Club Insurance-Do You Need It?

I recently received this email:

Hi Chris-

I've enjoyed your blog and noticed your "suggested topics" section and thought I'd write you and ask.

Could you write something about insurance in the future? We are a newer club and are researching it.

We are aware many clubs don't have it.
What are the benefits and what are there reasons to get it or not get it ? How much do you need? Where do you get it? What does it cost- different per state I would imagine....

another topic - what about profit and not for profit status for a club? Why would you want to do one over the other? We don't have a lot of formal stuff at this point(just a group of us that have gotten together) and as our budget is very low and we are funding everything ourselves, we don't want to pay for things we really don't need.

It would be nice to get opinions from others on this so that we can make an educated decision.

thanks,

Name Withheld


I'll admit, I didn't know much about insurance myself. My flyball club consists of about 8-9 people. We do not host a tournament (a fact I am working on to change) and haven't been contacted to do a flyball "demo" in several years. I had to take some time and do some research in order to answer these very good questions. How do you know if you need insurance?

1. The first question you need to ask is this: What do I own that I am willing to risk? Insurance protects you in the event that you are named in a lawsuit due to an incident/accident that results in property damage or personal injury. If you do not own much--maybe, you rent your home and live paycheck to paycheck. Your vehicles are old and not worth much. Since, you don't really have any "assets", if you were named in a lawsuit, the plaintiff couldn't collect much of anything from you anyway. That's one way to look at it.

......but, what if you own a nice home? ....a late-model vehicle? ....a boat and/or RV? ...and have a bank account and investments? You could lose a lot if you were sued for liability and had a judgment entered against you in a Court of Law.

2. The next question you and your club need to answer is: What are the chances that an accident may occur? We don't "host" flyball events and we don't even do flyball "demos".

On the surface, that may seem to be a "low-risk" situation. What else do you need ask?

• Does your club rent a practice facility? ...or, do you use some one's private residence?
• Do you or your "club" teach dog training (flyball) classes?
• Do you give private flyball lessons during your practices?
• Do you ever invite or allow a "guest" to attend your practices?

If the answer is "yes" to any of the above questions about teaching or guests, then you have a liability risk. If you rent a facility, the building owner may require proof of insurance before renting to your club because, as a property owner, they have a liability risk. If you meet at some one's home to practice and you have a "guest", again, that property owner has a liability risk and may not even realize it!

If a property owner requires anybody renting their property (such as may be necessary to hold practices) to carry insurance, then the choice of whether or not to carry insurance has been made for you. ...but, don't make the mistake of assuming you do not need insurance just because nobody is requiring your club to prove it carries insurance in order to carry on its activities.

3. How much do you need? First, you need to understand what kind of insurance you need to cover your "risks" as a dog club. Commercial General Liability Insurance is the type of policy you and your dog club typically should carry. The word commercial is in the title because, in the eyes of the law, the activities of your dog club are considered commercial in nature. Money does not need to be exchanged in order to be considered commercial. Any benefit, (such as learning how to train a dog) can be considered commercial.

General Liability refers to any incident or scenario which could result in a liability lawsuit. It could be a "slip and fall" injury. It could be weather related property damage. Anything can happen and, if it does, somebody might seek damages for their loss.

My research has revealed that policies for this type of insurance are generally written to pay out a maximum of $1,000,000 per occurrence and $2,000,000 maximum payout for the policy term. There may be other "limits" depending on who is quoting the coverage, which state it is in, etc. Premiums typically run between $350.00 up to $700.00 per year. Seems expensive, doesn't it? Still, how "expensive" could defending yourself against a lawsuit be?

4. Where do you get insurance? The best advice I can give for this question is to contact an Insurance Agency or Insurance Broker that specializes in Commercial General Liability Insurance for dog clubs. Dog sports and activities carry with them the added liability of a possible dog "bite" and there are some policies that specifically exclude dogs so, make sure your policy covers this specialized risk. Two good companies that can issue such policies are:

• Sportsmen's Insurance Agency Plan, Inc has been insuring dog clubs for over 25 years and carries several specialty policies that cover different "risks". Visit their website at Sportsmen's Insurance Agency Plan, Inc for more detailed information.
• R.V. Nuccio & Associates, Inc Kennel Club Plan is a special program of insurance specifically designed for a kennel or dog club. The program is available nationwide and is underwritten by the Fireman’s Fund Insurance Company, one of our nations oldest and most respected insurance companies. Please visit R.V. Nuccio & Associates, Inc for more detailed information.

5. What about profit and not for profit status for a club? Why would you want to do one over the other?

A non-profit corporation is a special type of corporation that has been organized to meet specific tax-exempt purposes. To qualify for non-profit status, your corporation must be formed to benefit (1) the public, (2) a specific group of individuals or (3) the membership of the non-profit.

Non-profit corporations enjoy the same "liability protection" as regular corporations and limited liability companies. In other words, your directors, trustees, members, and employees are not responsible for corporate debts and liabilities. There are also significant federal and state tax benefits available for incorporating as a non-profit. One of the most attractive benefits of forming a non-profit is "tax-exemption".

Forming a non-profit is a great way to keep the "business affairs" (money) of your club separate from your personal money. As a non-profit, your dog club is eligible to receive grants or tax-deductible donations, which are critical to your fundraising (sponsorship) efforts. Non-profit recognition also reassures potential donors that you are a legitimate organization.

You do not need to go the entire route of "incorporation". You can file a simple "DBA" (Doing Business As) with your state which will allow you to open a bank account in the name of your DBA. However, doing so will not afford you or your dog club "liability protection" as incorporation will. A DBA may be a "first step" towards eventually filing for non-profit status and tax-exemption as your club grows and becomes more active with more members.

For more information about business structure matters, please visit legalzoom.com For more information on tax matters for non-profits, please visit the IRS.

The Bottom Line

My conclusion after all my research is this: Every flyball club has a "liability risk". If you do not take some simple steps to protect yourself and your club from being held liable, you could spend a fortune defending yourself and the other members of your club in a lawsuit. If you cannot afford to pay an insurance premium to carry Commercial General Liability Insurance then, you should take the time and spend whatever dollars is necessary to incorporate your club which will protect the individual members of your club from personal liability. Seeking "non-profit" status for your club will save you from being liable for taxes for your club's activities. This would include a simple thing such as collecting for "dues".

Good Luck and Good Racing!