From fraud and sexual harassment to bullying and exposure to creditors, social and sporting clubs face a long list of potential risks. Insurance & Risk Professional looks at the dangers clubs face on a daily basis, and the types of policies that are most appropriate.
The role of social and sporting clubs is embedded in Australian culture. From providing the opportunity to partake in a variety of sports to being the social hub of a local community, these clubs serve an abundance of needs.
That means, however, they also face an abundance of risks. And not only do their insurance policies need to cover them against those risks, but they also must cover the current valuation of the club and the payroll. Risks often overlooked by clubs include sporting injuries, the management of workers’ compensation claims, occupational health and safety (OH&S), the operation of gaming machines, coverage for the actions of contractors – such as security and cleaners – and hiring out the club venue for functions and other activities.
“Whether the club owns and operates its own games machines or operates them on behalf of a third party, both scenarios carry specific risks,” says Steve Gilbert of Melbourne-based Sports Underwriting Australia. “Often clubs are required to extend their liability policy to cover the full value of the machines under a ‘Goods in Care, Custody and Control’ extension."
According to Gilbert, a number of clubs – particularly those that have a sporting aspect – often overlook critical parts of their liability coverage.
“Many policies exclude or restrict participation cover, which will affect how the policy will respond to claims arising from participation in the sport,” he says. “When considering professional indemnity coverage for a sporting risk it is important to ensure bodily injury is not excluded. Personal accident policies also vary significantly in terms of who is insured and what activities the policy will respond to."
Vince Richardson, Manager at JLT in Albury, NSW, says JLT spends a lot of time with clubs working to reduce the impact of workers’ compensation claims. “Workers compensation premiums can blow out enormously if not closely managed,” he says.
Occupational health and safety (OH&S), fines, penalties and investigations are areas that are often overlooked when forming a policy. He cites long work hours dealing with intoxicated patrons, armed hold-ups and exposure to smoking as some of the OH&S risks.
“The sort of fines and penalties that clubs can be exposed to range from breaching OH&S, liquor and smoking laws, and investigations arising from breaches can be costly,” says Neil Sheppard, Manager at ProRisk. “Failure to correctly handle investigations can lead to significant consequences to the club. Some management liability policies provide cover for the legal costs of investigations.”
When considering professional indemnity coverage for a sportIing risk it is important to ensure bodily injury is not excluded. Personal accident policies also vary significantly in terms of who is insured and what activities the policy will respond to.
Welcome on board
When people accept a position on the board of a sporting or social club, they need to be aware of their responsibilities and the possibility that their own assets could be exposed.
According to Gilbert, “Management Liability policies have lots of bells and whistles, but in my view the common and most important risks are directors’ and officers’ liability, entity liability and employee crime,” he said.
JLT’s Richardson says that at the heart of developing a good policy is to have a current valuation for the club assets and to establish good risk management practices.
“It is important to review business operations every year to ensure that the policy provides adequate insurance for gross profit, payroll and the increased cost of working. It is also critical that the indemnity period must be adequate,” he says.
“It is important to provide risk management training in-house for club managers and staff to create risk awareness and establish effective procedures.”
Often-overlooked risks
• A long-term employee of a country golf club, who was familiar with the internal controls of the club, was able to take small amounts of money over a period of time. The employee often worked behind the bar unsupervised and managed to pocket takings without being detected. Management eventually became suspicious and hired an investigator.
Shortly after, the employee confessed to her crime and further investigations revealed that this had been taking place for nearly two years and totalled over $20,000. The Management Liability policy covered the losses to the club, who then sought recovery against the employee. However, the employee had used the money for gambling and there was very little left.
• A suburban Sydney RSL Club and its manager were both sued by an employee who alleged that they did not protect him from being bullied by fellow employees. The employee claimed that, despite complaints, nothing was done to prevent the bullying and that as a result he was humiliated and nolonger able to work.
Although the directors of the club were not aware of the bullying, the manager and club were both found liable for not providing a safe work environment. The club’s Management Liability policy covered the legal costs of $25,000 and damages of $50,000.
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