Driving past the unique insurance needs in motorsports
The racing teams are effectively a business, and they operate their business based on sponsorship dollars.
It’s the middle of racing season and the arrival of summer is a welcome time for the world of motorsports. As each type of motorsport — from monster trucks to the Indy 500 — features a different racing style, there truly is something for everyone.
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“When you’re talking about racing in general, I would say that there’s a lot of different flavors to choose from and most people are going to find one of the types of racing interesting to watch,” says Alex Baiseri, a broker with specialized experience in entertainment, production, sports and motorsports.
Still, motorsports remain niche in comparison to other televised sports. But, just like any other sport, there are similar insurance needs that businesses involved need to account for — and others that totally unique to the world of motorsports.
Business as usual
“If you look at it from a standpoint of it being a business, you have your standard property, general liability, workers’ compensation, business auto (for transporting the equipment and the teams to the racing events),” says Baiseri. “All your normal nuts and bolts of insurance.”
The racing teams are effectively a business, and they operate their business based on sponsorship dollars. The hierarchy is fairly simple: the racing venue, the sanctioning body, teams, drivers, and sponsors.
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“When it comes to racing events, there is a relationship hierarchy that is established for general liability and the structure of the events, similar to concerts or large sporting events,” says Alex Baiseri.
A unique sport requires unique insurance
Vehicles used on the racetrack are not like any vehicle that most people drive, and so, the coverage that can apply to them varies with it.
“When we’re talking about the competition vehicles, they are considered equipment. So they’re not licensed for the road, and auto liability does not apply in this particular case when they’re in the venue,” says Baiseri.
In addition to the racing equipment, there is something called owners and sponsors insurance. Since logos and money are on display to the general public, this liability policy protects those sponsors in case they got called into some random lawsuit.
Hypothetically, if a vehicle goes off a racetrack and does damage or hurts somebody, everybody in the motorsports hierarchy can be named in the suit. Owners and sponsors insurance provides coverage so those involved cannot get named.
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Also, the drivers tend to be independent contractors for the most part. Since they’re not an employee of the team, they must insure themselves.
“The policies they [the drivers] need to get are generally like any sports athlete, people making a lot of money in doing something that could injure them. So you’re talking about disability, and they need to have their own workers’ comp and life insurance because they’re independent contractors,” says Baiseri.
Don’t try this at home
For those with an inner speed demon, motorsport country clubs do exist. But beyond not being safe, the risks can be huge in terms of insurance.
“A lot of people who are well off will take their Porsche or whatever they have and do hot laps around race tracks,” says Baiseri. “It is important to know that once you take your vehicle and put it on a racetrack, your personal auto doesn’t apply anymore. So any damages you do or damage to the vehicle is effectively not covered.”
The appeal of motorsports can range from the competition between drivers to the excitement of driver’s pushing their vehicles to the limit. Like any other sport, accidents can happen; but with insurance, motorsports and its numerous fans can keep crossing the finish line.