Helping Health Club Operators Respond to Lawsuits

Lawsuits, particularly personal injury suits, represent a growth industry in this country. According to an IBISWorld study, Personal Injury Lawyers & Attorneys Industry in the US (2015-2020), during the study period, revenue for the Personal Injury Lawyer and Attorneys industry was projected to grow an annualized 1.9% to $36.9 billion, including a 2% increase in 2020 alone.

When it comes to personal injury cases, not many actually make it into a court setting. According to the U.S. Department of Justice, only 4% of personal injury cases ever see a trial, with most being settled out of court. Some 16,397 cases—out of more than 400,000 personal injury claims—went to trial in 2020.

Settlement amounts vary from case to case. Overall, the median amount given to the plaintiff for any case is $31,000, and half of them receive $24,000 or less. Product liability has the highest average compensation of $748,000, and motor vehicle accident claims have the lowest, at $16,000. The kind of settlement derived from the most common health club accidents—slip and fall, part of premises liability—has an average payout of $90,000.

Responding to a Lawsuit

Given that potential loss, being notified that you are part of a lawsuit would send chills down any business owner’s spine, especially if you’re being sued for the first time. So, how should you respond?

“First off, don’t panic,” advises Lance C. Brenn, claims litigation analyst at K&K Insurance Group, Inc. “Contact your agent, broker, or claims company and immediately make them aware of the situation. Lawsuit responses are time-sensitive. The last thing we want to see is a default motion—which can occur if the response is late—being filed against a club operator client. These can be difficult to set aside, and coverage will always be in jeopardy.”

One key resource you have—likely hidden away deep in a filing cabinet in your basement—is a copy of your Commercial General Liability policy. Open it and dust off the cobwebs. Turn to “Section IV. Commercial General Liability
Conditions, 2. Duties in The Event of Occurrence, Offense, Claim or Suit.” There you will find a road map as to what needs to be done and provided to the company. This policy document is legally binding and mandates the requirements that need to be followed.

“In terms of the process, assuming no coverage issues, the lawsuit will be assigned to a company representative who will be retaining defense counsel for responsive pleadings to be filed, typically referred to as an Answer,” Brenn explains. “As part of the process, insureds will be required to assist defense counsel in replying to the plaintiff’s interrogatory and document production. Insureds can expect to be noticed for a deposition, which is done with court reporters, and participate in mediation. They may be required to appear at a trial, if one is necessary. Generally speaking, insureds are well informed of developments by the attorneys and company representatives throughout the process.”

How Your Policy Protects You

In your Commercial General Liability policy, you’ll find the “Commercial General Liability Coverage Form, Section I, Insuring Agreement,” which outlines specific protections.

“The policy language can be complex and difficult to comprehend,” says Brenn. “K&K realizes this, and we work hard to maintain excellent communications with our insureds. We direct and control all aspects of the litigation process. Assuming a covered claim, the policy will protect for liability up to the applicable limits. I strongly urge our insureds to have a secondary Umbrella Policy to protect against any catastrophic loss. Failure to do so can result in an excess judgment, which could be fatal to the business.”

The point is that you’re not alone in the litigation process. In addition to the defense counsel handling the suit, insureds are supported by paralegals, investigators, surveillance teams, medical, and liability experts. These players work interactively for your defense. Defense costs can be significant, but they’re all part of your coverage.

“In many of our cases, waivers are applicable, and it becomes our goal to file summary judgment motions to extinguish suits as a matter of law,” he adds.

Never Take Any Potential Suit Lightly

Is there a difference between steps you take if you think something has happened that might become a claim vs. when something actually does?

“I recommend to all our insureds that they treat all accidents as though they will become claims or potential lawsuits,” asserts Brenn. “Prepare for the worst-case scenario. We live in an extremely litigious society where it’s all fun until someone gets hurt. I’ve had many a case where our insured thought an incident was minor, didn’t document it, and failed to retain video. A year later the attorney rep letter comes in and it’s discovered that the claimant underwent back surgery and incurred $250,000 in medical bills.”

Take preventative action by retaining video, completing accident reports, and submitting them to your insurer. Just the submission doesn’t mean a claim will be set up and investigated, so it won’t impact your rates.

“We regularly record many matters as ‘Notice Only,’ which protects you in giving the company proper notice. In the event something should develop, then we can easily convert the incident to a claim,” adds Brenn.

Get Your Best Defense

“K&K actively stands ready to defend our insureds and what separates us from most other companies is how we handle, respond, and communicate,” he says. “We are experts in recreational litigation. We know waivers and membership agreements. We know Assumption of Risk laws. Being served a lawsuit for many insureds can be a frightening and traumatic experience. We recognize this and assure our insureds their case will be handled diligently and with the expertise they expect. K&K claims/litigation is a team with our underwriters, defense counsel, and others who work together to achieve favorable results. We will never promise something we cannot deliver on, and we always act in the best interests of our insureds.”

To learn more about the protections and services offered by K&K Insurance, visit their website.