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Old 09-08-2005, 01:07 PM   #1
Paul D. Smith
 
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Insurance Coverages - which ones?

Hello all:

I am starting a center and wanted to ask some opinions from those who have investigated the various insurance coverages. Funds are limited, and with another business in its first year, I want to build this dojo as organically (read, with as little $ and as much Kiai as possible). I am considering three things:

1. No insurance, extensive and detailed injury/liability waiver/indemnification.

2. A company which charges very little relative to (3) below. Coverages are for accident to $100,000, and general liability to $1mil/$2mil. No Professional Liability.

3. A company whose premium is double that of (2), but which includes only $25,000 accident/medical, $1mil/$2 mil general liability, and $1mil professional liability.

Questions:

1. Re: option 1. Does not the waiver cover a good portion of personal exposure, particularly if the entity is a LLC or Inc.? In other words, foolish as this may seem, is insurance truly a necessary expense, or is it often acquired solely because a Landlord requires it (in this instance, this is not a requirement from our Landlord)?

2. If insurance is necessary, the crux, as always, seems to come down to how much? How many here carry professional liability in addition to CGL or general liability? The low-cost company said that professional liability is sort of an "errors and omissions" coverage - broad, and covers everything not covered elsewhere. They further said that it is likely an unnecessary expense, and they don't write it. I posed two scenarios. (1) If a student falls in class, executing ukemi, and hurts himself; would I be exposed beyond the medical coverage in the way of professional negligence? They said no, as general liability would cover the fall, and no professional culpability would come into play. (2) would be obvious - the more expensive company said that professional liability is VERY important if, for example, a student executes a bad irimi on someone on the street, paralysing the individual, and the technique is traced back to me.

We are talking about app. $600 difference in premium, which could go to weapons, etc. What say ye?

Paul

Last edited by Paul D. Smith : 09-08-2005 at 01:13 PM.
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Old 09-08-2005, 01:24 PM   #2
Paul D. Smith
 
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Re: Insurance Coverages - which ones?

I should add that I rent from this Landlord at an unbelievably low rate, and no formal lease is in place. This space is more or less a collective of teachers and students who pay enough rent to cover costs, and that is all. Therefore, no lease, and no lease requirement to obtain insurance. I do not know if the LL has his own separate insurance.

Paul
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Old 09-08-2005, 01:25 PM   #3
Hogan
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Re: Insurance Coverages - which ones?

Quote:
Paul Smith wrote:
... (2) would be obvious - the more expensive company said that professional liability is VERY important if, for example, a student executes a bad irimi on someone on the street, paralysing the individual, and the technique is traced back to me....
This seems unlikely. I have never heard of this, and it would be as if someone who was shot suing a gun manufacturer for selling a gun to the person who did the shooting - I mean, who does that !?

But really, it would be like a drivers ed teacher being sued by someone who got hit by someone who was tought to drive by the teacher... Maybe this ins. co. is only after your money.
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Old 09-08-2005, 02:13 PM   #4
Brandon Shatley
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Re: Insurance Coverages - which ones?

But if a student does a technique incorrectly, wouldn't that only be your fault if you taught it incorrectly? And either way, you would probably be reminding students that martial arts techniques were intended to be used in warfare, and even a martial art as gentle as Aikido can be deadly. I think you should be in the clear. You're not the gun manufacuter anyhow... you're the guy teaching the combat marksmanship class. I've never heard of them getting into legal trouble because they are up front about what they're there for. Plus, you probably don't have enough money to be worth a lawsuit. I've been told that you could appeal over and over and drag things out for years using public defenders until whoever tried to sue you runs out of money.

Talk to a lawyer though. Even someone experienced with running a school (I'm obviously not) could tell you incorrectly if they do not know your individual state laws.
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Old 09-08-2005, 03:23 PM   #5
Bronson
 
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Re: Insurance Coverages - which ones?

Waivers are good but don't let them lull you. Depending on where you're at they may carry more or less weight. I've been told that here in Michigan you can't sign away your right to sue. So, even if somebody signed a waiver they would have full right to make a suit against you. They may not win but there is still the possibility of having to deal with a lawsuit...ugh.

As far as professional liabilty I think they'd have to prove some form of negligence on your part. As long as you're upfront with what will be taught, the methods used, and what will be expected from the students BEFORE they begin classes and you stay within those paradigms you should be ok. Since they are agreeing, of their own free will, to participate in a physical activity they assume some responsibility. You just have to make sure your instruction methods don't go too far outside what the student agreed to (you can't tell them they'll be listenting to meditation music all the time before they sign up then demand they practice in traffic after they've signed a contract).

As far as suing the instructor of somebody who causes injury, you bet. My girlfriend was just telling me her business law teacher said to include everyone even remotely connected to an incident. He said lawyers can name the manufacturer of the car that drove you there and the manufacturer of the shoes you walked away in, so I'm sure the instructor could be named also. Again, this doesn't mean it won't get thrown out but what a hassle to deal with in the first place.

I've known instructors who didn't carry any insurance. From what they've told me, lawyers often don't pursue cases because there's nothing to get...no deep insurance pockets to dig into.


Different strokes I guess.

Bronson

"A pacifist is not really a pacifist if he is unable to make a choice between violence and non-violence. A true pacifist is able to kill or maim in the blink of an eye, but at the moment of impending destruction of the enemy he chooses non-violence."
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Old 09-08-2005, 05:17 PM   #6
Paul D. Smith
 
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Re: Insurance Coverages - which ones?

Thanks, everyone, for the thoughts so far. From having worked for lawyers for years, unfortunately, I have seen far too much of what Bronson describes. In fact, yes, gun manufacturers in particular were sued all the time for the crimes committed using their product. I hadn't thought of the angle that, unlike Colt, or Remington, or (you name it), yours truly does not have a pocket at all, much less deep pockets...!

Thank you one and all.

Paul
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Old 09-09-2005, 07:16 AM   #7
Hogan
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Re: Insurance Coverages - which ones?

Quote:
Paul Smith wrote:
Thanks, everyone, for the thoughts so far. From having worked for lawyers for years, unfortunately, I have seen far too much of what Bronson describes. In fact, yes, gun manufacturers in particular were sued all the time for the crimes committed using their product. I hadn't thought of the angle that, unlike Colt, or Remington, or (you name it), yours truly does not have a pocket at all, much less deep pockets...!

Thank you one and all.

Paul
Correct me if I am wrong, yes people can sue you but that doesn't mean they will win. So, my question, does the insurance that people have pay the costs of any lawsuit if you are sued, or do they only pay the 'payout'.

In other words, yes they can sue and you can get insurance because you are afraid of being sued, but they will not win anyway (i.e., gun lawsuits, car lawsuits, the suit someone mentioned above about someone suing the shoes of someone, etc...none of them successful), so the insurance is a waste because they don't even pay the costs of a lawsuit defense ?

People warn about getting insurance, but can anyone provide an example of some instructor being successfully sued for someone getting hurt through training ? Or by some instructor being successfully sued by a victim of one of the instructors students if that student was violent to someone ? And I am talking about an instructor who just rented space, not an instructor who was a landlord and a student was hurt in his building...
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Old 09-09-2005, 07:50 AM   #8
Paul D. Smith
 
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Re: Insurance Coverages - which ones?

John, insurance coverages differ. From what I have seen, most which offer general liability (CGL) or professional liability will provide for legal defense - i.e., will provide for not only paying out if successfully sued, but for defending against the suit to begin with. But every plan is different and so are the coverages included.

Paul
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Old 09-09-2005, 07:58 AM   #9
Brandon Shatley
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Re: Insurance Coverages - which ones?

Seems logical that they would pay for the legal defense. Lawyers are expensive, but they'd still be cheaper/better than paying out $1 million to some guy that got hurt trying to rape someone.
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Old 09-09-2005, 03:51 PM   #10
Jack Simpson
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Re: Insurance Coverages - which ones?

Paul,
We recently did the insurance thing (accident protection and general liability). The cost was relatively low, ~$15 per student per year. The policy is via Midland Insurance Group in Naperville, Illinois. The guy I dealt with was Jim Taylor (phone: 630-778-7770, ext 251). Got his contact info from our parent dojo whose had a policy for years. From my understanding, this firm also has accounts with many aikido dojos across the US. We also have a "waiver" that all students sign before beginning practice, but I think separate insurance if vital if your club can afford it. Good luck with all the "business" stuff that comes along with for the ride.

Cheers,
Jack
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Old 09-09-2005, 06:28 PM   #11
crbateman
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Re: Insurance Coverages - which ones?

Laws vary from state to state, and there is legal precedent to support or oppose almost any position, no matter how lame. We live in a ridiculously litigious society, where almost anyone can expect to be sued at one time or another in his lifetime. One thing is certain: The "haves" tend to get sued more than the "have-nots", so the perception of wealth will get you more "attention" from the greedy. Even so, suits are often brought on the most ridiculous and indefensible pretenses, without a thought to an actual court battle, simply because it is felt that the defendant will be unable or unwilling to go to the trouble or bear the cost of a defense. And most suits over liability will name everybody that has ever had anything to do with you, in hopes that somebody will pay up, or that the defendants will collaborate to offer a settlement at a relatively low cost to each.

I would recommend that you consult an attorney in your area who has experience in these matters. The cost for this "ounce of prevention" will certainly be less than finding out the hard way. It's a safe bet that some insurance is better than none.

The thing about your insurance company paying for your lawyer in order to protect you is a misnomer, though. They are paying to protect themselves... there is a difference. Most insurers could care less what ultimately happens to their insured, as long as the company's exposure is minimized.
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Old 09-10-2005, 11:03 AM   #12
John Boswell
 
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Re: Insurance Coverages - which ones?

Quote:
Paul Smith wrote:
I should add that I rent from this Landlord at an unbelievably low rate, and no formal lease is in place. This space is more or less a collective of teachers and students who pay enough rent to cover costs, and that is all. Therefore, no lease, and no lease requirement to obtain insurance. I do not know if the LL has his own separate insurance.

Paul
From a real estate stand point, and I'm a licensed Realtor in Texas, it sounds like you are in the middle of a law suit just waiting to happen.

No lease.
No known insurance at present.
No requirement for insurance.

You know the old adage: if it sounds too good to be true, it probably is. First time someone gets seriously injured... your student or not, you could end up being a party in the lawsuit just be teaching there.

Another thought... rent goes unpaid, or the landlord files for eviction and says it was unpaid, no lease to protect you? Where are you going to go? How do you prove rent was paid/collected? What if the place burns down and he comes after you and the others teaching there... how do you protect yourself with no lease or insurance of ANY kind?

I haven't read the whole thread... I pretty much stopped at this above posting. You need to seriously consider if this is the place you want to be associated with. The risk is great, just going from what I have read so far.

Last edited by John Boswell : 09-10-2005 at 11:09 AM.

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Old 09-10-2005, 03:20 PM   #13
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Re: Insurance Coverages - which ones?

Paul,

First and foremost, knowing in which state your dojo is located would be of immense help. Laws vary from state to state in the US and what holds true in one, seldom holds true in another.

I live in California and have worked as a paralegal for the last fifteen years focused in the areas of criminal defense, insurance defense, and personal injury. So with that in mind, consider the following:

Get a lease or written agreement with your land lord. No lease, then can evict on thirty days notice for no reason whatsoever.

Incorporate as a non-profit if at all possible. This well help to limit all liability to the corporation, which has no real assets at the present time according to the facts you provided. There are a number of attorneys willing to help non-profits for a very nominal fee.

Get some insurance. Probably the biggest benefit of any insurance policy to a small business (or non-profit) is the requirement that the insurance company pay for your defense in the event you are sued for any reason covered under the policy -- even if the suit has no real legal basis. Given the rates in the Bay Area of $300-500 per hour for attorney time, even a basic defense resolved before legal action is commenced will easily end up costing you well over $5,000.00.

As to waivers, they generally will not protect against "gross negligence" or any malicious conduct. On the other hand, a number of states adhere to the concept of "assumption of the risk." In other words, there are certain risks inherent in certain sporting activities. In a martial art, there is the inherent risk of injury due to application of a technique, sparring, bad ukemi, etc. Doesn't mean the person can't sue you, just means that you have a defense to the suit. You still will incur attorney fees though. (See above :-)

Finally, check with some attorneys in your state. Again, you may find ones that are willing to assist you pro bono so long as you are not looking to the dojo to provide your lively hood.

Hope that helps.

Brenda
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Old 09-10-2005, 04:26 PM   #14
Paul D. Smith
 
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Re: Insurance Coverages - which ones?

Thank you, Brenda (and John), much information and much appreciated.

In terms of the "no lease," I am aware of the lack of protection, but without being up here it would be hard to convey what I feel exists at the place. I also paralegaled, Brenda, for a good many Chicago loop firms, and many of them insurance defense or subrogation, and normally I wouldn't even raise the question. But given that this rent is a mere $5 per hour of class time (presently, a total of $120 monthly), I am willing to bear the risk I'll be thrown out - but find it unlikely, given the track record of the many other collectives and martial arts people who have been there many years under a regime similar to mine.

The waiver I have everyone sign is a fairly exhaustive assumption of risk waiver. What I have to weigh is not the risk of a suit which prevails, but that I will be sued and therefore, as you pointed out, Brenda, the legal defense costs incurred therein. At $484 minimum premium, the one company I am looking at (with CGL and accident/medical) is probably the prudent thing to do, and your thoughts weign in here.

Thank you all.

Paul
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Old 09-10-2005, 07:21 PM   #15
Larry Feldman
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Re: Insurance Coverages - which ones?

If you do not go non-profit, talk to your legal connections about organizing in a way to limit liability, such as an LLC/LLP, which can discourage a lawsuit. Sole Proprietorship or a general partnerships tend to be the default if you don't elect anything and these will leave you personally liable.
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Old 09-11-2005, 12:39 AM   #16
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Re: Insurance Coverages - which ones?

Quote:
1. Re: option 1. Does not the waiver cover a good portion of personal exposure, particularly if the entity is a LLC or Inc.? In other words, foolish as this may seem, is insurance truly a necessary expense, or is it often acquired solely because a Landlord requires it (in this instance, this is not a requirement from our Landlord)?
Waivers / release forms don't protect you from ANYTHING. They never hold up in court. People cannot legaly sign their rights away. A release form is equivolent to a "hand shake" or a "gentlemen's agreement." This doesn't mean don't get one, but make sure you pay a lawyer to go over it so that it's as legal as possible.

Here's how it works. If a student gets hurt during a technique, the blame is technically on the student that did the hurting. However the buck is passed to the instructor because it was the instructors fault for not seeing that the student executing (or recieving) the technique wasn't adequetely ready for performing a task of "this magnitude".

Written agreements need to clarify what the instructor IS responsible for, not only what they are not, that way if the buck gets passed, it gets passed to the "deserving" party. Also what the students are responsible for while class is in session.

This isn't my opinion or anything, I personally think if you get hurt it's your own dumb fault for not following the program. We fortunately have several lawyers who take classes with us so we get lots of help on these kinds of things.

"Fighting for peace is like screwing for virginity"
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Old 09-11-2005, 06:51 AM   #17
Paul D. Smith
 
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Re: Insurance Coverages - which ones?

Without being an attorney, I believe it's correct that waivers will not allow you to "sign" away any rights counter to the law; as long as the articles or items of the waiver are within the law, then the waiver, I believe, will hold up in court.
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Old 09-11-2005, 09:40 AM   #18
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Re: Insurance Coverages - which ones?

Put aside all the talk about how effective waivers are or not, my question still stands...

Has anyone successfully sued a martial arts instructor for being hurt in class ?
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Old 09-12-2005, 09:15 AM   #19
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Re: Insurance Coverages - which ones?

The problem with relying upon a waiver is that the party can still sue you and you will still incur legal fees -- even if a judge or jury eventually determines the waiver valid and you not responsible.

BTW, include an "attorney fees and all associated costs" provision in the waiver if possible. At least that way, if you win, you may be awarded fees and costs. Of course, the losing party may have no money to pay those fees and costs.
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