Insuring Risk in the Fitness Industry and the Commercial General Liability Policy
Over the last decade, the health and fitness industry has witnessed substantial steady growth—becoming a $30 billion industry that encompasses thousands of fitness chains, boutique fitness studios, and sponsored fitness events around the globe. These fitness companies are particularly exposed to claims brought by participants for bodily injury, including death. Indeed, the very nature of the fitness industry promotes physical exertion, often to its max, and resultant injury is an inherent risk. As the fitness market continues to grow, so too will its potential liability exposure from fitness participants’ injuries. To reduce this liability exposure, insureds in the health and fitness industry should understand the coverage provided by and the limitations of the Commercial General Liability (CGL) policy.
The CGL policy is the standard business policy that protects an insured against claims of liability for bodily injury, property damage, and personal injury. It can also provide coverage for medical expenses incurred as a result of the bodily injury. The CGL policy is designed to provide the broadest liability coverage available for liabilities involving bodily injury. CGL policies typically define the term “bodily injury” as “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.” This definition is broad enough to encompass potentially all manner of bodily injuries to fitness participants that involve physical harm or damage to the body, including external injuries, internal injuries, and death. It is also broad enough to potentially encompass injuries to spectators, athletic coaches, referees and promoters.
An important feature of the CGL policy is that it typically obligates the insurer to defend the insured against any suit seeking damages for bodily injury. The duty to defend is a significant feature in CGL policies because litigation can be extremely costly. Moreover, unlike certain other forms of liability coverage, amounts paid to defend the insured under a CGL policy typically do not erode the limits of liability, leaving the full policy limit available to pay for a settlement or judgment.
The coverage under this policy does not apply to “bodily injury,” “property damage,” “personal injury,” “advertising injury,” or any injury, loss or damage arising out of:
1. Injury to any entertainer, stage hand, crew, independent contractor, or spectator, patron or customer who participates in or is a part of any athletic event, demonstration, show, competition or contest …
See New Appleman Sports and Entertainment Insurance Law & Practice Guide § 7.10, LexisNexis (2019).
The Sports and Athletic Participant Exclusion is one of the most common barriers to insurance coverage for those in the sports and athletic industries. Courts across the country have interpreted this exclusion as barring coverage for injuries sustained by participants during athletic competitions. See, e.g., Friar v. Statutory Trs. of Kirkwood Sports Ass’n, Inc., 959 S.W.2d 808 (Mo. Ct. App. 1997) (exclusion barred coverage for injury sustained by a baseball player from a protruding metal bar while sliding into second base during a game); Gen. Ins. Co. of Am. v. Acad. of the Visitation at St. Louis, 598 F. Supp. 1131 (E.D. Mo. 1984) (exclusion barred coverage for injury sustained by participant who fell off a balance beam and suffered serious, permanent injuries during her school’s mandatory day of athletic and competitive events); Morrison Assurance Co. v. Sch. Bd. of Suwannee County, Fla., 414 So. 2d 581 (Fla. Dist. Ct. App. 1982) (exclusion barred coverage for a student injured while running the 50-yard dash in a physed class and sued school). There is minimal, if any, case law that considers the application of this exclusion specifically to fitness companies. However, a recently filed case in the Southern District of California involves the application of the Sports and Athletic Participants Exclusion to coverage for the death of an individual after a weekend-long endurance fitness event, organized by SealFit and CrossFit. Complaint, Philadelphia Indem. Ins. Co. v. SealFit, Inc., Case No. 19-cv-1388 GCP AGS (S.D. Cal. July 25, 2019), ECF No. 1.
In sum, the broad coverage offered by CGL policies for “bodily injury” can be drastically limited, if not wholly eliminated, by the Sports and Athletic Participant Exclusion.
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