Bowling Centers Face New Risks

Insurers have historically been cautious about writing bowling centers due to their fire, slip-and-fall, and alcohol-related hazards. So it would seem logical that the "fun centers" into which they have evolved must be even more difficult to place coverage for, especially in today's hard market.

But this is one of many intersections where insurance and logic diverge.

"There is still a market for bowling centers," said Rick Lindsey, an underwriter with Prime Insurance Syndicate in Sandy, Utah, with the air of a man wondering what all the fuss is about. "We've been insuring them for 25 years."

Premiums have risen about 20 percent total over the past two years, which Mr. Lindsey pointed out is relatively modest compared to many other industries.

"Bowling centers have been left out of the huge increases. There have not been mass cancellations. It is not a distressed line," said Mr. Lindsey. He did note, however, that during a hard market there tends to be more individual placements, as opposed to program business.

Mr. Lindsey mentioned Lexington Insurance Company, Scottsdale Insurance Company, Western World Insurance Company and Virginia Surety Company as among the major writers of bowling centers.

Steven Gross, chief executive officer of Union, N.J.-based Metro Insurance Services Inc., has a somewhat different view of the state of bowling center insurance.

"Everything is difficult to place now. Its a difficult market," Mr. Gross said.

"Bowling centers have traditionally been tough from a fire standpoint due to flammable liquids, and also from a liability standpoint because of all the activities going on in them," he said.

He has seen bowling center premium increases of up to 40 percent.

Insurance is a significant business expense for bowling centers. Mr. Gross noted that the centers spend about 5 percent of their gross receipts on insurance premiums. He estimated that a 30-lane facility would pay about $50,000 to $60,000 on their overall property-casualty insurance program.

Mr. Gross listed Lexington, Lloyd's and Scottsdale as the principal markets for bowling center coverage.

Kurt Muntzinger, vice president of Central Insurex Agency Inc. in Van Wert, Ohio, has also placed his fair share of coverage for bowling centers.

"Many of the standard carriers are exiting the marketplace," noted Mr. Muntzinger. "We use non-admitted carriers providing property, general liability, and depending on the state, liquor liability."

"The requests for quotes, like in many classes of business, are quite active," Mr. Muntzinger reported.

While there are still fire-related underwriting concerns regarding the remote location and age of some of the buildings and the flammable liquids used on the lanes, Prime Insurance Syndicate's Mr. Lindsey noted that attentive maintenance, sprinklers and switching to non-flammable substitutes can keep these hazards under control.

In fact, risk concerns appear to be shifting from property-related to liability-related.

"We are seeing more bodily injury claims from the birthday parties," Mr. Lindsey reported. "You have one or two parents trying to control 15 kids." Many centers provide staff to help with the kids, but they are often teenagers with little training, he noted.

Mr. Lindsey explained that, because of the slip-and-fall frequency, bowling center liability policies often have excess medical payments coverage, instead of the usual medical payments that provide first-dollar limits of $5,000 to $10,000. "Unlike regular medical payments, these are not required to be paid. Payment is negotiated in exchange for a release from the injured person."

General liability premiums can range from $2,500 for a very small bowling alley, up to about $50,000 for one of the large fun centers, Mr. Lindsey indicated. "You will seldom see GL premiums above that $50,000 figure."

Bowling centers may also need "prize coverage," Mr. Lindsey added, as they sometimes offer prizes of up to $100,000 for perfect 300 games bowled in tournaments.

One type of insurance that Mr. Lindsey generally does not write for bowling centers is money and securities coverage. This is due to the theft exposure stemming from the large amount of cash usually on the premises and the robbery potential from being open late.

In addition to premises risks, there are the usual liability risks that go along with operating a restaurant and bar, which are often part of the bowling center's operations, Mr. Lindsey added. He strongly encourages the centers to carry liquor liability coverage, if alcohol can be purchased on the premises.

Bowling centers have some unique liquor liability exposures, said Chris Reisdorf, a senior underwriter in the Indianapolis office of Burns & Wilcox Ltd.

"A bowling center is one of the few places where you can smoke, drink and participate in your sport at the same time," Mr. Reisdorf pointed out.

"People can buy beers through a window separating the bar from the lanes, and who knows what they do with them after that. They might take beers back to the alleys, where they are consumed by under-aged drinkers," he noted.

Mr. Reisdorf also said that the bartender often cannot judge the intoxication of those who are drinking at their lanes and not in the bar area. So the bartender would not be able to make the judgment of whether people who have been drinking should be allowed to drive, increasing the liquor liability exposure.

Mr. Gross of Metro Insurance Services pointed out that the bars and restaurants don't seem to have as much live entertainment as they used to–a trend that may reduce the liquor liability exposure. He noted that people tend to drink less and are less rowdy when there is no live music.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 4, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.