Changes to state and federal law over the past few years may prove to be no gimme for golf and country clubs. In fact, since many club owners and managers are unaware of the potential impact of these laws, a simple omission may significantly increase the already complex liability exposure faced by clubs.
To complicate matters further, the variations in legislation from state to state can make it overwhelming for agents and brokers to keep track of the liability issues that their club insureds face. What exactly does each law mean to clubs, how do they differ by state, and how can you help the insured stay on course to prevent the risks associated with them?
On the Federal Level
There are three federal laws signed in the past two years that affect most golf and country clubs. First, the Illegal Immigration Reform and Immigrant Responsibility Act could have serious implications for clubs. Illegal immigration reform has shut down jobsites where managers historically looked the other way when it came to hiring practices. Even though many clubs have not yet been targeted for illegal immigration, clubs will eventually need to protect themselves as this risk is not insurable.
To avoid a situation that could have a devastating effect on a club’s bottom line and reputation, club hiring managers should use the most up-to-date screening process to check citizenship, as well as drug screening and criminal records. There are cost-effective means to screen the eligibility of potential hires, such as E-Verify, an Internet-based system operated by U.S. Citizenship and Immigration Services in partnership with the Social Security Administration.
Second, every club needs to understand the Fair and Accurate Credit Transactions Act (FACTA), a law that aims to provide more stringent protection for members’ sensitive financial data. Most clubs keep sensitive information such as credit card numbers on a computer database that they perceive to be secure. However, with identity theft becoming increasingly difficult to prevent, more stringent measures have become necessary. Information systems (IS) experts agree that encryption is one of the best solutions.
There are some insurance products that can help with identity theft. Such products include coverage for suits brought against a club, as well as the cost to cover credit monitoring, investigative charges and costs associated with accountability for fraudulent charges.
The third federal law affects clubs with on-site public pools or spas, which pose dangers if the drains aren’t properly covered. The 7-year old granddaughter of former Secretary of State James Baker was killed when suction from an insufficiently covered drain pinned her underwater. In response to this tragedy, the U.S. Consumer Product Safety Commission (CPSC) enacted the Virginia Graeme Baker Pool and Spa Safety Act in December 2008.
Under the Act, every pool and spa must have drain covers that conform to the American Society of Mechanical Engineers (AMSE) standards and each public pool and spa with a single main drain must have at least one additional level of entrapment protection. The maximum federal penalty for one or more related violations of this rule is currently $1.825 million, but Congress is considering legislation that would increase it to $10 million or higher. Under most insurance policies, fine/penalties or punitive damages are not insurable, so the club will be responsible for paying these amounts out of its own pocket.
Dram Shop Laws Differ by State
When it comes to state legislation, dram shop laws need to be monitored carefully because they differ widely from state to state and change often. Under dram shop laws, alcohol-serving establishments like golf and country clubs can be held financially liable if a customer becomes obviously intoxicated on their premises and subsequently injures someone or causes property damage by driving drunk. What makes dram shop laws so difficult for agents and brokers to follow is the degree to which they vary depending on the state.
There are currently 42 states plus the District of Columbia with dram shop laws and eight states without them: Delaware, Kansas, Louisiana, Maryland, Nebraska, Nevada, South Dakota and Virginia. States such as Nevada haven’t passed dram shop laws in part because the state relies so heavily on tourism and its accompanying alcohol sales. Other states, including Alabama, Alaska and Michigan, limit liability to illegal alcohol sales such as serving to minors.
Some states are very strict about dram shop laws. In Texas, the bar or nightclub is always held liable. There is no gray area. In fact, Texas law allows minors to sue the drinking establishment for their own injuries sustained while intoxicated. Similarly, in Massachusetts, the highest court in the state held that a club could be sued if a patron exhibiting “drunk, loud and vulgar” behavior was determined to be “visibly intoxicated.”
On the other hand, in states like California and Florida, a few more factors are taken into account and the bar or nightclub has a better chance of mounting a defense. Missouri’s recently revised dram shop law requires proof that the party demonstrates “significantly uncoordinated physical action or significant physical dysfunction.”
From most club owner’s perspective, unless the patron is falling over tables or passed out at the bar, it is difficult to tell if a person has consumed too much alcohol to avoid drunk driving.
For those states where club insureds are more vulnerable to lawsuits under dram shop law, loss control recommendations can be put in place to address the risk. For one, clubs should develop a liquor liability training program for employees who serve alcohol to customers. Many qualified programs are available such as TIPS (Training for Intervention Procedures) and SMART (Serving Managers Alcohol Responsibility Training).
The premium for liquor liability is not significant in many cases, but if a loss occurs, it is normally catastrophic. Many times, those claims pierce the umbrella, so it is critical to ensure that the umbrella coverage extends over the primary liquor liability.
New Regulations for Youth Golf Camps
In certain states, clubs with youth golf camps or other youth programs on the premises are affected by changes in “youth camp safety” laws. For example, new regulations were passed as part of the Texas Youth Camps Safety and Health Act and, as a result, all adults hired to work with youth must provide an annual background check with the State Sexual Offender Registration database and go through state-approved “youth protection training” each year.
A similar law was enacted in New York, where the Child Safety Act requires children’s camp operators to ascertain whether prospective employees are listed on the New York Division of Criminal Justice Services Sex Offender registry prior to hiring them.
For clubs in these states, youth camp policies apply to all adults who work with children, whether as a volunteer or adult staff member, and all youth protection training courses must be approved by the state. The regulations also require that management keeps a record on file of criminal convictions for all adult staff members and volunteers. Records of criminal convictions and sex offender status may be obtained by an annual criminal background check, and the Sex Offender Registration database can be accessed through a website without charge.
An Expert Partner Knows the Law
The variations in legislation from state to state can make it overwhelming to keep track of the risks that your club insureds face. Golf and country clubs in Texas require a very different program than clubs in Florida, for instance, and these programs can change with frequency depending on changes to the law.
It doesn’t have to be overwhelming, if you find an expert MGA that is up to date on the latest changes in state and federal law. With the right MGA partner, you will be well positioned to suggest the proper risk management measures and insurance products that provide that extra level of protection for golf and country clubs, no matter where they are located.
DeMarco is executive vice president of the Preferred Club Program (www.preferredclub.com) in West Chester, Pa., a leading provider of insurance and risk management programs to the golf and club industry.
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