Honing our game for golf courses and country clubs

HITTING a clean drive down the middle of the fairway and judging the distance to the green are skills that don't come naturally to most people. Indeed, the skill-building work required before one begins golfing gives rise to a phrase that describes the beginning duffer: You play other sports, but you "take up" golf. Many who do so find that they enjoy not just playing the game, but also working on their basic golf skills. Hence the popularity of driving ranges and facilities that offer putting and chipping greens, as well as private lessons with instructors.

Shortly after our agency was founded, we decided to "take up" golf course and country club insurance as a specialty niche. In response to a mailing we sent, a newly opened course near our East Texas office expressed interest, and we wrote a package policy for it.

Like a diligent student of the links, we've been able to develop our "game" from there, gaining expertise and building a successful book within this niche. We currently have 23 golf course and country club clients in the Houston, Dallas and Austin areas, as well as two courses in Indiana.

Making the tour

We market our program through direct mailings, and a growing portion of our new business comes from referrals. We maintain visibility in the community through membership in the local chamber of commerce, and we have received some inquiries from visitors to our Web site (www.sec-ins.com). On occasion, local clubs host vendor tournaments, and we always sponsor a hole at these events.

Our clients include a nearly even mix of private country clubs and public, daily-fee courses, with a few semi-private courses as well. (A semi-private course is open to the public but also offers memberships, which usually involve payment of a monthly fee in exchange for a discount on prepaid rounds of golf.)

Golf courses in our area these days are almost "overbuilt," so there's certainly no shortage of prospects. We use a multitude of online databases not just to find prospects, but also to screen our prospect list. We shy away from courses owned by municipalities, for instance. We initially might be interested in a course 50 miles from our office. When information we glean from a database shows us the prospect is a nine-hole course with just 5,000 rounds played a year (a relatively low number), we might decide such a prospect is not worth a 100-mile round trip.

Country clubs may desire higher liability coverage limits than some daily fee courses, and the clubs have a few exposures that other types of courses don't. For the most part, however, our program addresses the same basic liability exposures for all of our clients:

o General liability: We recommend a GL limit of no less than $1 million per occurrence/$2 million aggregate, with an umbrella policy of at least $1 million.

o Liquor liability: We suggest at least $1 million of liquor liability. This is especially important for country clubs, which may host such events as wedding receptions. We stress the importance of ensuring that only licensed employees serve alcohol at these events, and that they comply with all state alcohol regulations.

o Directors and officers insurance: Private clubs often need at least $1 million of D&O coverage. If a club's directors are involved in writing the club's employment manual, they may be named in an employment-discrimination lawsuit. This coverage also provides protection if someone alleges illegal discrimination in the selection of club members.

o Pollution liability: Herbicide and pesticide applicator liability presents a significant exposure for golf courses. Typically, just one or two employees at a course are state-licensed as applicators, and clubs should ensure that only those employees have access to the chemicals. We advise our clients to purchase at least $1 million of coverage, which would protect them against such claims as contamination of ground water because of improper chemical application.

o Auto liability: We recommend $1 million in coverage. Some clubs own an auto that may be used by any of several employees, in which case the club needs auto liability coverage. If a club does not own its own vehicle, we suggest a similar amount of hired/nonowned auto coverage. All of the programs we work with provide coverage for valet service, which clubs may offer when they host special events.

The property coverages address the course itself, the underground sprinkler systems, all the buildings on the grounds and their contents, any other structures on the course, and the equipment used to maintain the course. Some important details of that coverage are listed below:

o Building and contents: We provide coverage for every building on the grounds-the clubhouse, "halfway houses" on the course, pump houses, maintenance buildings and cart barns, for example. Coverage limits obviously vary with the value of the buildings: One of our daily-fee courses has a building and contents limit of $1.4 million, and we have a country-club client with a $4.3 million limit. We suggest a deductible of at least $1,000, but some of our country club clients elect deductibles as high as $10,000.

We like to make sure that every building at a course is included in the coverage. We've found that some of our new clients have failed to include coverage for a few buildings such as pump houses (which contain the pumps powering the underground sprinkler system), either mistakenly or because they were trying to save on premium. We can point out that we've had claims in which lightning has struck pump houses, resulting in as much as $40,000 in damage.

o Playing surface: Coverage for the course itself, walking paths and cart paths, the underground sprinkler system, and other structures on the course is provided through an outdoor property extension. We recommend at least $250,000 for this coverage, which also applies to such items as swimming pools and tennis courts.

Typical claims include weather and vandalism. We recently handled a claim, for instance, involving hail damage to a putting green. We've also seen instances in which following a rain storm, when the surfaces are soft, vandals steal a golf cart at night and drive around the course, creating deep ruts.

o Equipment coverage: Golf carts and equipment used to maintain the course are covered under an inland marine schedule. Of course, none of the items on the schedule can be licensed for use on a public road. Extending our previous example, we've had a claim in which vandals finished off their work by depositing a stolen golf cart in a lake on the grounds. We recommend that our clients have floodlights around the cart barn and that they install an alarm on the barn.

o Business income coverage: The standard 24-hour waiting period is usually imposed for a business-income claim. Such claims often don't present as serious a loss for golf courses as they might for other businesses. If the clubhouse burns down, for example, the club may lose some income. But while it is being rebuilt, they will quickly erect a tent, or take other steps, to keep operations going. A more typical claim would be a lightning strike that knocks out the power at a country club, preventing it from hosting a social event such as a wedding reception.

o Special events: Most of the programs we work with include coverage for tournaments and other special events, which often involve the work of such outside contractors as a valet parking service (if the insured doesn't already provide it) or a company that builds the bleachers for a tournament. The insured must obtain evidence of insurance from all such contractors.

Two times the fun

We meet twice with prospects before writing a proposal. I use the first meeting, usually a 30-minute sit-down with a club's general manager, as a "partnering meeting." I present the basics of our program, but I also use the time to gauge the prospect's commitment to working with us. It takes a lot of work to prepare a good submission, and we want to know the prospect is willing to work with us before we invest our time.

At the end of the first meeting, I give the prospect a list of the information I'll need at the second meeting, which we use as a risk-management audit. That list includes a copy of the current policy, a complete equipment schedule, the last 12 months of financials, and loss runs for the previous five years.

At our second meeting, we tour the prospect's grounds, take pictures and fill out a building and property information form. We sometimes find that prospects have left buildings off their previous policies without knowing it. We've created our own supplemental questionnaire, to collect detailed information on the daily operations-for instance, how often the kitchen hood vents are cleaned, where any chemicals are stored and if they are locked up. We talk to key personnel, such as the head chef and the head groundskeeper, in addition to meeting with the club's general manager.

Some of our prospects haven't had an insurance program before, and have covered their exposures piece-by-piece. We sometimes find gaps in their coverage, and we often win a long-term client by saving them as much as 15% on premium by using the program approach. Some of the prospects are grateful just to have some of the coverage we offer-such as coverage for the playing surfaces-that they haven't had before. In addition to Fairway Underwriters, our program underwriters include Bollinger Insurance (the program administrator for AIG), Safeco and Venture Insurance Programs (Venture administers the Preferred Club program on behalf of Chubb, ACE and USLI).

Signing the scorecard

The information we get from a client also helps us decide which of our programs is the best fit, which increases the success of our submissions. When I submit an application, I include a report that addresses each covered exposure with a separate one-page summary, pointing out why the prospect is a good risk. I might describe security measures taken to protect golf carts, for instance, or how the kitchen staff keeps the kitchen clean and well-maintained. Lately, some carriers have been inspecting the financials more closely and are less willing to accept insureds who are struggling financially. This does not affect private clubs as much as public courses, because private clubs can always assess their members to shore up the financial outlook.

Offseason moves

One of the most frequent complaints we hear from prospects about their current insurance agent is that they don't hear from anyone until renewal time. We make it a point to visit the client at least once during the year, just to keep in touch, and we visit again at least 60 days before the renewal date. We also send quarterly e-mails to all our clients, discussing risk management measures and providing other useful information.

During our first meetings and throughout the policy period, we also help our clients institute risk-management programs, which we've found most of them don't already have. We keep detailed equipment schedules for them, and when they notify us that they've purchased new equipment, we provide them with updated schedules. If a client constructs a new building, we visit the course, take a photo of the structure, and put it in their file.

We give our clients a 25-page risk management handbook we've written specifically for golf courses, and we suggest they go through the manual quarterly, with a different group of employees each time. The manual includes checklists of safe practices such as checking electrical circuits, keeping clutter out of hallways and not leaving oily rags in a maintenance building. We always recommend a no-smoking policy in maintenance buildings, and we're surprised at how many of our clients implement that policy for just the first time, at our request.

Golf course and country club insurance has become the largest specialty program we offer. Our clients come to value our expertise in identifying exposures and finding the best way to cover them; by providing this service, we earn reliable relationships with clients in an affluent niche. I may still have work to do on my slice, but our success with this program is in the bag.