General Liability Basics For Sports / Recreation Associations

Source: sadlersports.com - General Liability Basics For Sports / Recreation Associations
Author: John Sadler

General Liability is perhaps the most important insurance policy for sports and recreation organizations due to the prevalence of spectator injury and participant injury claims. Likewise, it is the most difficult policy to place due to the limited number of insurance carriers in the marketplace that offer quality coverage forms. 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” (ex: spectator injury or participant injury) or ”property damage” caused by an “occurrence” which 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” (ex: slander, libel, invasion of privacy, false imprisonment, etc.) and “advertising injury” (ex: 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 form pays covered claims as long as the policy is in force when the injury occurs. It does not matter if the policy is subsequently cancelled and if a claim is later filed after the policy expiration date. On the other hand, the inferior “claim made” policy form 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 an additional two years for the statute of limitations to run before filing a lawsuit. In some cases, this could be a period of 15 years. “Claims made” policy forms provide too many opportunities for problems to arise if a new carrier is selected upon renewal (and if the insurance agent does not know how to coordinate the “retroactive date”) or if the policy is non renewed or cancelled due to nonpayment of premium. See prior blog post on issue of occurrence vs claims made.

Definition Of Bodily Injury

The standard ISO 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 basic limits of coverage at a minimum:

Each Occurrence:  $1,000,000

General Aggregate: $2,000,000

Products / Completed Operations Aggregate: $1,000,000

Personal / Advertising Injury: $1,000,000

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: $1,000,000

Sex Abuse / Molestation Each Claim: $1,000,000

Sex Abuse / Molestation Aggregate:   $1,000,000

Non-Owned And Hired Auto Liability:  $1,000,000

Employee Benefits Liability: $1,000,000

Subsequent posts will explore policy limits and component coverages in more detail.

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