When your club sits near the beach in New Jersey, it's difficult to ignore the lure of the soft sand and the rolling waves. That's why at Karen Steinfield's Gold's Gym in Long Branch, NJ, the group exercise instructors sometimes hold classes on the beach. But they don't do so until Steinfield calls her insurance agent, Ken Reinig with Association Insurance Group, to make sure they are covered.

“A lot of insurance companies have a designated premises endorsement built into the policy,” says Reinig. “Coverage is only designated on the address shown on the declaration page, so as soon as you take people outside the four walls, you've taken away insurance coverage.”

Steinfield's conscientiousness is something Reinig wishes more owners had as clubs move beyond offering traditional services and programming to attract new clients and satisfy members. Unfortunately, a growing number of owners have added day spas, day camps, children's programming and other programs without informing their insurance agents of the changes.

“Club owners don't think a lot about the insurance ramifications of adding these new services, and they don't find out they don't have coverage until it's too late,” Reinig says. “Most insurance companies have exclusions for things, specifically physical therapy, piercing of the body (injections, tattooing), microdermabrasion — and they are very common [offerings] these days at health clubs.”

Even an insurance company that offers broad coverage will want to know of changes in programs and services, says Cheryl Meyers, underwriting manager for recreation and entertainment at K&K Insurance, a broad coverage insurance provider. Unless something is specifically restricted in the policy, K&K Insurance often will cover a claim although they always prefer to underwrite the exposure, says Meyers.

“The measuring stick shouldn't be what carrier they are with and whether they are a broad coverage provider or restrictive,” says Meyers. “It should be, ‘What do I have, and what do I need to inform them about when I change things?’”

Open and Upfront

Communication is the key.

“We find we have a better relationship when communication is more open, and we can be more helpful when they are upfront,” says Meyers.

Steinfield talks to her agent about once a month, and almost every year prior to renewal a field rep visits her facilities to do a risk assessment.

Stephen Priest, co-owner of Ms. Fitness in Fountain Valley, CA, also keeps in close contact with his agent, calling the company whenever he considers adding a program or service.

“I do like to run it by the insurance company to get their pros and cons, their past experience and lawsuits that come along with these programs and services,” Priest says. Based on these conversations, Priest has chosen not to implement some programs — mostly contact classes that involve gloves and punch bags.

The open communication and good relationship with his insurance company has helped Priest explain to members why his club doesn't offer certain classes they want. He can simply show them a letter from his agent stating that the class would not be covered or stating that it would be costly to cover. A letter from the agent stating that the insurance company wouldn't cover the club's group fitness instructors unless they were certified also helped Priest ensure his instructors earned their certifications.

At this time, Priest hasn't had any claims that haven't been covered by his insurance company, he says, including an incident where a member broke her ankle in the parking lot and sued the club for $25,000 in addition to the medical bills covered by the club.

“Owners don't know how members can turn,” says Priest. “They say good things to you and when something happens, they turn. It's the attorneys that force the members to make a mountain out of a mole hill.”

Club owners often don't inform their agents of changes because they just don't think about it, Reinig says. However, sometimes an owner might “forget” to say something for fear that their premium will increase. In reality, adding coverage often costs less than an owner thinks — sometimes it's even free.

Adding massage coverage costs about $300 more per year while adding physical therapy costs under $500 per year, Reinig estimates. That's not much considering Steinfield pays between $12,000 and $16,000 each on her 20,000-square-foot facilities, not including workers' compensation.

“The add-on is such a small amount,” Priest says about coverage for new programs. In fact, he removed day care from his facility two years ago, and it only saved him $200 per year on insurance.

“It's so minimal [to pay for the coverage],” says Priest. “It just takes one lawsuit without coverage and your business is over.”

Often, the uncovered exposures come from businesses working within the clubs but not owned by the clubs. Fifteen percent of the clubs that Association Insurance Group insures have arrangements with a chiropractor, massage therapist or physical therapist. Chiropractors and physical therapists are two of the exclusions at K&K Insurance, says Meyers.

Because these businesses often are independent contractors, club owners mistakenly think they don't need to inform their insurance company about the business, says Reinig, “but they fail to remember that anything that happens within their four walls falls on them.”

These businesses should carry their own insurance, but even so, a club owner needs his or her own coverage for these arrangements. The coverage often comes in the form of an endorsement added to the policy. Endorsements don't generally cost any more; they just put the insurance company on notice that it would be in a secondary position if the other business' policy lapsed, says Reinig.

The trickier matter is when two businesses have the same owner/operator, such as a combination health club and physical therapy business, Meyers says. Few insurance companies will insure these types of facilities.

“There, you've meshed two industries together,” she says. “The medical industry doesn't want to [cover] the recreation side and vice versa.”

Club owners must be more aware of what their policy covers.

“Some clients don't read their policies, and they may stick them in a file in the drawer,” says Meyers. “If you are with a carrier that is restrictive and has tightly controlled the box that they want to insure, there could be a problem when a loss occurs.”

In the end, it's better to be informed about policy coverage and to keep the insurance company informed about what needs to be covered, says Meyers. Openness and honesty can keep most facility owners from a rude awakening should a claim occur.

Sports Participation and Injuries, United States, 2004
Sport or activity Participants Injuries
Basketball 27,800,000 561,444
Boxing 700,000(a) 12,053
Exercise NA 192,998(b)
Martial Arts 4,700,000 25,680
Racquetball, squash and paddleball 2,500,000(a),(c)
Swimming 53,400,000 174,898(d)
Tennis 9,600,000 21,779
Volleyball 10,800,000 56,029
Weight Lifting 26,200,000 70,381
NA — data not available
(a) — participation for 2003
(b) — includes exercise equipment (43,117 injuries) and exercise activity (149,881 injuries)
(c) — includes racquetball participation only
(d) — includes injuries associated with swimming, swimming pools, pool slides, diving or diving boards, and swimming pool equipment.
Source: National Safety Council. Participants — National Sporting Goods Association; figures include those seven years of age or older who participated more than once per year except for bicycle riding and swimming, which include those who participated six or more times per year. Injuries — Consumer Product Safety Commission; figures include only injuries treated in hospital emergency departments.

Insurance Sources*

*Based on companies listed in the Club Industry's Fitness Business Pro 2006 Buyers' Guide.