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RISKY BUSINESS
Author: Kevin M. Quinley
Parked outside the karate studio is a candy-apple red Porsche sporting vanity license plates that read “ISUE 4U.” Maybe even tightly wound personal-injury lawyers need the release of a good sparring session. Savvy owners and operators of martial arts facilities don’t need to see vanity plates to be wary of today’s litigious environment.
The lawsuit industry always looks for the next deep pocket. Some may think that they’ve found it at their local dojo. —KMQ
To paraphrase a popular bumper sticker, stuff happens.
A visitor might slip in a puddle of sweat and fall. A black belt might claim she was injured because of insufficient supervision during sparring. A white belt might allege he tripped on a poorly secured mat and tore a knee ligament. A new student might say his Rolex watch was stolen after he stored it in a locker that couldn’t be secured. A female student might file a sexual-harassment claim because an assistant instructor seemed a bit too “friendly” when he was correcting her side kick.
One accident or claim is all it takes to sink your martial arts business. And even if the claim is groundless, the costs of legally defending yourself against a frivolous suit can amount to hundreds of thousands of dollars.
Not having insurance to cover such devastating possibilities is risky to business and your personal assets.
Choose Wisely
By their very nature, martial arts facilities not only court customers but also court risk of injury to virtually everyone who steps inside. When an injury occurs, you may find yourself in court and needing the financial protection afforded by liability insurance. As a small-business owner, you must have clear specifications when shopping for insurance, the main financial tool for safeguarding your assets.
Liability coverage for martial arts facilities has two key components. One is general liability, which pertains to slips, falls and other mishaps that occur on your property. The second is professional liability, which arises from personal services—instruction, supervision and so on. As an instructor, you need coverage for both.
Since the literature put out by insurance companies may not reveal everything you need to decide if a policy is right for you, you should ask each company’s representative the following questions before becoming a full-fledged buyer: • “Can I see a sample copy of the policy?”
You probably wouldn’t buy a car without test-driving it. Unfortunately, you can’t test-drive an insurance policy. You can, however, request and review a “specimen copy” of the policy and all endorsements before deciding to buy. (Endorsements are add-on provisions that customize the coverage to your specific needs.) Invest some time in reading the various policies you request and note the differences. Enlist your insurance agent to help with technical language. If one quote is sizably lower than another, tread carefully. Sometimes policies are cheaper for a reason. Often it’s because the company skimps on service after the sale.
• “What safety and risk-management services do you offer?”
Seek an insurer that not only offers financial protection but that also helps you promote safety and risk management. Some insurers offer on-site safety visits and audits, with specific tips on how to “suit-proof ” your operation. Others will send you free newsletters with safety tips or conduct safety seminars and in-service training for policyholders. Press for details on post-sale services: Are they customized to the martial arts business, or are they generic?
• “How much is my coverage or limit of liability?”
Normally, the policy section titled “Declarations of Coverage” lists the amount of available insurance, along with the inception and expiration dates. Coverage of $1 million per loss and $3 million aggregate, for instance, means that your facility has coverage for up to $1 million per claim and up to a total of $3 million per year.
Other policies have a combined single limit, wherein the total coverage is $3 million. Whether you have one $3 million claim or six claims valued at $500,000 apiece, $3 million is the maximum the policy will pay.
• “How solvent is the insurance company?”
Your customers want assurances that the martial arts facility they join will be around to open its doors next week and next year. Likewise, you want an insurer who is around for the long haul, especially since claims sometimes surface months after the accident in question takes place.
While most insurers are financially strong, headlines show that some suffer periodic financial woes.
You can check the strength and stability of any insurance company by contacting an independent rating agency. Such groups grade insurers based on their financial strength. Make sure all the candidates on your list of possible insurers have a high rating. A cheap premium quotation does you little good if the insurer goes broke or delivers poor service because it is strapped for cash. The following insurance-company rating services are a good place to start:
A.M. Best ...................... (908) 439-2200 www.ambest.com
Demotech Inc. .............. (614) 761-8602 http://www.demotech.com
Fitch Ratings ............... (312) 368-3157 www.fitchratings.com
Moody’s ........................ (212) 553-0377 www.moodys.com
Standard & Poors ....... (212) 208-1527 www.standardandpoors.com
Weiss Research ........... (800) 289-9222 www.weissratings.com
Suggestion: Limit insurance placement to companies with the highest financial rating, which is usually expressed by the letter “A.” These are akin to the “black belt” levels of insurance companies. Avoid insurers with a “B” grade or lower. You will sleep better knowing that your insurer has rock-solid financial stability, even if the premium is a bit higher.
“Am I buying enough insurance?”
A million dollars in coverage may sound impressive, but these days when million-dollar jury awards are fairly common, you could risk financial disaster if you are under- insured. The answer to how much coverage is enough is like Abraham Lincoln’s reply to the question of how long a man’s legs should be: “Long enough to reach the ground.”
No easy formula exists to determine the amount of insurance a martial arts facility should carry. An experienced agent or broker can help answer this question by factoring in variables such as your business’ financial health, your claims history and even your risk tolerance.
Final Reminder
Once you determine exactly what endorsements you need, read the completed policy that is printed for you. If anything varies from what the insurance company’s representative told you, question it and keep careful records of all correspondence.
With a little forethought, you can design your insurance program as carefully as you would assemble a successful dojo.
And if you are willing to invest a little extra time, broader coverage and lower premiums will be your reward. ...
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