 50% of rec depts. and municipalities have a major problem with their coverage.
Excuse #6: Our sports organization doesn’t need to buy Accident Insurance to pay for our participants’ medical bills since they’re covered under their parent’s health insurance.
Reality: National statistics indicate that up to 10% of all children in the U.S. aren’t covered by health insurance, with much higher uninsured rates in certain states such as FL and TX. Obamacare may have slightly reduced the numbers of uninsured; however, it also created a new problem by driving up the cost of health insurance resulting in higher deductibles and coinsurance. The deductibles and out of pocket payment responsibility may be so high now that it can create a real financial hardship or in parent’s choosing to skip needed medical attention such as advanced care for concussions. Remember, unpaid medical bills often result in a lawsuit being filed by the injured participant.
Critical Mistake #3: Not Understanding the 15 Most Common Ways Volunteers Can Be Sued
(And one very powerful secret)
Don’t be negligent in these areas:
- Slip/trip/fall around playing field due to hazards such as holes, slippery surfaces, or uneven surfaces.
- Slip/trip/fall off of bleachers.
- Contact with ball caused by lack of barriers or defective barriers. Also, caused by improper positioning of players during warm ups.
- Failure of supervisor to stop participant rowdiness.
- Failure of supervisor to be located closely enough to activities in order to prevent injuries.
- Improper ratio of supervisors to participants.
- Supervisor incompetence or lack of training (certification) that results in participant injury.
- Improper instruction of participants on sport specific techniques and skills, game rules, and safety rules.
- Improper layout and design of the playing facility.
- Lack of facility maintenance and repair that leads to injuries caused by holes, depressions, or slippery spots.
- Improper decision to play under inclement weather conditions.
- Lack of emergency planning and coordination with local medical care providers and ambulance services.
- Failure to select, properly fit, and inspect quality equipment that is to be used for its intended purpose as prescribed by the manufacturer.
- Failure to engage in pre-participation screening for medical risks.
- Failure to warn participants/parents of the dangers inherent in sports participation (Waiver/Release Form)
Important Secret: You can do everything possible to prevent these injuries, but they can still occur.
Critical Mistake #4: Not Understanding the 5 Ways to Save Money on Insurance
You always want to get the best deal when buying sports organization insurance on your limited budget. But, how do you know if your insurance agent is charging you too much? Sports insurance is a highly specialized field where very few agents have the buying power to negotiate the prices you want. Your agent may not be one of the lucky few with access to the Big Boys!
Below are five money-saving tricks for buying Sports Insurance.
Money-saving Tip #1: Buy from a Sports Insurance specialist. Insurance is a huge industry, and nobody can specialize in all of it. In fact, a professional insurance agent can only specialize in a few niches and really understand them. If someone specializes in insuring homes, auto, and retail stores, it doesn’t mean that they know anything about sports leagues.
The sports insurance marketplace is so secretive and hard to access that only a sports insurance specialist will know where to go in order to satisfy the specific needs of a particular league. This knowledge can mean big savings because the specialist knows which program or insurance company is offering the most competitive rates for a particular type of league.
Money-saving Tip #2: Tap into group purchasing power. Only the biggest sports organizations and leagues operating on a statewide, regional, or national basis have the buying power to establish their own programs with special rates. The average sports league will never have the clout to get the attention of an individual insurance carrier.
The solution for the average sports organization is to join forces with other organizations to form a buying cooperative with enough clout to get the attention of the insurance carriers. These buying cooperatives are known as association programs or risk purchasing groups and allow for significant rate reductions. (We have customized insurance programs for associations such as Dixie Youth, Dixie Boys, Dixie Softball, Dizzy Dean, American Youth Football, NYSCA and SODA.) Quite simply, the carriers that specialize in sports insurance are hungry for large accounts.
Money-saving Tip #3: Raise the deductible on your Accident Policy. The deductible is the amount that you pay before insurance kicks in when you make a claim. If you have a $1,000 claim and a $100 deductible, you pay the first $100 and your insurance company pays the next $900. The disadvantage of raising your deductible is that when you do have a claim you will pay more. The advantage of raising your deductible is that your premium will go down, sometimes by as much as 25%.
Money-savings Tip #4: Bundle your policies. Many insurance companies offer built-in discounts for sports organizations that purchase both Accident and General Liability policies from the same company.
Money-saving Tip #5: Don’t get nickeled and dimed. Avoid insurance carriers that charges to cover special non-sport activities, volunteers such as coaches and umpires, and adding field owners and sponsors as additional insureds.
Critical Mistake #5: Falling Victim to Dangerous Loopholes
Let’s say you decide to (without reading this special report first) buy insurance from the local agent who sponsors a team. You assume your worries are over, but
Two months later…
You get a phone call late one night from one of your coaches. His voice begins to crack as he says, “Little Johnny Andrews got hurt real bad after the ball game. He was roughhousing and fell off the top of the bleachers.” Your heart sinks.
You rush to the hospital and talk to Johnny’s parents who are distraught. Johnny has not regained consciousness, may require surgery and an extended hospital stay, and there’s the possibility of permanent damage. Johnny’s father mentions that he dropped his health coverage last month. Johnny’s mother is furious because she had given strict instructions that Johnny was to be closely supervised at all times because of his short attention span.
One week later…
Johnny’s recovery is slow and steady. But, the doctors still aren’t sure he’ll make a full recovery.
One month later…
Johnny leaves the hospital and goes home. Johnny’s father hits the roof when he gets his first hospital bill in the mail totaling more than $100,000.
Two months later…
A stranger knocks on our door and hands you a “Summons and Complaint” alleging that both you and your coach were “grossly negligent and showed willful, wanton, and reckless disregard for the safety of Johnny Andrews”. His attorney is seeking $400,000 in actual damages plus unspecified punitive damages.
After explaining the situation from A to Z to your insurance agent, you finally pop the big question: Am I Fully Covered? Your heart sinks when the agent answers “I’m afraid we might have some problems.”
You volunteered your services for free because you love kids. But now, you have to worry every day about your future because of the lawsuit and the coverage problems.
You can avoid this scenario by downloading the “Sports Organization Insurance Coverage Checklist” and asking your agent to complete it to determine if your policies meet the minimum standards for sports insurance. Over 95% of sports organizations fail this test.
Buy the Right Insurance! Not all insurance policies are created equal. Sadly, the majority of sports insurance policies sold are inadequate when it comes to protecting against certain types of injuries and lawsuits. Don’t learn this lesson the hard way. Incredibly, you probably won’t even be aware that these dangerous coverage problems exist since they are usually not disclosed in the insurance brochure. Your local agent might not even be aware of them! The only way to know which coverages you’re really getting is to request a copy of every page of the insurance policies and to read them thoroughly. But, since insurance can be so technical and complicated, we will gladly perform a no-obligation review of any of your policies and make recommendations.
Critical Mistake #6: Buying inadequate Accident Insurance
- Maximum Medical Limit: Avoid any policy with a limit less than $25,000 as it won’t be enough to pay the medical bills for a moderate to serious injury. Given the cost of medical care, consider raising your limit to $100,000 or more because doing so is incredibly inexpensive.
- Internal Payout Schedules: Avoid any policy that limits surgeon fees, hospital room and board, doctor visits, etc. under a separate schedule as they often result in an underpayment of medical bills.
- Excess vs. Primary: Primary insurance pays whether or not there is any existing coverage (such as parent’s health insurance) and may even allow a double recovery. On the other hand, Excess insurance only pays what medical bills aren’t already covered by existing coverage. When there is no existing insurance in force, Excess Insurance becomes Primary and pays up to the policy limit. If existing insurance is in force that does not pay for all of the bills, Excess Insurance will fill in the gaps and pay for the deductible or coinsurance.Excess insurance is better because it allows a league to purchase affordable coverage with a limit high enough to cover a moderate to serious injury. Primary insurance is so expensive that it results in a Maximum Medical Limit that is either too low or that is eroded by restrictive internal payout schedules.
- Deductible: A deductible is the amount the injured person pays out of pocket before insurance kicks in. In other words, if there is a $100 deductible and $1,000 in medical bills, the injured party pays $100 and the insurance company pays $900.
In amateur sports, deductibles commonly range from $0 to $1000 per claim and can result in substantial premium reductions. A Corridor Deductible applies when there is existing insurance in force (parent’s health coverage) and when there is no existing insurance. On the other hand, a Disappearing Deductible only applies when there is no existing insurance in force.
- Covered Persons: Your policy should cover all athletes and staff whether paid or unpaid. Avoid policies that limit coverage only to players and coaches as there are other volunteers and league officials who deserve protection.
- Covers While: Your policy should cover while participating in all organization authorized activities under adult supervision including games, practice, tournaments, non-sport activities, and group travel. Avoid policies that limit coverage to games and practice as most amateur teams engage in group travel and other non-sport activities such as awards banquets, picnics, cookouts, and outings.
Critical Mistake #7: Buying Inadequate General Liability Insurance
- Limits — Your policy should contain the following limits for bodily injury and property damage liability:
Each Occurrence Limit $1,000,000 General Aggregate Limit $2,000,000 or None Products / Completed Operations Aggregate Limit $1,000,000 Personal / Advertising Injury Limit $1,000,000 Damage To Premises Rented To You Limit $100,000 Medical Expense Limit $5,000 Non Owned And Hired Auto Liability Limit $1,000,000
- Occurrence vs. Claims Made: The distinction is important because it is possible that a child who is injured at age 6 could wait until age 20 before filing a lawsuit. If your league purchased an Occurrence policy during the year of the injury, you would have protection even if the policy is not renewed in later years. On the other hand, avoid a Claims Made policy that may only protect if the same policy or a renewal was in force both when the injury occurred and when the claim or lawsuit was filed (which could be 14 years later).
- Participant Injury Liability: Believe it or not, some policies only cover lawsuits arising out of injuries to spectators. Beware the Athletic Participant Exclusion and avoid policies that don’t cover lawsuits arising out of injury to your sports participants.
- Punitive Damages: Almost any lawsuit filed will allege that your volunteers engaged in “grossly negligent behavior that is willful, wanton, and reckless” and will ask for punitive damages inflict extra punishment (not to mention extra fees for the plaintiff’s attorney). Avoid policies that don’t cover punitive damages.
- Abuse/Molestation: Most sports liability policies now exclude abuse/molestation or offer ridiculously low sublimits. You should request a policy that does not specifically exclude or limit coverage for abuse/molestation. These types of lawsuits usually result in settlements or jury verdicts in excess of $500,000. Even the innocent board members are usually sued for failure to screen out sexual offenders with a criminal background. Please refer to our articles and programs on abuse/molestation risk management and background checks in our online risk management library.
- Brain Injury: Some policies have an exclusion or limitation for lawsuits arising out of brain injury whether concussions or long term memory loss. If your policy has such an exclusion, you need to seek alternate quotes.
- Financial Strength: Your insurance company is no good if it’s no longer in business when it comes time to pay a claim. Avoid any insurance company that has a rating of less than A- in Best’s Key Rating Guide and that is not licensed in your state. You might have been happy to get a B+ in high school, but the likelihood of a B+ rated insurance company going under is much bigger than that of an A- rated company.
- Covered Persons: Your policy should cover your sports organization, its directors, officers, employees, and all volunteers. You should also be able to provide Additional Insured status for field owners and sponsors if they request it. Avoid policies that don’t cover all persons and entities mentioned above.
- Special Coverage for Owned/Leased Facilities: Sports organizations that own or have a long-term lease on a facility are responsible for what occurs there 24/7, 365 days a year. Most General Liability policies only cover lawsuits arising out of sanctioned and supervised activities. They wouldn’t cover lawsuits arising out of injuries occurring after hours or during the off-season. Close this loophole by paying an additional charge to add this coverage to your policy. To determine if your policy meets the minimum standards, download our “Sports Insurance Coverage Checklist” and submit it to your insurance agent. Over 95% of organizations fail this test.
Why am I giving away inside secrets?
The honest answer is because it’s good for you and it’s good for my business. It’s taken me years to accumulate, organize, and perfect the information I’ve shared here. But I find that generosity and willingness to provide great service comes back to me tenfold. In fact, that’s how I’ve built my business. So, if you want to protect your kids and volunteers from a future crisis or catastrophe, or just see if you can save money on your insurance, review the custom designed insurance programs available on our website. The worst that can happen is you’ll have spent a few minutes learning something new.
We offer the following helpful articles, reports and forms in our online risk management library
- Emergency Information/Consent Form
- Image Release Form
- Sample Waiver/Release Form – Minor
- Sample Waiver/Release Form – Adult
- Are Waiver/Release Forms Worth the Paper They’re Written On?
- Before You Sign the Facility Lease Agreement…
- Collect Certificates of Insurance from Vendors
- 12- and 15-Passenger Vans
- Child Abuse/Molestation Protection Program – Administrators (Includes volunteer application and disqualification criteria)
- Child Abuse/Molestation Handout for Parents
- Types of Criminal Background Checks
- Criminal Background Check Vendors
- Brain Injury/Concussion Risk Management Program
- Concussion State by State Interactive Map On Concussion Laws
- Heat Illness: Avoidance and Prevention
- Lightning Safety
- Horror Stories about What Can Go Wrong
- Sports Organization Insurance Coverage Checklist
- Municipal Recreation Department Insurance Checklist
- Risk Management Program for Sports Organizations
- Liquor Liability for Sportsplexes
- General Liability Concerns for Sportsplexes
- Videos for Administrators:
- How to Implement a General Risk Management Program
- Sex Abuse & Molestation Risk Management Program
- Videos or Awareness Training for Staff:
- General Ballpark Safety
- Sex Abuse & Molestation