Ask the Expert: Recreation and Leisure Coverage

Nearly 18 million people annually use commercial zip lines. Thirty million people ride horses. And the number of trampoline parks has risen from 25 to more than 350 parks in a four-year time span. The U.S. recreation industry continues to experience rapid growth. However, with more thrill-seeking experiences comes more risk. For example, trampoline park injuries accounted for 11 percent of all emergency room visits in 2014.

Clients who own and operate commercial recreation and leisure businesses often work in unique environments—facing different risk exposures than standard commercial operations. With unique vulnerabilities like these, brokers should educate businesses that offer entertaining experiences on how to protect themselves with a Recreation and Leisure policy against the exposure of debilitating business interruptions.

Insurance Market Source regularly taps into its network of experts for insight into key trends across the insurance landscape. Laura A. Bates, Corporate Vice President, Atain Insurance Companies, shares her thoughts and commentary on Recreation and Leisure insurance.

Q: What are some common target classes for this policy and how does coverage differ among them?

Laura Bates (LB): We see a variety of target classes for this type of coverage, including escape rooms, zip lines, water parks, white water rafting, trail rides, kayak and tube rentals, BMX or go-kart tracks, and indoor climbing walls – to name a few. While certain activities may require more specific exclusionary endorsements, coverage does not differ significantly among target classes.

However, brokers should be cognizant of minor variances. For instance, clients who offer aquatic activities. Policies for water-related activities may require an endorsement mandating that lifeguards are present for coverage to be active. In the excess and surplus lines arena, policies can be tailored to specifically meet the needs of the client while restricting coverage to certain exposures or operations.

The key to recreation risk is ensuring that coverage is broad enough to accurately protect the client, while limiting the coverage to avoid including exposures which were not accounted for at quote stage.

Q: What are some mitigation measures brokers and agents can advise their clients of in order to avoid those exposures?

LB: Risk management related to safety procedures are paramount in mitigating recreation and leisure exposures. It is important for clients to require participants to complete and sign waivers or releases of liability ahead of enjoying the activities offered. The purpose of the waiver is to not hold the client responsible for injuries inherent to the recreational activity.

The key to recreation risk is ensuring that coverage is broad enough to accurately protect the client, while limiting the coverage to avoid including exposures which were not accounted for at quote stage.

Brokers should advise their clients to have an experienced, reputable attorney draft an appropriate waiver of liability for all participants to sign. The waiver should be specific to the state in which the insured is operating, as the interpretation and legal enforceability of waivers can vary significantly in different jurisdictions. It is equally imperative for clients to have a robust procedure in place for collecting and recording waivers signed by participants.

Advising clients to have written safety procedures in place for all activities offered is another consideration for brokers whose clients do not already have such a plan written. For example, if rock climbing is offered, written procedures should require protective helmets. Essentially, the client should have full control over the conduct and physical well-being of customers and guests participating in all on-site activities. Proof of the aforementioned risk mitigation measures will help ensure a smooth underwriting process. Partnering with a risk mitigation provider like Afirm, can help brokers further understand and evaluate the risks of their clients.

Q: What common pitfalls may brokers or agents encounter with recreation and leisure clients?

LB: It is important for brokers and agents to have regular dialogue with the client to discuss any updates and changes in their operations to help avoid potential gaps in coverage. At a minimum, this should be a yearly conversation. It is not uncommon for an insured to begin offering new or different activities without considering whether the new activity is covered under their policy. This is particularly important with Recreation and Leisure policies as coverage is typically restricted to the specific operations of the insured as described at the policy inception. For example, a go-kart track operation that installs batting cages in the middle of summer may not consider how this would affect their insurance, only their bottom line. Claims of negligence against the insured that result in bodily injury can bring about costly litigation, which may ultimately result in financial impact to the business. Brokers can mitigate financial loss and help recreation professionals continue to successfully operate their business by educating clients on, and arming them with, the appropriate coverage.  Additionally, maintaining consistent communication with clients throughout the business relationship can safeguard them against additional exposure they may take on with any business changes.

References:

  1. NPR

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