Playing the Green: Insuring Golf Courses

It’s a well known fact in the insurance industry that we are also, in large part, the golf industry. Nine times out of 10, a golf tournament will accompany a convention. Want to raise money for charity? Sponsor a golf tournament. Work out a business deal? Take ’em out on the links.

Much of America shares the insurance industry’s passion for the sport. According to the National Golf Foundation’s latest facilities report, Golf Facilities in the U.S.: 2000 Edition, a record 509 courses opened in 1999. California and Florida topped the rankings by state with 36 new courses apiece. Texas, which ranked a distant 11 in 1998, jumped to the number three spot with 31 new courses.

Along with the increase in the number of courses comes a corresponding increase in the types of coverage available.

“There are probably more programs available now, more players in the marketplace, more competition for people that have geared a product toward the golf industry, although there’s only a handful of really quality national players,” said Bill Dalton, director of sales and marketing for West Chester, Penn.-based Preferred Club Program. Preferred Club, an insurance program manager specializing in the golf club industry, covers more than 1,000 clubs in North America and has a program in Canada as well.

Dalton has been involved in writing golf programs since 1993. “There are a couple of keys to make sure you are providing a service to your client,” he said. “Number one is to assist them in any way as it relates to loss prevention, making sure they have a quality loss control team on the carrier side.

“Starting right from the beginning, the club should have an appraisal completed every two years to make sure there are adequate limits available at the time of the loss. Different types of construction, size of the club, age of the club, that’s where the appraisal really comes in handy, to be able to purchase the coverage on a blanket agreed amount basis.”

Also important is securing appropriate coverage on the golf carts, maintenance equipment, computers, inland marine, coverage for loss of members’ property—the list goes on.

Covering the clubhouse
The clubhouse is where much of the liability comes in when looking at writing a golf club progam, making adequate property coverage a crucial component of a golf course program. “Because if you lose the clubhouse, potentially you could have a $10-million loss with business interruption and everything else,” Dalton said.

Michael McCoy, president of Grandy, Pratt, McCoy, Rosenberg & Associates (GPMR) in Des Moines, Iowa, agrees that property exposure is the principal concern. “You typically have fairly high property values—the clubhouse, maintenance buildings, things of that nature—that are typically located on the outskirts of town, with the proximity of fire protection probably being a little further away, particularly for Midwestern golf clubs. With coastal clubs you’ve obviously got the windstorm exposure, the hurricane exposure, so underwriters are looking at the property value very carefully. Just the whole underwriting of the property is probably the most difficult hurdle to get over.”

It’s a hurdle that hasn’t been too troublesome for GPMR. The full-service insurance agency, brokerage and risk management firm writes clubs across the U.S., with the largest markets in Tennessee, Pennsylvania, Georgia and on the West Coast.

Pollution prevention
Those rolling slopes of emerald green are not a product of nature alone. Chemicals used to keep the grass lush and neat create exposures for pollution that can often be overlooked.

Most programs provide some type of pollution liability, which can be on a limited basis, sublimited, or limited as to what it is actually providing as it relates to herbicide/pesticide application. “They just say ‘here goes the golf club program,’ and you got herbicide/pesticide but…what’s that really covering?” Dalton said. “It’s covering overspray—they may need some additional coverage, particularly if they have above-ground and below-ground storage tanks. If they just want to purchase the herbicide/pesticide application, they should be looking for limits up through the general liability limits, and then limits up through the umbrella which is available in some programs.”

Another separate pollution policy can be purchased which provides additional coverage as it relates to premises for such things as tank leakage, in the event of an accident or a fire, gas or oil or diesel, tanks above and below ground, chemicals getting into rivers, cleanup and liability issues. “So it’s typically in the best interest of the broker to not only include the herbicide/pesticide, but to make sure that the full pollution liability policy is offered to the club,” Dalton said.

McCoy described some of the different pollution exposures: “You’ve got the on-premise exposure, because golf courses do tend to have chemicals on hand from time to time prior to applying chemicals to the golf course; you’ve got the drift exposure when they’re spraying to third parties across their property lines; many golf courses still have some underground tanks or above-ground storage tanks for gasoline for their equipment and golf carts.”

Having clear safety guidelines in place regarding the storage of chemicals can help prevent fires or contamination resulting from improper storage, such as liquid chemicals being stored in conjunction with fertilizer.

Most competent golf programs do offer environmental coverage, and although there is a variety of exposures, most of them are readily addressed with additional coverage.

Other areas of concern
“Ordinance and law coverage is a big item with these older clubs, because local ordinances have changed,” Dalton said. “In the event of a large building loss, you have an ordinance that may require the building to be restored to codes that are current, as opposed to when the original structure was built. They could include things like sprinkler systems, wheelchair accessible ramps, elevators and other requirements of the Americans with Disabilities Act…could cost hundreds of thousands of dollars for a large loss.”

Most programs include a sublimit for ordinance and law. It’s in the best interest of the broker to seek a higher limit or to have it included in the total building limit, Dalton said.

Business interruption and extra expense are other issues that will undoubtedly come into play in the event of a large loss. “It’s a very difficult limit to choose and not an easy process to go through,” Dalton said. “You really have to get together with their financial people to understand their financial statement and select an appropriate limit of business interruption.”

Other items on the account checklist for a good golf club program include: errant ball (both from a physical damage and liability standpoint), liquor liability, professional liability and umbrella coverage. EPL can also be a huge issue in the club industry, especially with the potential for membership discrimination. Neglecting to suggest any of these coverages could put an agent at risk of errors and omissions.

Special events
The lovely wedding reception, the fraternity winter formal, the charity dinner dance—a golf course provides a gracious setting for all these events and more. But the liabilities can add up.

“The private or nonprivate club industry has a lot of exposure from outside events such as weddings,” Dalton said.

“Typically those are things that are contemplated under the commercial general liability policy,” McCoy said. “There’s probably liquor involved, so you’ve got to be sure you’ve got the liquor liability coverage addressed—that’s part of the program as well.”

As most clubs sell alcoholic beverages, agents should be sure that club employees are properly trained to deal with alcohol risk management in order to cut down on exposure in this area.

For more out-of-the-ordinary special events, there are specific coverages such as hole-in-one, which is underwritten by a handful of specialty underwriters; or weather cancellation for large revenue-producing events; or broadcast interruption coverage if the event is to be televised.

McCoy said CNA is trying to expand its coverage. “Right now our program has focused traditionally on the daily, privately owned, public facility, and we’re having a lot of interest on the part of our agents and private golf clubs to offer our product to the private country clubs. And having the directors and officers coverage as part of the package is very important, because those nonprofits typically have outside directors serving on their boards.”

Building a base
It’s a market that can be very profitable if done correctly, but the failure factor is always present. “There are a lot of players out there that will be the low price provider for a year or so, but typically they’re in and out of the marketplace,” Dalton said. “Our strength is consistency.”

The CNA Golf Course Advantage Partnership Program has been around for approximately nine years, McCoy said. “We’ve got nearly 2,000 golf courses insured around the country…We’re fine-tuning some coverage forms and making some of the other underwriting disciplines—employment practices liability coverage, directors and officers coverage—more readily available, more user-friendly for the agents to put together.”

Some insurance professionals are members of the clubs they write, but on the other hand, some stay far away from their own risks.

“It’s nice to go out to your own club and just enjoy being a member,” McCoy said.

Topics Profit Loss Agencies Property Pollution Chemicals