Preparing for the 2011 Summer Season

An Interview with Robert Monaghan of Hibbs Hallmark Insurance Agency, an ACA Business Affiliate
February 2011

Q: Summer will be here before you know it and new activities are emerging at camp, such as “barn swinging” or “slack lining.”* While these activities might be “fresh” and exciting programming options, what are the insurance implications of offering such activities, and what are some of the things a camp needs to consider before adding these kinds of activities?

A: With any new camp activity, you need to consider insurance implications. In fact, in most all situations when a camp applies for insurance, they are required to fill out a very detailed application that asks about all of their activities, programs, buildings, etc.
Introducing emerging activities raises questions about safety for insurance companies. Who will be supervising the activity? How will the supervisor be trained? How will the camp maintain the integrity of the equipment used? How will the camp ensure the equipment is only used under appropriate circumstances (un­der supervision and in the locations for which it is designated)? Basically, what are the operating procedures for the new activity?
Often when insurance companies are unaware of what exactly a new activity will entail, they “Google” it and/or search for it on “YouTube.” You can imagine the types of extreme videos they find on virtual show-and-tell sights: slack lining across a rock formation in the Moab Desert, for example. Needless to say, these wild and crazy images are not endearing to insurance companies.
To negate this, you should be prepared with answers to your insurance company’s questions before you submit new activities on your insurance application. Plan ahead, do your homework, and determine what actions you need to take to really make the activity safe at camp.
Determine how staff will be trained, how the activity will be operated, and how you regulate against unauthorized use. For example, with slack lining, it is important to have spotters for the participants when they are walking the line. Have a plan for where this activity will be allowed, as it is important to have the appropriate surface underneath the slack line. You should also assure the insurance company that you will set up the line at an appropriate distance from the ground (less than eighteen inches) between two trees. As slack lines are portable, education as to where/when they can be used is critical. With many activities, it is important to also have a plan for secure equipment storage in order to keep it from ending up in the wrong hands (who just might want to set it up over a ravine or other dangerous location)!
After considering the safety implications, and appropriate steps to take to minimize risk, you might be wary of integrating new activities, or you might decide that the cost to reproduce them safely just does not outweigh the benefit at the moment for your camp. It’s important to think of these things before you start mak­ing major adjustments to your camp and its facilities.
If you have these operational guidelines in place before you call the insurance company to inform them of your new activ­ity, your insurance company will be more likely to approve your activity faster.
And don’t forget that you need to alert your insurance com­pany whenever you add a new activity — not just one that might be considered extreme. If you get a new element for your ropes course, alert your insurance company. It might not end up being a big deal, but make sure your insurance company knows.

Q: With H1N1 seemingly under control last season, what factors might camps weigh when deciding on pandemic insurance coverage?

A: Pandemic and contagion insurance are somewhat new in the insurance world. Companies are just now starting to roll out pandemic and contagion policies, usually called “communicable disease or outbreak” policies.
These policies pay extra expenses, and in some cases, loss of income related to your camp operations being shut down due to things like H1N1, Anthrax, etc. What triggers the policy is camp/ site being shut down by an authority. The authority is usually the CDC or the state.
However, the effectiveness of this kind of policy is question­able. For example, last season, two or three camps voluntarily shut down after being in communication with the CDC regarding contagious outbreak. But because the CDC never “demanded” the closures, and the camps shut down voluntarily (although under the advice of the CDC), the camps had no claim and the policy was never triggered.
So even though this kind of coverage is now available, there really isn’t a good solution for a pandemic — the CDC must shut down a camp, and they have not yet really embraced that role. In addition, property insurance, which can cover of loss of in­come and extra expense, does not cover communicable diseases. Property insurance and the business interruption you can add on is for property-related claims, such as fire, lightning, hail, wind etc.
One solution might be to require or suggest that parents buy tuition reimbursement insurance. Usually the policy covers about ten defined reasons for cancellation, and pandemics are included in newer versions of these policies. With these policies, parents will be rewarded what they are not refunded by the camp if a cancel­lation occurs. In turn, the camp will be rewarded the percentage of tuition that they deemed “non-refundable” to parents in the camper agreement.
However, this creates a challenge for camps to consider in their camper agreements. If, for example, your camper agreement states that parents will be refunded 90 percent of the tuition they pay, you will only receive the 10 percent of the tuition you retained as a non-refundable deposit. So the only way for the camp to cover their expense and/or loss is through the non-refundable deposit wording in their camper contract.
As a director, you may have to have a really tough refund policy if you want to be reimbursed by the insurance company for the lost tuition. That doesn’t fair too well sometimes with Mom and Dad. While you want to be generous to parents with your cancel­lation policy, you also want to make sure you can be made whole for any expenses you incur.
A third way to cover pandemic risk is with an event cancellation policy. Event cancellation coverage is usually for expensive events like conferences and other large gatherings. If for some reason (including pandemics) an event is prevented from happening, the insurance company covers the expenses for the event. This sort of route is tricky as well, since the event site would have to be closed by a written authority as well.
Ideally, a new policy will be developed that is similar to the new communicable disease and outbreak policies, but doesn’t require the camp to be shut down by an official authority

Q: What aspects of a camp business does contagious outbreak insurance cover (cancellation of sessions, loss of business, etc.)?

A: Right now there are only a handful of insurance policies covering this risk. Some pay for extra expenses you incur, while others pay for loss of revenue up to a specific limit. The outbreak insurance offered stand-alone does not pay loss of revenue. It pays a flat amount per day. Camps can use that to clean the facility, or take the money and use it for loss of income. It pays a specified amount of money for a specified number of days — typically, the higher the daily payout, the fewer number of days a camp will receive money. Some of the forms that provide loss of revenue will have a waiting period rather than a deductible. Often the waiting period is seventy-two hours.
In general, business interruption coverage has a waiting period of seventy-two hours. They will not cover any loss of revenue dur­ing the first seventy-two hours. A camp could easily lose revenue during the waiting period. It’s often recommend that camps “buy back” the waiting period to twenty-four hours.


Q: What do you feel a camp director should know about “cancellation” insurance (from the perspective of the parents cancelling the camp experience)?

A: Currently, there is not a really good policy designed to cover a case where a parent decides to cancel their child’s camp experience. The contract, or camper agreement, is really the only place to es­tablish loss mitigation . . . and as discussed earlier, it can get yucky.
The question then becomes, “how do I protect myself without upsetting the parents?” Many camps use a payment installment system, where a 25 percent tuition deposit is due a few months prior to camp; then 50 percent is due approximately one month before camp; and finally, tuition is paid in full two weeks before camp. This type of payment system usually is accompanied by a policy that states parents will receive a 25 percent reimbursement if cancellation occurs less than two weeks prior to camp. That way, parents don’t risk losing all but 25 percent of their payment if they need to cancel long before the session starts.
These percentages are just an example. One of the reasons your cancelation clause will be important is if the parent does purchase tuition reimbursement coverage, in the event of a covered loss, the insurance company will only pay what was not refunded by the camp. This is a good solution to make the parents whole; however, it may not make the camp whole if your non-refundable deposit is too low.
The same delicate balance put in place for parents in camper agreements needs to be present in contracts with rental groups. If a camp is told that 180 people are coming, and then only half show up, the camp loses money on those missing attendees and the food they’ve bought. A rental group contract must require the group to pay for a minimum number of people. Also consider that if groups cancel two or three weeks before a session, a camp may be refunded $2,000, but it loses a lot more in potential revenue. The only way to address this is in your contract.

Q: What are some key points a camp director might need to know about “loss of business” insurance and what typical scenarios might prompt a claim to be filed?

A: The number one cause for loss of business is power outage. Next in line are telecommunication, IT, and human error. Natural disasters like fire, lightning, or extreme weather are less frequent but often more severe.
Loss of income and extra expense coverage are endorsements that can be made part of a property insurance policy. To trigger loss of income and extra expense coverage, there must be a covered loss to covered property. The loss of income coverage would have a waiting period of seventy-two hours, so it would not pay loss of income for that first seventy-two hour period. The extra expense coverage does not have a waiting period or deductible. Often camps sustain income loss due to a power outages off-premise. In those situations, in order for the policy to respond, you would need to add an endorsement for off-premise utility service disruptions.
The surprise with loss of income coverage is that, while there is not a deductible, there is a waiting period — often seventy-two hours — which means the insurance does not cover any loss revenue for the first seventy-two hours after an event. But as pre­viously mentioned, it is possible to buy that waiting period down to zero or twenty-four hours. The other surprise is that you have to document your loss of revenue. Often this requires submitting financial statements for the past several years. We recommend purchasing loss of business income and extra expense coverage so that you have a choice in the event of a loss. One can decide either to shut down operation and claim loss of revenue, or in most cases, the camp decides to use the extra expense coverage to secure temporary buildings and continue operations.
When cash is needed, you can get a check in advance on extra expense coverage. For example, if your camp were to suffer from a devastating fire, you could use the extra expense money without delay to start setting up portable facilities, phones, bathrooms, etc. Extra expense coverage is really important because it helps you stay open.

Q: What are some emerging issues that you see for 2011?

A: I think the contracts a camp uses to rent to an outside group and with camper parents need to be reviewed by an attorney. Some camp contracts I’ve seen recently are way out of date on their cancellation clause, and are in need of a venue clause.
Also, be cautious when selecting vendors. I know of a camp that had extreme flooding in their administrative office building after a shoddy re-roofing job and couldn’t be reimbursed for it. This particular camp had hired a contractor who presented a certificate of insurance indicating he was insured. In reality, he was only insured for residential roofing, not commercial. The camp’s insurance company wouldn’t pay for the damage because contractor negligent work caused the loss. The contractor’s insurance company wouldn’t pay for the damage because they weren’t insuring the contractor for commercial roofing. Now the camp’s only recourse is a legal battle with the contractor and his insurance company for reimbursement, and it is sure to be long and painful.
In these difficult economic times, some contractors may be tempted to stretch their job descriptions in ways they are not qualified for in order to get more work. In this particular situation, the camp had followed procedure and done everything possible. Be sure to check references whenever you hire a contractor, and don’t hesitate to call the insurance agency and verify that the contractor is covered for the job he or she is going to do.
*Editor's note: Slack lining is a balance sport that uses nylon webbing tensioned between two anchor points.