Is Sports Sponsorship Always Good for Business?

However, there is an endorsement, CG 21 46, that is used by many insurers in those instances where the possibility of abuse and molestation exists. This endorsement excludes coverage for bodily injury, property damage, and personal and advertising injury arising out of the actual or threatened abuse or molestation by any person. In addition, because a lawsuit will be filed against the named insured employer alleging negligent investigation, employment, and supervision of the abusive employee, this endorsement also excludes coverage to any insured that is or ever was legally responsible for the conduct of the abusive employee. If this endorsement is attached to the general liability policy, then the named insured company is not going to have liability coverage against a sexual abuse or molestation claim.

Another point to consider in relation to a sexual abuse claim is the fact that, even if the allegations are false, the business is going to suffer a public relations blow. The general liability policy is not going to protect the insured from a possible loss of business that could occur after a sexual abuse claim is made known to the public. In fact, even the standard business income and extra expense coverage form is not going to provide coverage for the insured under such circumstances.

Hauling Precious Cargo
The auto exposure is another coverage gap that exists for the athletics-sponsoring business under the general liability policy. Suppose the coach (who is also an employee of the named insured business) uses the company van to transport some children in a little league team that the company sponsors to a game. If there is an accident on the way and the children get injured, then the general liability policy will not provide coverage because of the auto exclusion that prevents coverage for injury arising out of the ownership, maintenance, or use or entrustment to others of any auto owned or operated by or loaned by any insured. Even if the employee-coach uses his own personal vehicle, the employer's general liability policy will not provide coverage for the injuries. The company will need its own commercial auto policy to properly protect its interests—although the standard personal auto policy of the employee will provide coverage for the employer with respect to its legal responsibility for the acts or omissions of the employee-coach.

The auto exclusion would also come into play if the company van is being used to transfer the young players' sports equipment. If the equipment is damaged in an auto accident, then such property damage is not covered because of the auto exclusion. Even if the van is parked at the playing field or at the post-game victory feast at a local fast food place, and the equipment is stolen, the care, custody, or control exclusion can be used to prevent any coverage for that loss. The insured may very well not be held liable for such a loss to another's property, but if so, the general liability policy is not going to automatically pay for that loss.

The general liability policy does pay medical expenses for bodily injury caused by an accident on premises that the named insured owns or rents, or because of the named insured's operations. At first glance, this provision may seem to allow the company's general liability policy to pay for first aid if a little leaguer gets hurt, or even pay for an injury to the coach, say if they're hit by a foul ball; however, the medical payments section of the liability policy excludes coverage for such injuries. The policy will not pay expenses for injury to any insured (the employee-coach), to a person hired to do work for any insured (the employee-coach), or to a person injured while practicing, instructing, or participating in any physical exercises or games, sports, or athletic contests (players and coaches). The intention of this exclusion is to prevent the general liability policy from becoming a substitute for a person's own health insurance. Of course, if a parent is injured while cheering on her son or daughter, med pay coverage could be extended to the parent as a goodwill gesture.

Additional Insureds
One more point to consider is the additional insured. If the company-sponsored team is using premises owned by another entity for practice and games, the other entity is going to want to be added as an additional insured on the general liability policy of the company. This is usually no problem for the company, which can have this request fulfilled through the attachment of a standard additional insured endorsement (for example, CG 20 12, which makes a governmental agency an additional insured). The company, however, needs to be aware of the fact that it is sharing the liability insurance with the additional insured; any losses paid on behalf of the additional insured will decrease the policy aggregate amount available to the named insured.

Moreover, even though the coverage for the additional insured applies only with respect to operations performed by the named insured for which the permit or authorization was issued, the experience modification factors that may lower or increase the policy premium can be affected by the losses and claims of the additional insured. Of course, lawsuits against the named insured and the additional insured mean that both parties are entitled to a defense with its accompanying legal expenses.

A Winning Endorsement?
The risk exposures facing a business that sponsors an athletic team are not catastrophic, but they do exist; the items mentioned in this article are but a few. For appropriate insurance coverage, businesses should not hesitate to protect their civic-minded goodwill gesture by purchasing a specialty lines policy or by having proper endorsements—standard or manuscripted—attached to the general liability policy.