What Sports Planners Need To Know About Insurance
In spite of all the best planning and safety precautions, accidents happen. It’s the unforeseen that makes it all the more important for sports organizers to prepare for worst-case scenarios to avoid risk. Planning and the proper insurance coverage provide peace of mind.
When it comes to insurance, agents and attorneys warn that every event organizer needs general liability insurance to protect the organization from lawsuits or claims from third parties.
Mark Beck, senior vice president of K&K Insurance Group Inc., said any event organizer, host or planner should consider contacting a local agent to assess their insurance needs and identify resources.
“Many local agents have their own resources and can help an event organizer to do some of the legwork from a risk-management standpoint. It’s like shopping for any type of insurance, the first step is identifying what coverages are needed,” he said. “For smaller organizations, the complexity of insurance coverages may not be so great. They are usually renting a field or a few fields for a tournament and may only be required by the contract with the venue to provide proof of general liability insurance.”
General liability insurance would protect the organizer from claims for bodily injury, property damage or the cost of legal fees if the organization is sued.
“You don’t have to use much of an imagination to realize that sometimes even when you’ve done nothing wrong, someone might sue. That’s why you need general liability insurance,” said Nick Pentsos, senior regional sales representative with K&K.
“Our company works with everything from the smallest teams to the largest governing bodies,” Beck said. “Nick and I, however, focus on smaller tournaments, camps, clinics and community sports events on a community or regional scale. We pride ourselves on focusing only on sports and recreation with an underwriting staff who are knowledgeable and have the experience to question planners appropriately, identify needed coverages quickly and offer competitive prices.”
Beck said an agency familiar with sporting events already has a good idea of the type of insurance needed and will provide guidance and ask questions to determine exactly what is required, so working with a specialist in the sports and recreation insurance industry may save the organizer time and money
“Our policies are designed with special endorsements to ensure you’re covered properly,” Pentos said. “Depending on the carrier you’re working with, standard contracts may use language that excludes coverage for athletic participants who sue the organizer, which is one of their largest exposures. We advise every sponsor or organization to make sure their policies include language protection from participants who sue [often referred to as ‘participant legal liability’]. You want to avoid the temptation to pick the lowest priced policy up front, and then find out at the time of a loss that the policy has an exclusion that leaves you uncovered.”
Leagues, organizations, associations and others should also inquire about the need for equipment and contents coverage. Known as inland marine coverage, the policy covers loss or damage to the organizer’s owned equipment, such as, computers, pads, helmets and other items used in their operation. It protects the items while they are being stored and transported.
Beck said transporting athletes is not always covered in a policy but non-owned/hired auto coverage should be considered to protect the organizer, when an employee or volunteer uses a vehicle to run errands, or when renting a vehicle in their business.
“If a volunteer drives a vehicle and, say, hits a pedestrian or a telephone pole, the entity itself can be pulled into a lawsuit,” Beck said.
Groups also need to ensure that enough insurance is available to cover injuries to participants.
“If a participant is injured during a sporting event, the individual’s own insurance may pay for most medical bills but many times additional medical expenses can be covered by the hosts insurance through a coverage called Excess Accident Medical Coverage,” Beck said.
In addition, Beck said planners should make sure workers’ compensation insurance required by the state is up to date in case an employee is injured during the event.
“One thing organizations should do is make sure they understand what adding a person or organization to their policy as an additional insured really means. In those situations, such as when a venue or sponsor requires to be added to a policy, the organizer is now sharing their policy limits with the venue, which could reduce the amount of protection they really have if a large claim occurs. They should only add someone to their policy if they are required to in a contract,” he said.
The venue contract will determine what insurance is required and often asks for proof of insurance before booking the facility. But Beck and Pentsos caution, “read the contract thoroughly.”
“The contract will dictate a lot,” Beck said. “Usually, insurance is the last thing anyone thinks about until they go to sign the contract and then learn they need proof of insurance with special coverage requirements. Venues may require that the organizer’s policy include endorsements such as Primary/Non-contributory, which makes the organizer’s policy pay first before venue’s policy would pay, or a Waiver of Transfer of Rights or a Waiver of Subrogation endorsement that removes the right of the organizer and their own insurance company from trying to recoup money from the venue even if the venue is responsible for the loss. Some insurance companies will charge additional premiums to add these endorsements, so sports organizations need to be careful about the wording in contracts. Don’t just dive into the cheapest policy and always make sure that everything is taken care of and you are aware of additional costs to include extra policy endorsements.”
John Sadler, president of Sadler Sports & Recreation Insurance and a licensed attorney, sport risk manager, and a sports insurance and risk management blogger, said, “Tournament hosts are often too reliant on their own insurance and ignore the critical importance of contractual transfer. Contractual transfer occurs when the party with the most amount of leverage contractually shifts the risk of loss to the weaker party through common provisions such as waiver/release, indemnification and insurance requirements. Contractual transfer is smart because it can protect the insurance loss record of the tournament host which may help to guarantee the affordability of future renewals.”
Sadler said tournament hosts should also require participants and parents if their children are minors to sign a well drafted waiver/release agreement. “These agreements can be very effective for adult participants. As regards minor participants, even if the parental signature is not upheld, as is the case in about 40 states, they can serve as evidence for an assumption-of-risk defense. This is why it is critical for minors to sign the agreement along with their parent/guardian.”
In addition to individual signatures and waivers or release forms, Sadler said teams should enter into a tournament agreement, which would include standard provisions and an indemnification agreement. “An indemnification agreement that is favorable to the host should require the team to agree to provide legal defense and accept responsibility on behalf of the host for all third-party losses caused by the sole or partial negligence of the team,” he said.
“Furthermore, teams should also be required to carry both accident and general liability insurance that meets specific requirements as regards minimum limits and the absence of certain dangerous exclusions. Common minimum limits for team insurance would be $25,000 for the accident policy and $1 million for the general liability policy,” he said.
The general liability policy should require the tournament host to be named as an additional insured.
Both Beck and Sadler said additional endorsements on general liability policies should include sexual abuse and molestation.
“Thirty or 40 years ago, there wasn’t as much focus placed on insurance entities to provide sexual abuse and molestation coverage,” Beck said. “The need has certainly increased in recent years, so it is important for insurance buyers to review policies to see if they have exclusions for sexual abuse/molestation, and can it be added back. If the coverage is available, the insurance company will want to ensure proper precautions are being taken by the insured by requiring background checks and a thorough application process to make sure the people who are working with the organization or around the event don’t have criminal backgrounds.”
Sadler agrees and said additional provisions that can benefit the tournament host include:
– An agreement that the team has complied with certain abuse/molestation controls such as screening its staff with criminal background checks.
– An agreement that the team will not use 15-passenger vans due to the tip-over propensity hazards.
– An operational control agreement which clarifies that the tournament host is only responsible for the actual play in the facility but not during activities such as travel, hotel stays or non-sports entertainment activities.
“Even when the host has successfully practiced contractual transfer, it is still important that the host carries its own accident and general liability insurance as it should not totally rely on the insurance that is required of participating teams,” Sadler said. “We sometimes see situations where team insurance includes dangerous exclusions that are not obvious upon inspection of the certificate of insurance. Unfortunately, there are also cases of teams presenting a fraudulent certificate where insurance has not been purchased.”
Lorena Hatfield, marketing resource manager with K&K, said the company has been working with sports groups for 65 years, serving more than 110,000 clients across the United States and can provide guidance for the smallest teams to large association and athletic organizations.
“One of the benefits of working with us is that we have a lot of programs for different size groups, from small organizations to national programs that are matched with underwriters who have a great deal of knowledge in their area of expertise,” she said. “Many planners come directly to our website to complete the online process, which is essentially a checklist when applying online.”