Gyms are unique and not one is the same. But, almost every gym has at least one contract that is integral to the business. In some cases, it’s a lease agreement for the rented property, but in others, it is a license agreement to use the brand of another entity. Within these contracts are specific insurance requirements that must be upheld and if it’s not there could be severe consequences for the gym.
Recently we’ve uncovered two cases where an insurance company sued their insured because the gym did not take out the correct policy for the injury that occurred. The insurance companies, Philadelphia Insurance Company, and Atain Specialty Insurance Company disclaimed coverage in both cases. Read about the cases here:
CrossFit Not Covered For Athlete’s Death, Insurer says
Former Members of Switch CrossFit File Lawsuit After Being Filmed in Restroom
If you’re a gym owner like myself you’re probably thinking, “why do I need to care about these law cases?” I’ll make the argument below.
Avoiding an allegation of breach of contract.
If your chosen insurance company does not correctly protect additional insureds, the additional insured can sue the gym for breach of contract. These cases are expensive to defend and could end up closing the gym.
Purchasing insurance that provides coverage for the operations of the gym.
When an insurer sues an additional insured, or in some cases the insured, they are disclaiming coverage for your claim. It’s an expensive exercise to fight an insurance company, and it could mean being led down the wrong path when searching for the right insurance policy.
The impact on your brand.
Gyms need to be safe to succeed. When an uncovered injury leads to news stories and a fight between the insured and insurance company, folks will be less likely to come train at the gym.
In the case against Switch CrossFit, the insurance company did not properly maintain the request for additional insured paperwork which led to the breach of their license agreement.
As gym owners, what can we do to make sure our insurance company does the right thing?
First and foremost, get an insurance broker to help you. Make sure that they have a close relationship with the insurance company and that the insurance company knows your operations intimately. With insurers, money is power. It’s wise to purchase insurance from a broker who has purchasing power with the insurance companies. This provides them with the leverage and power to negotiate and get a better policy on your behalf.
It’s clear in these cases that the insurance broker did not review or maintain their client’s contracts and paperwork correctly. If you need a review of your insurance program NEXO is here to help. Together we can avoid unnecessary litigation costs by partnering with insurance companies who understand the fitness business.