Written by FMC Executive member David Barnes, this article was originally published in the June 2017 issue of Backcountry Magazine. We’ve reproduced it here as part of the Outdoor Community resource. If you’ve got extra tips or advice to give, then please get in touch.
In this increasingly risk averse world, individuals and organisations look to insurance policies to manage the financial aspects of some risks. As individuals, many of us will have our houses, contents, cars, life, income and medical costs insured. Some make an active decision not to insure some of these – either because they are prepared to carry the risk themselves, because they perceive that there is no real risk, or because they feel they can’t afford the cover (the question should probably be ‘can you afford not to have the cover?’). Insurers have an increasing suite of policies, and you could go broke insuring all possible risks. In my view, unless another party requires you to have insurance (such as in a hire purchase transaction), you insure against losses that would have a significant financial impact and a reasonable chance of happening. But what is ‘significant’ and what is ‘reasonable’ is a subjective question for you to answer.
All these principles apply to clubs. Our clubs are diverse and so are their insurance needs. We have clubs with 20 members and no assets. We have clubs with hundreds of members which own clubrooms, huts, ski lodges and vehicles. Let’s look at some of the main categories of cover of interest to clubs.
Most clubs that owns clubrooms will insure them, as well as the contents. Likewise the more substantial ski lodges. For the likes of huts, ask yourself ‘what would we do if it was destroyed or substantially damaged?’ Would you replace it? Maybe it’s a hut with a historical connection to the club but not really a key part of the hut network. If it’s old and a bit tired, would the amount pay for a replacement?
For a small club that owns a bit of gear and maybe a projector, it might be worth insuring if the items are all kept together, as you could lose the lot in a fire or burglary. But one club was paying an extra premium to cover those items anywhere in New Zealand, with a $250 excess. Realistically, they’d only lose one or two items at a time – say a PLB or an ice-axe – so the payout would be minimal. The club opted to restrict cover to the clubrooms and got a premium reduction.
A club vehicle is usually a substantial asset, hard to replace, so probably best insured. If not, the potential liability from an accident makes third party insurance a likely minimum requirement.
Public liability insurance provides cover for legal liability for damage to someone else’s property, as well as legal costs defending a case. For clubs, this can be divided into liability from events on trips and liability arising from occupancy of premises. Most policies will indemnify both the club and individual members while on club activities, although if there’s not enough cash in the pot the club gets first bite.
The occupancy risk covers events such as damaging premises that you are renting or (if you rent or own) nearby property. Examples include leaving the pie warmer on burning down the building or flooding the shop downstairs and putting it out of business.
Probably fire represents the biggest risk on club trips. As well as paying for the damage, the Forest and Rural Fires Act 1977 means you can be liable for the cost of putting out a fire. For this reason, if you have public liability insurance, ensure that it includes cover for costs imposed by this Act. Likewise, if you have property in a rural area, you can be levied to contribute to the cost of fighting a fire if your property is saved, so cover for costs imposed by the Act will be important.
Separating out liability between an organisation and its members is difficult. If a member causes a fire on a club trip, is the club liable? Or the member? Or both? Any legal action would likely be taken against both. Public liability policies usually indemnify both the club and its members (although usually members are only indemnified on club activities).
Most home contents policies include what is essentially public liability cover, and many include Forest and Rural Fires Act 1977 cover. This is good news if you do something silly on a private trip, on a club trip if the club doesn’t have insurance, or on a club trip where it can be argued that it was your fault.
Sometimes, clubs without public liability cover find that an outside body requires them to have it. For example, DOC often require clubs with huts to have a policy.
The existence of ACC means that it is virtually impossible to be sued for causing personal injury. In pre-ACC days, one of the main reasons to have public liability insurance would have been to cover liability for personal injury.
The insurance industry seems to be actively selling a product called associations liability. Basically, it covers the club for costs arising from the negligent or dishonest act of an officer. It’s not cheap – one club with 140 members was quoted $1200. Unless your club has significant assets, you’re better off investing in robust and open procedures that make it hard for an officer to do something dodgy.
Other policies cover costs arising from employment disputes or legal costs incurred if the club is prosecuted. The latter became a hot topic after the prosecution of the Le Race event director following a death in 2001. At the time, I wrote:
‘However, when considering insurance, consider also all the other risks you don’t insure – both as a club, and as individuals. Many clubs don’t have public liability insurance. Is the risk of a fire greater, than that of a fatality-related prosecution? If so, why do you want cover for the lesser risk? Do you insure against legal defence costs as an individual? What happens if you open a car door in front of a cyclist? The message here is that there are no right answers in striking the balance between protection and risk – everyone’s needs and attitude to risk is different. Maybe you need more insurance, but you may also need less.’
That applies to insurance decisions across the board.
Group insurance schemes
FMC is occasionally asked about facilitating group purchasing arrangements for club insurances. Unfortunately, this would only work if most clubs participated. As a federation (as opposed to a national association with branches), we can’t impose this requirement on clubs. The diverse insurance needs of clubs also mean that a one-size-fits-all approach isn’t appropriate.
Few insurers now offer commercial insurance directly to clients, so you’ll probably need to use a broker. However, for small clients, many brokers have set policies with one insurer, so your broker may not shop around for a better deal. Ask what approach your broker uses.
Find a broker who understands your club, as they may be less inclined to over-sell. Brokers are obligated to find a suitable product for clients, so there may be additional protection in that.
David Barnes has worked in the insurance industry. He’s happy to discuss individual insurance needs with clubs, so drop him a line.