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A lot may have changed for your fitness center in the past year, and that may affect your insurance needs. Here are some tips to heed when you perform your year-end insurance review.
Most fitness center owners and managers don't give their insurance policies a second thought - until they have a claim and find out they aren't completely covered. No one likes to dwell on the intricate details and fine print of an insurance policy, but, as time goes by and your facility changes, it's important to make sure that your insurance policy reflects the current state of your business. You should review your policies at least once a year, and December is a great time - before the New Year's resolution crowd floods into your facility and takes up all of your time.
It's a good idea to get your risk management director involved in the process. He or she needs to know the limits of your policy and what to do to decrease potential claims. Lisa Dreiling, director of benefits and risk management for Wellbridge, Greenwood Village, Colo., says, "Our insurance claim reviews occur at the corporate level. The executive team and I complete quarterly reviews of all claims above a certain monetary threshold, and discuss the claims with our adjusters. This allows us to make decisions while everyone is in one place, focused on one matter. We review all policies once a year, including casualty and executive liability insurance."
Andrea Pugliese, president of Andrea Pugliese Insurance Services, Warrington, Pa., says, "If you are concerned at all about your coverage amounts, you can always purchase additional umbrella coverage for those unforeseen circumstances. We typically write a $1 million-per-occurrence policy with a $3 million aggregate."
Just because you use a 1099 form instead of a W-2 for a staff member does not mean you are in the clear in case of a lawsuit. Many states argue that if the fitness center is setting appointments, schedules and dress codes, it is engaging in an employer/employee relationship. If you wish to avoid covering all of your contractors, you need to have an up-to-date copy of their certificate of insurance, as well as a signed waiver that clearly states that the contractor understands that he/she is not covered by the fitness center for any liability or worker's compensation issues.
Unfortunately, many fitness professionals do not realize how devastating a lawsuit can be. Todd Galati, spokesperson for the American Council on Exercise (ACE), San Diego, Calif., says, "ACE recommends that all fitness professionals carry their own professional liability insurance, even if they are an employee of a club. Often, they may change clubs mid-year, or work in several facilities at once, and it's possible for there to be a gap in coverage. This could be disastrous."
If your staff members question you about the necessity of insurance, tell them that you have their best interests at heart. One lawsuit can destroy their entire life. It's a good idea to renew the contractor waiver each year, just as a reminder that these staff members are not covered by your policy. This also applies to massage therapists, day spa operators and any other contracted personnel working on the premises.
Most property insurance policies contain a coinsurance clause that can spell big trouble if you aren't insured for the proper amount. A coinsurance clause is insurance for the insurance companies. It states that you must insure for at least 90 percent of the full replacement value of the entire building and its contents. If you make a claim and an adjuster finds that you have underinsured, even by a just little bit, you can be severely penalized. "For example," says Reinig, "say you have a water damage claim for $50,000 and you are insured for $200,000. You figure, no problem. But, if the full replacement value of your property is actually $400,000, then, by the coinsurance clause, you are 50 percent underinsured. So, the company penalizes you by agreeing to pay only 50 percent of your claim, and you end up with a check for $25,000. Most property policies are relatively cheap, on average just $300 for $100,000 worth of coverage. It's very important to insure for the full replacement cost, and review those costs every year. Too many people just don't understand coinsurance until it's too late. One bad claim can financially ruin a health club." Replacement costs change constantly with the cost of materials and transportation. Talk with your broker or agent to be absolutely sure your coverage amounts are accurate and up-to-date.
Make sure you have a certificate of insurance from every outside company or contractor who conducts a special event at your facility, from Red Cross blood drives to flu shot clinics. The certificate should name your fitness center as an additional insured. Also, you should provide the same proof of insurance to any outside venue you attend - high schools, civic centers, municipal functions, etc. Most insurance companies do not charge extra to cover general fitness activities off-site - you just need to notify them ahead of time. Never transport anyone to or from an event, and have all participants sign a "special function" waiver any time they step outside the facility for an activity.
Also, check your policy to make sure you don't have a "designated premises endorsement." This requires all covered activities to take place on the designated premises. If someone gets hurt walking to a special outdoor class, you might be denied coverage.
Written by Julie Anne Eason