Bunker mentality: Insuring golf courses requires playing good defense

Most agents and brokers, given their druthers, would probably like to find a nice specialty niche-preferably one in which they have a personal interest. I also suspect that agents who already have specialties would like to have a sub-specialty within that niche as well.

Luckily, I qualify on all those counts. I'm a former PGA of America member, and while I never purport to be an expert, my specialty is golf. My sub-specialty is the most specialized golf niche of all: the PGA TOUR. Property and liability insurance is a tough business, and I'm very fortunate to be able to combine it with a great client in an industry I grew up in.
In this article, I'll discuss some of the many exposures golf clubs face, and the corresponding loss-control measures that are critical in this market niche. The PGA TOUR may appear to be “golf heaven,” but the exposures faced by a course like TPC Sawgrass are not significantly different from a small country club in a rural county in Kentucky. Golf is still golf and risk is still risk, no matter where you play it.

Teeing off a fun career
I grew up around golf, and out of college went into the golf business. (I was the guy in the golf shop and bag room, selling balls and gloves and loading bags on carts). I left the business after eight years to join a training program with an insurance broker in Chicago. I spent two years in a cubicle in the inner recesses of a downtown office building, doing nothing but reading policies. As miserable as that sounds, it gave me a solid grounding in insurance that I'd have been hard pressed to obtain so quickly any other way.
Eventually I moved back to Atlanta, where I had attended college, and joined a privately held brokerage firm. In 1987, we learned that the PGA TOUR was having some problems with its tournament insurance. We met with them and devised what we thought would be an excellent program. Suddenly I found myself, with only seven years in the insurance industry (although they were seven quite intensive years), part of a team working on the PGA TOUR account. Fortunately, in addition to insurance, I knew something about running a golf tournament from my prior career.
It turned out to be a good match, and we were able to capture the PGA TOUR's tournament business. The coverage itself was (and is) basically a sophisticated version of special events insurance, with the tournament itself serving as the event. However, there are a number of other peripheral activities that revolve around each PGA TOUR and LPGA tournament, such as concerts and pro-am tournaments and so forth, so our program encompassed all these related functions. After securing the tournament insurance program, we later became involved with the PGA TOUR's corporate program. This eventually led to the Travelers Eagle 3 program for country clubs, endorsed by the PGA TOUR and one of the longest-running golf insurance programs in the country.
The ensuing years saw mergers and partners coming and going, and ultimately I was just about the “last man standing.” When I joined Integro Insurance Brokers in 2007, the PGA TOUR business moved to Integro as well. I have two other clients–a prestigious golf club in Atlanta and the World Golf Foundation in St. Augustine, Fla.–but otherwise insuring the PGA TOUR is my full-time job. I work primarily from my home in St. Augustine, 30 miles from PGA TOUR headquarters, and I receive great support from Integro's offices in Atlanta and New York.
Speaking of support, I'd be remiss if I failed to mention the importance of having professional underwriters. The Travelers Eagle 3 underwriters understand the golf business and take great pride of ownership in their product and professionalism. That's good for the client, and good for the agent.
In addition to running golf tournaments, the PGA TOUR also owns several golf courses around the country known as TPCs, or Tournament Players Clubs. Many PGA TOUR events, such as THE PLAYERS Championship in nearby Ponte Vedra Beach (widely recognized as the fifth major), the AT&T Classic in Atlanta, the Travelers Championship in Connecticut, the Zurich Classic in New Orleans and the John Deere Classic in Illinois, take place at these clubs. We insure them all as well.
A smorgasbord of unique exposures
Golf club coverage is fairly unique because of the many types of businesses and exposures at a single location–all those associated with the course itself, plus the bar and restaurant, retail shops, swimming pool, tennis courts, D&O and others. We work hard with the PGA TOUR's risk manager to identify all the exposures and effectively address them through adequate coverage and detailed loss-control procedures. Fortunately, from my first day with the organization, the PGA TOUR has insisted on doing whatever is needed to prevent injuries and losses–something an insurance agent is always thrilled to hear. They're determined to have safe environments at both their courses and tournaments.
This is a point worth emphasizing, because this determination makes all the difference in the world. With so many exposures from so many different angles, there are going to be claims–no way around it. That's why risk management should be an integral part of loss control, and it has to start at the top. If a club's owners or directors aren't particularly committed to managing risk, subordinates won't be either, and a club can't rely solely on the loss-control guy who comes out once a year. Ideally, clubs are performing daily maintenance and safety checks, but without good direction from above, losses will be left to control themselves. The PGA TOUR sets a fine standard of responsibility that other industries would do well to imitate.
On the property side, the two biggest issues are fires and wind damage. Although fire frequency is very small–maybe 4 percent of total property claims-it accounts for approximately 40 percent of the total claims cost. Similarly, wind makes up only about 13 percent of total claims, but constitutes approximately 23 percent of costs.
While we can't do much about wind other than prune greenery and tie things down, we can easily identify fire risks at golf courses. Fires at clubs frequently occur in the electric cart storage areas, because there's not always enough electrical capacity for the number of chargers. Most clubs also have some sort of electrical circuit room that ends up being used for storage–often cardboard boxes and other easily flammable materials, perfectly suitable for burning when a switchboard overloads. The same sort of thing can occur in the restaurant kitchen. Not only are the stoves and ovens obvious hazards, but if there's three feet of space between the top of a refrigerator and the ceiling, someone will likely try to store something there. We try to have our TPC courses inspected once a year, since a good loss control person will pick up on all of these factors.
Under general liability, slips, trips and falls account for approximately 33 percent of our claims and 42 percent of claims cost. Indoors, one of the most common problems is wet staircases after a rain, so a club needs a system for putting out mats or mopping up quickly. Outdoors, most golf courses have numerous hills, which get slippery and may need to be roped off in rainy weather. Even at prestigious clubs, concrete steps or brick walkways wear down and become uneven, posing a potentially serious hazard.
A particularly ticklish and complicated issue with private club insurance is liquor liability. It can be very difficult for an employee to tell a prominent member of the club that perhaps he or she has overindulged and can no longer be served. (I've seen members fail to make it safely home when their condo is directly across the street from the club.) The alcohol exposures on and off the course are huge–you may be surprised at some of the things intoxicated people will do with golf carts–so clubs need to conduct alcohol awareness training on a regular basis, not only for servers but for all employees. Diplomatic techniques of dealing with tipsy members should be included in the training.
Anticipating the forces of nature–and more
Lightning is another major consideration. Studies show that 5 percent of lightning deaths occur on golf courses. Obviously a club can't prevent lightning, but it can communicate warning procedures to employees and guests. These days, however, sirens may no longer be enough. In prior years, a club could “plead ignorance” and consider lightning an act of God, but now sophisticated weather detection equipment is available that warns whenever lightning is imminent. If a club has this equipment, it must ensure it's well maintained and operating properly, along with providing lightning-safe structures on the course itself.
Another recent development in golf course safety is the use of electronic defibrillators. The catch, as it is with the weather detection equipment, is that the good intention of trying to save lives actually increases insurance risk if employees can't find or don't know how to use the equipment. Clubs must practice ongoing training and maintenance. Many clubs today are also placing call boxes around the course, so in an emergency someone doesn't have to sprint to the clubhouse to get help. Because there may be only three or four minutes to act, call boxes must work and the club must be able to respond rapidly at all times. Many clubs are adopting these precautions as a matter of course.
Swimming pools, hot tubs and kiddie pools are always big issues, and clubs have to observe all the usual safety measures: fences, self-closing gates, drains, qualified lifeguards, etc. One area clubs usually haven't considered until we ask is end-of-season “employee appreciation days” (think of the movie Caddyshack). The club is closed and management turns the pool over to employees-and bad things can happen.
With the advent of “golf course communities” (a golf course is built, followed by expensive homes surrounding it), adjacent properties present another problem. Courses should be designed to keep wayward golf shots away from houses and roads as much as possible, but if you've ever played golf, you know “as much as possible” isn't all that much. What we've seen from a liability standpoint is that when the course precedes the homes, the onus is more on the homeowner to accept the consequences of living next to the 14th hole. When the course is built after the homes, it's the other way around. The claims are usually small property damage, but if a slice conks somebody in the head or knocks a passing bicyclist off his bike, that may be a different story. Hedges and nets, while not necessarily aesthetically pleasing, may be necessary.
One final thing we see all too frequently is the need for certificates of insurance from suppliers or contractors working on the property. This happens all the time: “ol' Billy Bob” arrives on the property to “straighten out the fridge unit upstairs.” He lights his propane torch, and the next thing you know the clubhouse is on fire. Clubs need to verify that they're working with reputable contractors who can prove they have adequate limits and who will name the club as an additional insured.
Take all you want, but insure all you take
A strong property insurance program is the core of any golf course coverage. Certainly, all the buildings should be covered, from the clubhouse all the way down to pump houses, equipment sheds and irrigation rooms. Grounds coverage is also necessary for the greens, tees, fairways and roughs. Vandalism protection should be included, especially when the course is surrounded by a residential area, since breaking into the cart barn, destroying the greens and then driving the cart into the lake seems to be an adolescent rite of passage. Trees, plants and shrubs need coverage, too. Hurricanes Katrina and Wilma, beyond the more obvious damage, really did a number on golf courses, too. Even in Atlanta, ice storms can wreak havoc on tree limbs. Clubs can easily anticipate the likelihood of such damage, and should plan accordingly.
The real and personal property coverages are usually written on an all-risk basis, but it tends to be named-perils when you step outdoors. One peril that clubs would love to have but can rarely obtain at a reasonable price is flood coverage for damage to the course itself–I get calls about it from literally around the world. The problem is that courses are trying to insure dirt, which is a pretty hard thing to ask an underwriter to do. Anyone going into the golf business must realize that there are inherent risks, not all of which can be effectively addressed by insurance, and flood tops that list.
A way of partially mitigating the exposure of wind damage to the course is business interruption coverage, but there are usually sublimits: After a few storms that shut the course down for a while, carriers learn to cap the BI. Conversely, lost income due to fire isn't the problem that it may first appear to be. The restaurant burning down isn't going to stop anyone from playing golf, so simply setting up a starter's tent outside usually meets the need. Oddly enough, many clubs find that they actually increase profitability when the bar and restaurant are out of service, since they're only there in the first place because members expect them.
Along with property coverage, clubs need equipment breakdown coverage–boiler and machinery and other such things. In terms of general liability, it's the old conversation: How high should the limits be? That's like asking how high is “up,” so I advise making them “adequate”–just don't ask me exactly what I mean by that!
Golf clubs also have pollution exposures. There may be fuel tanks on the property, as well as significant herbicides and pesticides. Chemicals can end up in a water stream, or be carried by wind into Mrs. Jones' flower garden next door, so pollution is another risk that can be easily foreseen and addressed.
D&O liability is an important consideration with any private club. I'm not a lawyer, so I can't speak with authority on the issues involved, but I can offer my personal opinion. I've served on various boards of directors, and there is no way I'm putting my personal assets on the line under any circumstances. Every club must thoroughly review their management liability policy, including employee practices. In addition to the many exposures mentioned above, golf clubs may also run the risk of denying membership, which always has the potential to turn into something ugly. Fiduciary liability is another possible coverage, since many big clubs have some sort of employee benefits program.
Crime, usually petty theft, is 25 percent of the claims, but only 6 percent of the dollar amounts. This is a common occurrence: A member completes his round and an attendant places the bag out on the rack. Then someone drives up in a Mercedes or Cadillac–there are groups of professional criminals who do this, believe it or not–hops out, throws the bag in the trunk and drives off. No one bats an eye until the member asks what happened to his $2,000 bag of golf clubs. Clubs must anticipate this issue by having adequate security personnel or locking up the equipment until the member is ready to leave.
Bigger crime may become more serious in the near future. Many clubs now have Web sites and electronic files containing private information about members. I would never have dreamed of this 15 years ago, but now clubs need to consider guarding against employees or hackers getting into the system. I'm not sure all clubs are taking this threat seriously enough, but brokers should advise their clients accordingly, because they can't afford not to have protection against it.
Excelling at golf means endless practice, superior self-discipline and an ability to concentrate and perform under pressure. Insuring golf courses, with the emphasis on preparation and attention to detail, requires many of the same traits. Maybe even a few more, since there are no mulligans with golf club insurance! Insuring professional golf events: A peek behind the curtain Being involved with the PGA TOUR's insurance program is certainly one of the more enjoyable, rewarding and challenging parts of my job. As a lifelong golfer, I don't know if I could have consciously designed a better market niche for myself.
As for enjoyable, how many people can sit in front of a TV watching golf and claim they're actually working? Every Thursday and Friday my office TV is set to the Golf Channel, followed by network TV on the weekends. Also, along the way I've had occasion to play quite a few fine golf courses. There are obviously worse ways to spend one's time.
As for rewarding, in 2005 the PGA TOUR passed the $1 billion mark in charitable donations since its founding, far in excess of any other sport. I was present at the event when Jack Nicklaus made the announcement, and it's hard to describe how much pride I felt at having worked with the PGA TOUR during a portion of this time.
Of course, the challenges never stop. As I hope the main article shows, golf course exposures flow like water from a faucet. When you add in a PGA TOUR or LPGA tournament, the flow becomes a waterfall.
When I was a child, the PGA TOUR would come to town for a week, play the tournament and leave. Today, professional tournaments include a number of what I call “extracurricular events.” They range from pro-am tournaments to almost anything else you can think of: hot-air balloon rides, race car rides, deep-sea fishing pro-ams, swimming with dolphins, surfboarding and even a closest-to-the-pin contest from the roof of a high-rise condo adjacent to the course. If the event is part of the PGA TOUR tournament promotion, insurance coverage must be considered. To say the least, things can get a little complicated.
During the week of the actual tournament, countless golf carts intermingle with spectators, while hundreds of courtesy cars transport players and tournament officials to and fro. At the four-day event itself, thousands of spectators will be spread out over a 200-acre property–and naturally, not sitting in assigned seats as they would in a stadium, but walking all over the course. As at any golf club, slips, trips and falls are a common source of incidents. One question I'm frequently asked is how often spectators are struck by stray shots. Fortunately, even with so many people crowding the fairways, it's an infrequent occurrence.
Loss control plays a critical part with a PGA TOUR event. Setting up for a tournament begins approximately 30 days out, and “takedown” can continue for 30 days after. Since the carrier can't place a loss control person on the course for two solid months, early last year Travelers developed The Advocate Program, in which a tournament employee or volunteer is designated as a “loss control deputy.” Travelers will coach this individual on where problems typically occur, and he or she will act as the insurer's “eyes and ears” onsite. Similarly, if we notice a frequency of issues on a particular section of a particular golf course, we will discuss them with the PGA TOUR accordingly.
Our ultimate goal, of course, is to provide the contestants, spectators, volunteers and employees with the safest and most enjoyable experience possible. Stringent loss control procedures also allow me to sit in my recliner and try to relax while I'm watching golf. Believe it or not, when you know all the things that can go wrong if you haven't taken the proper precautions, watching golf can be pretty nerve-wracking!
Bob Goldthorp is a principal with Integro Insurance Brokers in Atlanta, Ga. He can be contacted at bob.goldthorp@integrogroup.com.