"The only time we hear from people is when they have a problem," says Wes Brandt, Tampa Bay Area Vice President of Gallagher Hospitality Services, a division of Arthur J. Gallagher & Co., the Itasca, Ill.-based insurance brokerage and risk management services firm.
As Brandt's comment attests, it's easy to take club insurance coverage for granted, especially if you've built up a long-term working relationship with the same broker and have never filed any major claims. But even the strongest ties to the best brokers in the business won't automatically ensure that everything will run smoothly and as expected, if and when that "problem" does occur.
The unfortunate fact is that these days, in our increasingly litigious culture, there's really no such thing as too much protection. One determined member or guest who slips on a wet entrance stair can still cause a complacent club to face a lawsuit of crippling dimensions. Are you absolutely sure your insurance is ready to cover the full extent of all potential costs?
Natural disasters also have a way of causing irreparable damage to a club's financials. Greensburg Country Club in Pennsylvania found that out the hard way. A double whammy of tornado damage in the 1980s and a 1999 fire that destroyed much of the clubhouse combined with an aging and declining membership and some difficult years for the golf business in general to finally bring the club to its knees.
Last August, Greensburg filed for Chapter 11 bankruptcy protection, and it has survived into 2005 only because a few wealthy members paid off creditors in an effort to save the club. Now those members have brought in outside management and are trying to reinvent the club with a family atmosphere. The story may yet have a happy ending, but would the situation have been less dire if the club had been able to lessen the impact of the natural disasters? Perhaps.
According to Brandt, there are several areas where clubs are simply not optimizing their potential for speedy and satisfactory claims processing. By paying special attention to the details, he feels, a club can truly minimize financial hardships from insurance-related situations, rather than just survive.
Making "Adjustments" in Advance
The past year's hurricane season, which affected nearly everyone in Florida, offered a particularly strong refresher course in this subject. Recognizing the high-risk area that it is, nearly everyone in Florida had insurance to protect against hurricane-related damage. But did everyone receive prompt attention from an insurance adjuster? Absolutely not. Some businesses didn't see adjusters for upwards of six months, because there simply weren't enough to go around.
Clubs and resorts that had taken the proactive step of designating an independent adjuster on their policies, however, didn't have to wait in line. This is probably not something insurance providers–who always pay for the adjuster's services–will suggest on their own. But most won't resist accommodating good clients like clubs when the idea is raised, especially if you choose a reputable adjuster.
And certainly, it's also worth taking the time to do some homework before the selection is made; which adjuster you choose is just as critical. Making a wise choice and building a strong relationship puts you that much closer to prompt service–and protracted claims don't do anyone any good.
Here, too, club managers are at an advantage because almost all have access to insurance executives through their Boards and memberships. Networking with these people should lead you quickly to the best adjusters in your area. You can then decide which one to designate, and start to build a working relationship with them even before any claims are made.
This will help to create a built-in level of trust; or, more to the point, stymie the mistrust that adjusters often develop about victims' inclinations to inflate their claims. And there is another good reason to take the time to develop a relationship in advance with an adjuster, even as you hope you'll never have to actually work with him; because adjusters work independently, you will be able to retain the promise of their services should you ever need to change insurance providers as they are independent.
The Costs of Interrupting Your Programs
Another area that calls for special coverage and claims attention is accounting–specifically, getting the right fix on the true cost of interruptions to your club activities. While almost no club would consider operating without professional accounting services, many club managers don't realize that there are specialties within the field that many professionals aren't always prepared to handle.
Business interruption costs, and their relationship to insurance coverage and claims, qualify as one such specialty. Determining what degree of revenue loss your club will experience as a result of temporary closures or scaled-back operations can be quite daunting. This task should not be left to your regular accounting personnel (internal or outside), especially when it will detract from their focus on daily issues.
And while it's true that accountants who specialize in this area come at a price, check with your insurance provider–they may be willing to help foot the bill, as this type of specialized accounting can result in more accurate claims and less protracted filing processes.
Legal Wordsmithing
Just as with accountants, attorneys also have specialties. While you might not think you need to get a lawyer involved in insurance matters unless or until the potential for a lawsuit arises, at that point it might be too late. Insurance policies are chock-full of legalese, and while most of the words they contain have been around forever, very few people actually understand the language as well as they'd like to think. (See sidebars on this page for insights on where insurance buyers can get tripped up by language or overlook critical areas of coverage altogether.)
Here, too, the easy way out is to rely on your general counsel and hope for the best. But knowing that insurance claims are often large enough to break a club and send it into bankruptcy, do you really just want to depend on a generalist's "best shot," or might you feel more comfortable with the independent analysis of a tried-and-true expert?
Outside Relationships
While expert legal counsel and accounting services are critical, the most important person in your insurance arsenal remains your broker, as the person you count on to find the best coverage for your situation. And while more and more major insurance providers are now offering comprehensive golf coverage plans, remember that all of these plans aren't necessarily created equal.
In an industry where everything can start to look alike, word-of-mouth and referrals can be critically important. And both the "shotgun" and "rifle" approaches have their merits. If you're inclined to do the shopping yourself, pick two local agents who are familiar with your club and have them each go to two to three markets to compete for your business (don't overdo it, though, because you'll run the risk of overwhelming the market). Another strategy, however, is to work very closely with only one broker, which will demonstrate loyalty and encourage the highest level of service.
When you get to this point, however, it is probably a good idea to draw a line between yourself and club members who are in the business themselves. As mentioned previously, your membership can be valuable for networking, to help you find good adjusters and other specialized service providers. But Gallagher Hospitality Services' Wes Brandt says there's a growing trend to avoiding direct connections between your club's insurance coverage and its membership, because you can face some real issues if problems
arise.
Choosing a Plan
Many clubs today simply go through the motions of comparing insurance plans, and rely heavily on the recommendations of their broker to make decisions. Sometimes the only issue that needs to be addresed is where the balance between budget and comfort level should fall. This is an efficient approach that has its appeal to time-stressed club managers. But at the least, you should make sure you've secured answers to these questions:
• Does the insurance provider have a solid history of working with golf and country clubs?
• Is the provider financially secure, or is there a risk of default if the company is hit simultaneously with multiple large claims?
• Is the coverage package sold "as is," or can changes and substitutions be made to suit a club's specific needs, such as valet parking, or leased vs. owned equipment? Is the company interested in working with your needs, or trying to force your coverage into a predetermined, inflexible plan?
• Is the pricing competitive?
• Does the provider have a strong reputation, or are they offering sizeable discounts to lure clients?
• Can adjustments be made to the policy mid-year if the club's situation changes, or must everything wait until the policy is up for renewal?
• Does the provider have a good track record with customer service and handling claims?
• Are any added benefits offered, such as risk analysis or exposure management tools or training? If so, are they included in the general coverage, or only offered as extra riders?
In the true spirit of insurance, it's better to be safe than sorry in all of these areas. Use the best available professionals and all of their resources. Hopefully, you'll never need their full line of defense, but if you do, you can spend your energy resolving the problem rather than worrying about things that it's too late to correct. C&RB
Summing It Up
• Buy insurance for quality, not price.
• Designate an independent adjuster on your policy.
• Outsource business interruption accounting to a specialist.
• Enlist the help of a lawyer specializing in insurance for a second opinion.
• Fully understand your policy even if it bores you to tears.
• Ask for extensions in key areas that often aren't included in base packages.
• Be proactive, not reactive.
Do I Really Need This?
Many golf packages are just that–packages. However, a good program will have a level of flexibility built into it, and a good broker will "have your back" and be able to make club-appropriate suggestions. It doesn't hurt, though, to know what to ask about yourself. Here are the coverage areas that can make or break a club if handled poorly:
Business Interruption–Use your broker's worksheet to figure this out or, even better, outsource the complicated task to a specialist accountant. Make sure this coverage isn't limited just to damage to the clubhouse, and make sure you don't underestimate your coverage limit.
Debris Removal–Here, too, seek the broadest terms possible, as the playability of the course has a large impact on your ability to resume operations and generate revenue.
Directors and Officers (D&O) Liability–This protects the Board members' personal assets in the event that a case is brought against them in relation to their duties as a Board member.
Employment Practices Liability–This is usually excluded from general liability policies, therefore it's often overlooked. It covers things such as discrimination, sexual harassment and wrongful termination–sensitive areas that increasingly find their way into courtrooms and are high-risk topics in a club environment.
Pollution Liability–It's easy to mistake this coverage for any pollution-causing incident on the property, but it really only kicks in if the mess spills over club boundaries.
Property and Inland Marine–This usually covers buildings and their contents, as well as swimming pools, tennis courts, fences, etc. To choose the proper limits, be sure to have a complete and thorough "statement of values." Avoid sub-limits if at all possible.
Tee-to-Green–Some less-reputable plans only cover greens and tees, but nothing in between. Be sure fairways and sand traps are protected as well. Avoid sub-limits, especially per-hole limits. Also, try to find a policy that covers ball washers, signs, cart paths, bridges, etc.; it's not always a given that these will be included.
Wind-Driven Rain, Hail, Etc.–These "Acts of God" are often excluded from coverage or subject to astronomically high deductibles. Look for plans that allow coverages such as business interruption and tee-to-green to be triggered by windstorm damage, even if you can't get around the high deductibles themselves.
The Twisted Language of Loss
Few things are as straightforward as they seem, and, this goes double when dealing with insurance. Much of the language used in insurance policies has been carefully crafted over decades by lawyers. Unless you are trained as such and are also familiar with the mountain of case law associated with the befuddling prose, you can rest assured that you'll most likely misinterpret at least one clause. And that's if you're good.
Here are some of the more commonly misunderstood phrases and areas of insurance coverage, according to Wes Brandt of Gallagher Hospitality Services. These occur mostly in extensions of coverage, so don't take it for granted that any of the following appear in your policy. It's best to go over your policy with a fine-toothed comb, or better yet, have it done by an attorney who has special expertise in insurance matters and golf and country clubs.
Designated adjuster clause–As discussed in the accompanying main article, this is where the name of your pre-appointed independent adjuster would be listed. The insurers pay this person's fees, but the named adjuster will develop a business relationship with the insured, which will improve the loss settlement process.
Increased cost of construction and demolition–An extension of coverage that includes business interruption as a result of building ordinance laws. Sometimes policy terms include coverage for "changed in height or footprint," or an alternative site, should ordinances preclude rebuilding at the same square footage that existed prior to the loss. If you choose to make such changes when they aren't required by law, though, don't expect any extra money from your insurer.
Interruption vs. suspension–This is not a clause, but a difference in wording that is built upon court precedent and can determine whether or not your claim is paid or denied. Typically, suspension of business means the total or complete shutdown of operations caused by direct physical loss or damage to the property. Interruption is a looser definition that also encompasses slowdowns or reductions in operations. Get a lawyer's advice on your policy's exact wording and how it applies to your club. Does the entire club need to be closed to constitute a suspension, or will closure of one or more individual revenue-producing divisions (golf course, restaurant, etc.) suffice?
Loss preparation costs–An added coverage that provides for the reimbursement of the fees associated with filing a property claim. This includes accountants, engineers, attorneys, and other professionals whose services you enlist to prepare and present your claim.
Severability of interests–This clause can protect management companies from loss if, for some reason, a club owner fails to repair or rebuild with due diligence. Th
e owner may still face a denial or reduction of business interruption coverage, but the management company's fees remain insured.
Wes Brandt is Tampa Bay Area Vice President with Gallagher Hospitality Services, a division of Arthur J. Gallagher & Co., the Itasca, Ill.-based insurance brokerage and risk management services firm. Brandt has provided input for this Club & Resort Business feature on insurance through his relationship with HospitalityLawyer.com, a Web site that offers a full range of legal resources to club and resort managers.
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