“I dont think there is any doubt that the vast majority of health club claims emanate from the use of treadmills,” he said. “If somebody falls off the treadmill, it is usually not in one of the at-fault areas, but you see it all the time. Someone is watching TV, or even talking on the cell phone, for Gods sake, and they take a spill.”

Mr. Palmer said that some of these claims may be paid, even if they are not worthy, to avoid the legal hassle, while other such incidents never get to the claim stage from the health club. The treadmill manufacturer could also be liable, he noted.

Mark Beck, vice president for Fort Wayne, Indiana-based K&K Insurance Services, said treadmills and climbers can cause injury at times when the previous user failed to turn off the machine properly so it would start at the first stages of programming.

“Most manufacturers are working toward these types of units resetting themselves back to the beginning to prevent an unsuspecting member or guest becoming injured when they jump on the equipment and find that the unit starts beyond their capability,” he said.

Mr. Palmer at Burns & Wilcox chooses to work with one independent retail agent and one non-admitted rated carrier, which he declined to name. “We have agreed to parameters to what we will not do in providing coverage to health clubs and what kind of health clubs we will not cover,” he said of his two partners.

At K&K, Mr. Beck said his firm primarily writes on paper from one admitted carrier for its health club accounts. “We are not a wholesale or brokerage insurance provider, who may access different markets and compare,” he said, declining to identify the carrier that K&K works with.

As more and more health clubs evolve from the limited “muscle club” environment to the more family-friendly atmosphere with pools and childcare services, new underwriting concerns arise. “These are the kinds of facilities that these clubs have to offer, whether they want to or not, to broaden their spectrum of service,” he said.

Rock walls remain a source of concern to Mr. Palmer, as they fall outside his range of standard covers. “It does not mean I could not get it placed elsewhere, but it would just not be with the advantageous terms I can offer from a nationwide program,” he said.

In addition, so-called “key clubs,” where patrons exercise without on-site supervision, will also not be covered under a standard program.

Ron Hernbroth, vice president of Tanner Insurance Services, located in the San Francisco Bay Area, said the market for insuring health clubs is very limited, with unique programs required. “You really have to develop a program designed for health club operations,” he said. “A standard policy will not fit because of the unique exposures.”

Mr. Hernbroth said he has seen more childcare claims of late involving some form of sexual molestation, “and it is not necessarily between staff and patrons, but between two youngsters,” he noted. “The allegation is that you failed to supervise many times, not that you were the culprit yourself.”

As clubs take on a more social role in the community, Mr. Hernbroth warned, new liabilities arise. “For example, it is a very popular for high schools in this area to contract with health clubs to have graduation parties,” he said.

Liquor liability is becoming an increasingly important component, as some clubs now serve beer and wine to give their health enthusiasts a chance to stray just a bit after a workout. “Is it worth paying more for insurance? The vast majority, when they sell beer and wine, will pay more in liquor liability than in receipts,” he said.

As for market conditions, Mr. Palmer said he does see a softening in prices that is occurring in the general commercial market. “I would say overall that the health club industry has enjoyed better pricing because of more focused people in that arena who can help clubs reduce risk,” he said.

A good combined ratio for the industry with generally favorable experience, with some bad pockets, makes for a profitable p-c line, Mr. Palmer said.

Mr. Beck said that health club pricing trends generally follow those of the general market. But in spite of the relatively small market, he also noted that over the past 14 years, “the insurance marketplace has changed, with many carriers coming and going in and out of the program business.”

While the insurance market remains confined, the number of health clubs and membership figures just keeps going up. IHRSA figures show that as of January of this year there were 26,830 facilities in this country, including commercial health clubs, gyms and fitness centers. As of January 2004, the clubs earned $14.1 billion in revenues for the previous year.

Two of the fastest growing membership segments represent the under-18 and over-55 groupsaccounting for 11.4 percent and 17.4 percent of health club membership, respectively, according to IHRSA/American Sports Data Health Club Trend Report.

Slips and falls in wet areas constitute the second greatest source of claims, behind treadmill accidents. “Sometimes it is not easy to determine if the club is negligent, but often it is just easier to pay the medical claim,” Mr. Palmer said.

A potential clients loss experience will usually tell the tale of their commitment to loss control. “Those clubs that have employees involved in their clubs risk management programs and develop incentive programs for their staff to focus on safety concerns at their premises do the best job without having to hire or contract outside services to help them manage their facilities,” K&K's Mr. Beck said.

The most significant loss control measure by far remains the waiver members must sign before using the facility. “We provide a waiver form for our clients, but how the laws are interpreted in each state will determine their usefulness. That being said, any health club that does not have a waiver signed is nuts,” he said.

Having been in the business of health club underwriting for over a decade, Mr. Beck has seen some changes along with many constants. “Insurance buyers are more savvy than they used to be. Those insureds that have had problems with coverages or losses require a bit of attention from their agents or brokers to keep their costs controlled or down,” he said.

The advent of many chains taking the place of “mom and pop” facilities has not necessarily led to more professional risk management practices. “The faster-growing chains sometimes sacrifice risk management during their growth periods, which will in turn require a higher degree of monitoring from their insurance carriers,” according to Mr. Beck.

Reproduced from National Underwriter Edition, March 17, 2005. Copyright 2005 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.