Assessing Your Insurance Needs
IT GOES WITHOUT saying that every fitness center will
have its share of incidents, from members slipping on a wet
floor to falling off of a cardio machine to dropping weights.
And, although the risk of liability is high in a fitness environment,
thankfully, only 30 to 40 percent of fitness centers
will ever file a claim. The explanation, according to Steve
Shelton, president of Sports and Fitness Insurance
), Madison, Miss., lies in the facility's
response to its members in every situation — not just
those that could result in a lawsuit.
When consumers thoughtfully choose a fitness facility,
they pick one that has a safe, well-managed, proactive
environment (including shoveled sidewalks, mats in wet
areas, well-maintained equipment), and responsive staff
(trained in first aid, CPR and AED use). Also important
is a camaraderie between the staff and members. All of
this goes a long way toward preventing a claim in the
event of an incident. People don't want to sue those
to whom they feel close and who treat them well —
both during an incident and in the months and
years they've been a member without incident. So,
your staff members' responses to anything from
a prospective member's facility tour, to questions
about equipment usage, to preventing or
responding to an incident, can all help to prevent
However, when claims do happen, they
generally fall into two categories: premise
liability, such as slipping and falling on an
icy sidewalk, and health club specific liability,
such as slipping and falling on a
wet pool deck. Premise liability accounts
for anywhere from 50 to 60 percent of
claims. Remember, for someone to
successfully file a claim against your
fitness center, there has to be negligence
on your part. Club managers
can take big strides toward mitigating
those risks with thoughtful
planning and execution of prevention
strategies (see Risk
To pay or not to pay
When a claim is filed, insurance companies have to decide
whether to pay, pursue mediation or fight the charges. Some companies
and, for that matter, facility owners, may choose to pay the
claim right away to prevent the issue from becoming a larger one.
Others will want to fight. The decision primarily rests on why the
charges were filed.
Doug Hamm, chief claims officer with K&K Insurance Group
Inc. (www.kandkinsurance.com), Fort Wayne, Ind., says that the
course of action in determining whether the insured has a legal
responsibility to pay "is done through a thorough investigation of
the facts as to what the insured did and didn't do, as well as an
examination of the claimants actions. If it is determined that the
insured is not responsible, the claim is denied. Then it is up to the
claimant at that point to decide which way the case goes. He or she
will either accept the denial or hire an attorney to file suit. Insurance
companies don't mind paying a legitimate claim, because that's
what we are here for. However, paying for a frivolous claim will hurt
the club, its members and the insurance industry as a whole."
If the insurance company finds that the insured was at fault,
there's still a chance of a trial or mediation if the claimant thinks
his or her injuries are worth more than the insurance company is
willing to offer. Mediation, though not binding, often results in a
successful resolution of claims.
Choosing the right policy
Choosing coverage for a fitness business can be daunting
because insurance programs are not all alike. Shelton cautions
against choosing a standard policy from a "standard insurance company,"
because those types of companies often exclude professional
liability. Or, if you choose to go with a standard policy, make sure
that you purchase extra liability insurance. Ron Zaiger, president of
HRH Insurance Agency (www.insurefit.com), Lowell, Mass., agrees.
Thankfully for the fitness industry, he says, there are specialty insurance
companies that can help a fitness business to be well covered
with custom-made policies. About 80 percent of fitness center owners
choose to go with these specialty insurance programs.
Within the specialty market, owners will find policies specific to
fitness centers that include provisions for pools, children's programs,
climbing walls and whatever else the center may have. These
pre-packaged and tailored policies can help fitness owners because,
hopefully, the insurance company has already thought of possibilities
that need to be covered. Owners can also choose additional
coverage. An example Shelton suggests is a hired and non-owned
auto policy that protects the facility should employees doing business
in either their own car or a rental car have an accident. This
coverage protects the fitness center against claims that might be
made due to that accident.
You may also want to review A.M. Best Company's, Oldwick,
N.J., website (www.ambest.com), which rates insurance companies'
financial strength and credit quality. Insurance companies
must apply to be rated, so if a company you are considering is
not listed with this organization, it does not mean that the company
is not well-run or does not provide excellent service with
policy and claims. It just means that it chose not to be rated.
Still, reviewing the website will help you to formulate questions
when interviewing potential insurance companies about your
new or renewed policy.
Insurance companies evaluate your business, too
While you are choosing a new insurance policy, remember that
insurance companies are choosing you, too. Before they will
accept you as a customer, they'll need to assess the risks they will
incur by taking you on as a client. Typically, they will want to see
your previous three-year loss runs from your previous insurance
company. "The numbers don't lie," says Shelton. If your fitness
center has had numerous claims made, it may be a bad risk for the
The insurance company will also take a look at what your facility
offers — martial arts, a restaurant, etc. — and get an overview of
the entire risk you may incur. They will also want to know how many
staff members are present during working hours. The fewer staff
members, the less able your facility will be to respond to emergencies,
which will increase your risk of having a claim filed against you.
Other potential liability risks, according to Zaiger, are saunas
(because of the increased risk of fire), and air structures such as
domes or bubbles. Managers need to take extra precautions with
these air structures, in particular, during inclement weather and
know when to increase or decrease the pressure within the structure
and how to safely remove snow.
"Swimming pools with diving boards are [also] a concern," says
Missy Ross, senior underwriter with K&K Insurance's recreation
and entertainment unit. "Clubs should have an approved waiver
release agreement signed by each member/participant."
How much do I need?
When deciding how much and what type of insurance to purchase,
Zaiger recommends thinking of the worst-case scenario. "If
the club disappears," he asks, "what would it take to rebuild?"
Think of salary costs, rebuilding costs, equipment replacement
costs. Owners who think they don't need a certain coverage or
choose to underinsure are often unable to rebuild after a disaster.
"Ultimately, the decision regarding how much insurance to
purchase rests with the insured," Ross says. However, "a club should
always get their agent/broker involved to properly identify and
review their exposures to determine what coverages they should
purchase." Specialty insurance programs will provide package coverages
for things like tanning, professional liability, etc. However,
it's important for facility owners to carefully review all insurance
company quotations and policies to make sure that they understand
what is and isn't covered.
Fitness facilities with a good track record can typically renegotiate
their insurance policy when it comes time for renewal. The
insurance business is competitive for fitness clubs; while managers
have a lot to think about when choosing the right policy, they also
have many policies from which to choose.
The right insurance policy is so important to the health of your
business. It's one of those things you hope never to need, but, when
you do, it can mean the difference between going forward or closing
your doors. Ask questions, check references and read the policy
thoroughly to be sure you are getting what you need, then be
vigilant about your staff and maintenance procedures. Being a
well-insured fitness center is no reason to not be well-run.
Risk Reduction Checklist
The following recommendations are ways for your fitness
center to reduce risk to members, and reduce liability claims
against your facility.
Assumption of risk and release of liability.
legal team draft an assumption of risk and release of liability
form stating acknowledgement of the risks involved in participating
in your program. At minimum, the following four areas
should be covered in the release form:
- Physician's approval.
- Knowledge of proper equipment usage.
- Understanding of the training program.
- Awareness of the risk of possible injury, such as from a)
strains, sprains, muscle tears, muscle pulls, heart attack, stroke,
broken bones, death, etc.; and b) improper use of equipment.
The release form should be discussed with each member and
guest, and signed before they start participating in your program
or using your facility.
All emergency procedures must be
established in writing (see Emergency Procedures Guidelines),
and each center employee must be familiar with these procedures.
Emergency procedures should be posted near the front
desk telephone, and emergency numbers posted on the phone.
Rehearse emergency situations periodically with your staff, and
complete an accident report form for every accident or serious
illness in your facility.
Warning labels and cautions.
All warning labels specified
by an equipment manufacturing company must be displayed as
specified by the manufacturer. Additional cautions or warning
may need to be added to some machines.
Have an established orientation for members,
and mandate that everyone must complete it before they can use
your facility. Cover exactly the same thing in each orientation.
Make certain that all required forms are completed accurately.
Some criteria must be established relative to
when members will be required to have medical clearance before
they are allowed to participate. The PAR-Q can be used as one
aspect of an initial screening. (For example, anyone who checks
"yes" on any of the questions will be required to have medical
clearance before he/she can participate.) Some criteria relative
to blood pressure readings should also be established. (For
example, anyone with a systolic blood pressure at or above 150,
or diastolic at or above 96 will be required to have medical
clearance. Anyone on blood pressure medication will be required
to have medical clearance.)
Automatic external defibrillator (AED).
The facility should
have an AED unit and require all instructors/trainers/staff members
to be AED-certified.
A staff and/or member manual provides
an excellent vehicle for providing cautions and warnings that
relate to exercise and the use of exercise equipment. The manual
offers another piece of evidence to establish that you are acting
as a reasonable and prudent person, and that you are not
Emergency Procedures Guidelines
Proper instruction and hiring competent trainers are two of the
most important ingredients for preventing liability problems, says
Rolan Ryan, owner of Exer-Fit (www.exer-fit.com), Littleton, Colo.
Establish some minimal requirements for your instructors/trainers,
such as at least a four-year degree, and CPR, first aid and AED
certification. Periodic staff meetings and workshops can also be
used to review key elements of your facility's operation.
Ryan says that the facility should be supervised at all times,
whenever it is open, because unsupervised fitness centers can
cause significant liability problems when accidents occur. He also
recommends following an emergency procedures guideline, such
as the one below, to handle extreme situations. "Although …
exactly how you handle liability should be determined by your
own legal counsel," he says.
In the event of an emergency, professional staff should do
- Make the decision to call the paramedics.
- Monitor and assist the member.
- Use a stethoscope to monitor the member's pulse.
- Provide emergency first aid.
- Keep other people away.
- Enlist the assistance of qualified people in the fitness
center, as appropriate.
- Assume complete control of the facility when help arrives,
and assist medical professionals as directed.
- Notify the fitness center director of the situation.
- Complete an emergency report.
And, the front desk staff should do the following:
- Call 911 to give the fitness center's location, indicate the
problem and stay on the phone to provide any additional information
- Pull the records for the member and give them to the
emergency professional or manager.
- Follow all directions provided by the professional staff person.