by Darrow Milgrim, Certified Insurance Counselor
An insurance policy is a complex legal document that only your insurance
broker, attorney or astrologer seems to understand. Few camp directors
have an understanding of their policies, or even what's covered or not.
I'll attempt to walk you through some of the minefields of legalese,
exclusions and limitations and provide some guidelines, checklists and
questions to assist you and your team of advisors.
Before we begin, a generalization of the purpose for insurance is in
order. Note, insurance is only one part of your risk management process.
It is the transfer of risk to a deep financial pocket. Other risk management
methods are avoidance, modification of activity, or retention of risk.
Since insurance companies charge a risk premium over and above expected
claims, there are three reasons to purchase insurance:
- You can't afford the potential financial loss.
- It is useful to have a third party handle claims.
- An underwriter's estimate of loss is usually lower than your own.
Begin by addressing the big issues in your insurance program:
- Don't risk more than you can afford to lose.
- Don't risk a lot of exposure to save a small premium.
- Consider the odds of an occurrence.
- Don't spend a lot for a little protection.
Critical to these issues are the need to identify the risks, evaluate,
reduce or avoid them, then transfer to insurance the remaining risks.
Commercial General Liability (CGL) policy
The Insurance Services Office, Inc. (ISO) has developed standardized
policy forms that are used by the majority of insurance companies today.
However, not all insurance companies follow the same procedures, use identical
forms or even the current edition. I've used ISO's 1996 Commercial General
Liability (CGL) policy edition for this article. It's the most current
form and has been adopted by the majority of State Insurance Departments.
Let's look at the key components of the CGL and highlight the most critical
issues with some relevant comments. The first step in understanding your
insurance coverage is to read your policy carefully. This is a legal document
that cannot be assumed to cover everything. For that reason you have a
responsibility to review it carefully. An insurance contract provides
great protection for an insured within the covered insuring agreements.
Where the agreements are unclear, courts usually side with the insured,
since the insurance carriers should know better. This is legally called
a "contract of adhesion." A CGL policy provides the money to
fund your legal obligations that are covered in one of the insuring agreements,
and, in addition, it provides a defense for those items covered by the
policy. Let's now review the policy.
First, there are two versions of CGL policies. One applies on an "Occurrence"
basis, the other a "Claims Made" basis. Both policies cover
liability arising out of an occurrence. The "occurrence" policy
covers liability for occurrences which take place during the policy period,
regardless of when it is first reported. Thus you will still be covered
10 years from now when the seven year old injured at camp last summer,
while you were insured under an occurrence based policy, decides to pursue
a suit against you. On the other hand, "claims made" policies
cover liabilities from claims made only during the policy period. Naturally,
the "occurrence" type of policy is desired, if available.
Both versions include the following:
- Declarations, which include the names of all insured parties plus
their dba's and address (the first named insured is the only party who
will receive all notices, premium statements, and who may cancel a policy);
the policy period; coverages to be provided; endorsements attached;
- Conditions include terms of cancellation, changes, examination of
your books and records, inspections, surveys and premiums.
- Specific Coverages include separate declarations, coverages and conditions
sections. The coverage part is divided into five sections, with three
Section One Coverages
Coverage A: Bodily Injury and Property Damage Liability. Highlights
of the insuring agreement are that the carrier will "pay those sums
that the insured becomes legally obligated to pay as damages to which
the insurance applies. They will have the right and duty to defend the
insured against any suit. They have no duty to defend you against any
suits seeking damages to which the suit does not apply." Since this
is such a broad grant of coverage, exclusions are listed, either because
the hazards should not be insured or are more appropriately addressed
under another type of policy. Some exclusions are:
Expected or intended injury. It is against public policy to insure
one who would intentionally injure another. A CGL does cover injury that
is a result of reasonable force to protect persons or property.
Contractual liability. Your policy will cover an insured contract,
which is defined as a lease of premises; side-track agreement; easement
or license agreement; obligation to indemnify a municipality; elevator
maintenance agreement; or that part of any other contract or agreement
pertaining to your business under which you assume the tort liability
of another (which is that liability which would be imposed by law in the
absence of any contract or agreement). Your CGL does not cover other types
Liquor Liability. Required if you are in the business of manufacturing,
distributing, selling, serving or furnishing alcoholic beverages. Coverage
usually exists for social hosts who provide alcoholic beverages at no
Workers' Compensation. Covered under a separate Workers' Compensation
Employers Liability. Covered under most Workers' Compensation
Pollution. The CGL provides coverage for pollution from heat,
smoke or fumes from a hostile fire (one which becomes uncontrollable or
breaks out from where it was intended to be). Other pollution coverage
requires a separate policy.
Aircraft, automobiles or watercraft. These should be covered under
a separate policy, except watercraft while ashore on your premises, or
that which you do not own that is less than 26 feet long.
Mobile equipment. Consider separate coverage, specifically while
being transported or involved in racing, speed, demolition or stunting
War. Can't assume this coverage.
Property damage to property you own, rent, occupy, sell, give away
or abandon. This includes personal property in your care, custody
or control. The insurer doesn't want to pay you when you damage your own
property. This can be covered under a property policy.
Other exclusions include: Damage to your product, work, impaired property
or property not physically injured, or recall of products, work or impaired
Coverage B: Personal and Advertising Injury Liability. Personal
injury is "injury, other than bodily injury, arising out of false
arrest, detention, imprisonment, malicious prosecution, wrongful eviction
from or entry into or invasion of the right of private occupancy of a
room, dwelling or premises that a person occupies by or on behalf of its
owner, landlord, or lessor. Oral or written publications that slander
or libel a person or organization or disparage their goods or services
or violate a person's right of privacy." Advertising Injury includes
"misappropriation of advertising ideas or style of doing business,
or infringement of copyright title or slogan."
This coverage also has its exclusions, including:
- Personal or advertising injury if publication is done with knowledge
of its falsity, or
- First publication took place before the beginning of the policy period,
- Arising out of the willful violation of a penal statute or ordinance
committed by or with the consent of the insured, or
- For which the insured has assumed liability in a contract or agreement.
- Arising from pollutants at any time.
Advertising injury further excludes breach of contract, failure of
goods, products or services to conform with advertised quality, performance,
or the wrong description of the price of goods, products and services.
Coverage C: Medical Payments. "Insurance will pay medial
expenses for bodily injury caused by an accident on premises you own or
rent, or because of your operations. Expenses must be incurred and reported
within one year of the date of accident . . . These payments are made
regardless of fault, and will not exceed the limit of insurance."
Primary exclusions in this section are treatment to any insured, employee
of the insured, person normally occupying premises of the insured, or
a person taking part in athletics. For these reasons separate Camper Accident
insurance is recommended.
Your insurance carrier provides supplementary payments under coverages
A and B with respect to a claim or suit they defend. The supplementary
payments will not reduce the limits of your insurance.
Section Two Who Is an Insured
Depending on your organizational structure, the insured will be an individual;
partnership or joint venture; limited liability company or corporation.
Section Three Limits of Insurance
Limits are stated for each coverage. There is a limit for each occurrence;
a separate products and completed operations aggregate limit; fire damage
limit for property in your care, custody or control; and the general
aggregate. The general aggregate is the most that will be paid for
damages under coverages A, B and C combined. The fire damage limit as
well as the aggregate can and should be increased based on the exposure
Section Four Commercial General Liability Conditions
Most noteworthy are:
Prompt notification to your carrier of an occurrence or offense
which may result in a claim.
Premium Audit. You must keep records of
information needed for premium computation.
Representations. You must have been truthful in your application
and provided complete descriptions of all operations. The policy was
issued based on this and it should be reflected in the policy
Declarations. Some insurance carriers may void coverage if you fail
to disclose all hazards; others won't if the error was unintentional.
Is this important? How serious is the claim . . .
Transfer of rights of recovery against others to us. You must
do nothing after a loss to impair the insurance carrier's right to recover
payments that may be due them from others.
When we do not renew. Requires insurance company to give you
at least 30 days notice of non-renewal before the expiration date.
Section Five Definitions
The Definitions define all of the key terms in the policy. Should litigation
become necessary, these are the terms that will govern the interpretation
of the policy.
Now that we've reviewed the CGL insurance contract and primary exclusions,
what are the practical considerations that a camp director must look at?
- What are the special exclusions or limitations found in many camp
liability policies and can you do anything to modify them?
What exposures are generally not meant to be covered in a CGL?
Program Activities Be sure to have these specifically covered
on the liability declarations or by endorsement to the liability coverage
section when excluded:
- Athletic participants
- Adventure, high ropes, wilderness and survival programs
- Watercraft, whitewater rafting and kayaking
- Underwater activities, SCUBA, snorkeling, and skin diving
- Saddle animals
- Trampolines and rebounders
Asbestos, Lead and Pollution Liability from these
exposures is almost always excluded.
Employment Practices Exposures from refusal to employ,
wrongful termination, discipline, defamation, harassment or discrimination
are normally excluded. Coverage is now available through a supplement
Employment Practices Liability policy.
Medical Malpractice Excluded under Section II of the CGL.
Therefore it is necessary to add endorsement to cover physicians,
nurses, EMTs and other medical professionals, whether paid or volunteer.
Mobile Equipment and Mobile Recreational Vehicles Tractors,
golf carts, forklifts, ATVs, snowmobiles, etc. should be separately
scheduled and endorsed onto an appropriate policy.
Products Athletic or gymnastic exercise equipment designed
or modified by you or others to your specifications are often excluded.
This usually may be "bought" back or separately insured
if the exposure exists.
Professional Liability for Camp Directors Wrongful Acts
Excluded under Section II of the CGL. This, like the Medical Malpractice
above, must be separately endorsed onto your policy in order to have
Punitive Damages Normally excluded since their purpose
is to punish the entity and/or individual who has committed "outrageous
conduct" and to deter others in the future. Lawsuits today often
ask for punitive damages even when claims for the actual damages are
Sexual Abuse and Molestation Many policies either exclude
or are silent about this. Unless specifically addressed, an allegation
of abuse may be interpreted to be an "intentional act" and
thereby excluded or covered under a "reservation of rights"
by the carrier. Look for a policy that clearly addresses the coverage.
Read the insuring agreement, exclusions and consider defense costs
as part of the appropriate policy limit.
Volunteers Often excluded, but may be added as additional
insured by endorsement.
What limits should you carry in your CGL?
Directors and Officers Liability Covers members of the Board
of Directors of a Corporation as well as the entity for actions or
inactions and wrongful acts as a board member. While there is limited
federal protection for members of nonprofit boards, you can still
be sued! Defense costs are often considerable, even if no damage is
Employee Benefits Liability Provides coverage for errors
and omissions in the administration of employee benefit plans. With
the ever-increasing requirements, it's possible to forget to add an
employee to your medical plan or give them timely notice of COBRA
Environmental Liability Since this is completely excluded
under the CGL you must consider a separate environmental liability
policy to cover exposures from underground storage tanks, septic systems
or other hazardous waste.
ERISA/Fiduciary Liability Law designed to protect workers
from loss of their employee benefits and pensions. Fiduciary coverage
is available for fiduciaries of employee benefit plans who are otherwise
personally liable for their imprudent acts or omission in the management
of the plan assets or administration of the benefit program.
Fidelity and Crime Employee dishonesty, forgery, robbery,
burglary, computer fraud are all available as optional coverages.
Discuss exposures and coverage needs with your insurance professional.
Others include: automobile, property, equipment breakdown
and personal coverage (homeowners, auto, watercraft, RVs, umbrella
This must be determined by what you have at risk financially. What is
the obligation to your clients? How do you discourage those looking
for deep pockets? What is available and affordable? What activities
do you offer or provide, and what is their catastrophic potential? A
minimum of $1,000,000 primary general liability and $2,000,000 to $5,000,000
of umbrella liability coverage would seem appropriate for most camps.
Today, policies of $25,000,000 to $50,000,000 of liability limits are
readily available and no more costly than a $5,000,000 limit. How bad
is the loss . . . how much can you afford?
What services should your insurance carrier offer?
What are A.M. Best Ratings?
- Underwriters knowledgeable of camp operations and exposures.
- Coverage tailored to the camp's unique exposures.
- Risk management and loss control assistance, understanding camps
needs in the areas of fire prevention, product safety, fleet vehicle
safety, employee safety, emergency preparedness planning and crime
- Educational workshops, bulletins and videos geared to the camping
- Claims management and adjusters competent in handling youth recreation
and recreational claims.
- Property survey and property valuation
- Comprehensive coverage.
- Competitive pricing.
Highly respected opinions as to the relative financial strength
and performance of insurance companies. Their letter ratings are a quantitative
and qualitative evaluation of a companies financial strength of performance
(A to F). The Roman number rating reflects the comparative financial
size of their capital, surplus and reserve funds (I XV). What should
your carrier have? We recommend a minimum of B+ (Very Good) and financial
size class at least VI ($25,000,000 to $50,000,000).
How do I compare coverage?
Use the checklist on page 10 to assure coverage for catastrophic
exposures. Don't trade limited coverage for price. You want the coverage
when the unexpected happens.
Can you save money without cutting
coverage? This rarely applies to liability coverage. Something too cheap
usually leaves big gaps. Your camp's individual and the industry's combined
experience will have a significant impact on premiums. Group purchasing
power may assist in containing premiums.
Darrow Milgrim is a Certified Insurance Counselor and
one of the owners of Speare Insurance Brokers, a full service property,
casualty and employee benefits broker in West Los Angeles, California.
Currently he serves on the Executive Board of the California Collaboration
for Youth and the State Camping Advisory Council. He was formerly National
Legislative Liaison as a membe