- Date 11 Oct 2017
- Category Insurance Knowledge Base
For Your Knowledge
I’ve been providing insurance programmes to marine-based clubs for over 19 years. If I were to ask that very question to a room full of insurers and insurance brokers who operate in this specialist segment I am quite certain that there would be a deafening clamour as each sought to affirm that their own pet policy or scheme was the very best insurance option for sailing, yachting, cruising and any other marine-based club. An array of whistles, bells and other rinky-dinks would be paraded in great detail, no doubt represented from the point of view of the provider rather than a sailing club. After all, sales people have something to sell and rarely are they able to resist the opportunity to get selling – even when odds as fearsome as this demand selling of heroic proportions – which usually means shouting even louder.
It’s pretty much the same scenario when it comes to insurance marketing in this specialist part of the Marine Leisure Industry. There’s lots of noise from an increasing number of participants with each trying to gain attention by being noisier than everyone else. Lots of noise but very little in the way of differentiation and everyone offering “bespoke” cover with plenty of “unique” features. How on Earth is a sailing club committee to decide exactly what the best option is for their club and its members?
It is against this backdrop that in April this year the Royal Yachting Association (RYA) announced changes to the insurance requirements for their approved training centres: Public Liability (PL) to be increased to a minimum indemnity limit of £3,000,000 and, of greater interest, Approved Centres would need to carry £500,000 of Professional Indemnity (PI) cover in respect of their training activities.
Prima Facie this appeared to be a sensible move. First and foremost, although a trend of “indemnity creep” has seen PL limits nudge upwards in the last few years, a PL limit of £3,000,000 is currently seen as the sensible minimum to carry. Secondly, professional services, including “advice”, are specifically excluded under normal PL Insurance wordings (including marine leisure policies) where it is provided for a fee and, obviously, where training is being delivered for a fee, one would expect some advice to be imparted by an instructor. Training and advice, therefore, is normally insured on a PI policy which is why the new requirement appeared to be a sensible move.
One can only speculate how the announcement of the new requirements was received by training centres – particularly the grass roots not-for-profit sailing clubs for whom every pound counts. An uplift in PL Insurance to a £3m limit would probably not break the bank but PI might, perhaps, be a different matter altogether. Firstly, PI in the Marine Sector can be expensive, even for relatively low limits of cover due to a limited Market appetite. Secondly, where children and/or vulnerable adults are involved in activities, the Market appetite diminishes even more creating further scarcity that could lead to even higher prices.
If the clubs received the news less than enthusiastically, one wonders how certain insurers and insurance brokers might have reacted at the prospect of what appeared to be something of a game changer being announced – for precisely the same reasons as above. Insurers because PI is an anathema to many of them and, brokers, because accessing a market prepared to offer palatable rates in return for the required scope of cover would not be easy.
No doubt everyone breathed a huge sigh of relief then when, just 5 months later, in September, the RYA announced that Professional Indemnity Insurance would not be a requirement after all just so long as a centre’s Public Liability insurance carried an extension that covered their training activities including indemnity for bodily injury to participants.
Cue a meticulous scanning of small print in policy wordings by interested parties to ensure they met the following requirements which are to be implemented by 1 February 2016:
“The purpose of public liability insurance is to indemnify the RTC and its instructors where a third party (which could be a student, customer or a member of the public) suffers personal injury or damage to their property as a result of the RTC’s or instructor’s negligent acts or omissions, and the RTC and/or its instructors is/are required to defend and/or pay damages to the injured party. The RTC must therefore ensure that any instructors employed or engaged directly by the RTC are covered by the RTC’s public liability insurance policy. The RTC’s public liability insurance must extend to indemnify the RTC and its instructors where negligent advice or instruction given by the RTC or its instructors causes personal injury or other damage or loss and the RTC and/or its instructors is/are required to defend the claim and/or pay damages” (RYA Training Notice TN 07-15 dated 7 September 2015).
Helpfully, the statement tells everybody precisely what the purpose of the PL cover is. How then, do we square this with the exclusions regarding training and advice? Well, insurers have addressed this in various ways. One, for example, maintains that as long as they state “Training” within in the business description on their schedule of cover then the explicit exclusion in their policy wording would not apply to the club or centre concerned. Another applies what I consider to be a “safer” option for the club by providing a specific endorsement that confirms tuition is covered.
So, everything’s okay: the centre is indemnified in the event of injury to third parties caused by negligent acts or omissions on the part of their instructors in respect of the advice and instruction provided. Yes? Well, actually, not necessarily.
Remember all those insurers and insurance brokers earlier who were shouting about who had the best features and benefits? Well it’s time to grit your teeth and listen to what some of them have got to say, particularly about “Bodily Injury”. One insurer defines bodily injury as including “Death, Illness, Disease or Nervous Shock”. Another defines it as including simply “Death, Injury or Disease” Still a third as “All physical injury to a Third Party including death, sickness, disease, mental injury, anguish or shock resulting from such physical injury”.
If you haven’t nodded off you might see the [not so] subtle differences between the 3 definitions. The first includes Nervous Shock but what exactly is that? Well, the legal definition of Nervous Shock is a mental condition that extends beyond grief or emotional distress to a recognised mental illness. This contrasts with the third example which includes mental injury, anguish or shock which are not conditions as advanced as Nervous Shock and so potentially provide a better scope of cover as if any of the conditions described did progress to a mental illness then the cover would still be effective. Conversely, the first does not state that Nervous Shock must result from a physical injury whereas the third example will only cover the mental injury, anguish or shock (and sickness or disease) if it results from physical injury. The second definition provides no scope of cover for any form of mental anguish or illness.
So, which option would you prefer or does it even matter to you, your club or your members? At the end of the day all of them appear to “tick the box” as far as what the RYA’s intention is.
However, we must consider what the intention of the insurance is. Is it to indemnify the club, centre and instructors in the event of injury arising during the course of the training itself – ie during actual instruction on and off the water – or something more? What about the efficacy of the training? What if somebody suffers an injury or damage several months after training and alleges it was as a result of an error or omission during training? In this scenario the club or centre would almost certainly have no protection from their Public Liability Insurance.
Furthermore, the extract from RYA Training Notice TN 07-15 (above) calls for cover in respect of “other damage or loss”. Whilst damage to third party property would normally be met, “other loss” presumably means some form of loss (eg. purely financial) other than injury or damage which, in fact would not be covered under the PL Section and would normally require a PI policy to protect this kind of liability.
Let’s have a look at a couple of other scenarios that could affect clubs and their committees:
Imagine there’s an incident at a club or centre where somebody under instruction is severely injured and the centre is prosecuted by the Health & Safety Executive (HSE). What if the PL cover you thought would cover you for £3m has an inner limit of £50,000 in respect of legal fees for HSE prosecutions and doesn’t cover any awards? £50,000 soon gets eaten up in legal fees. But, hey – the cover “ticks the box”.
Furthermore, following the incident the HSE don’t just prosecute the legal entity that is the training centre they also prosecute the directors and/or officers of the club itself. There is no protection for them whatsoever under their PL Insurance, not even for legal expenses.
A club committee decides to take the step to expel a member who subsequently decides to take legal action against the club; a club volunteer or employee sues the club for harassment or discrimination, a group of members decide to take legal action against a club’s officers because they feel the officers have not acted in the best interest of the club or its members. Here we see further examples where there is no protection for the club or its officers under the club’s PL Insurance – but it “ticks the box”.
Insurance that “ticks the box” can be low in price – often a driver for a club looking for an economic solution – but will not offer the bespoke gap-free protection that club officers might want in the 21st Century.
5 Questions Sailing Club Trustees and Officers Should Ask Themselves Before Deciding Which is the Best Insurance for Sailing Clubs
1. What are the long-term objectives of my club and the members?
2. If the club was prosecuted how would it fund its defence?
3. If the club had compensation awards made against it outside the scope of its Public Liability Insurance how would it meet those awards?
4. How would I defend allegations and charges made against me for decisions, errors and omissions made in my capacity as a club officer?
5. Do I want to put my personal assets at risk, either during my tenure as a club officer or after I have stood down?
These are just a handful of questions you can ask yourself as a club officer that will help determine what scope of protection you might wish to invest in to meet the objectives of your club, its members and, indeed, yourself. For some these issues will be important, others will consider them irrelevant and if they are important then the concept of value will often override that of bottom-line price.
Value, of course, is in the eye of the beholder but, even so, I would hazard that the “Best Value” solution is a programme that is fully aligned to your objectives, underwritten by good security and delivered at the best available premium – in other words, the best insurance for your sailing club. The differences in definitions in policy wordings as well as the variance in scope of cover outlined above suggest that a single “off-the-peg” policy offering a one-size-fits-all solution that is anything but bespoke may not necessarily be the best option for your club or centre.