In this episode of The Dive Locker Podcast you’ll learn what you need to know about professional liability insurance for dive professionals and how to select the right policy for your needs.
Welcome To The Show!
Welcome to The Dive Locker Podcast, the podcast for dive professionals where we bring you the latest in diving industry resources that make you excellent at teaching techniques, risk management and dive business.
Hey everyone welcome to the show it’s great to be with you today. So this episode is arguably one of the most important episodes I’ve ever done on The Dive Locker Podcast. Here’s why. My background in the diving industry has afforded me the opportunity to delve into the world of professional liability insurance. As a former director of the YMCA Scuba Program I had to work with brokers to select the policy that would benefit our dive professionals the best. And then as a forensic dive accident investigator I investigated the incidents that either could lead to claims or did lead to claims, which those reports went to the defense attorneys assigned by the insurance brokers.
So because of that background, the most frequent question I get is “Tec, what insurance program should I go with?” Now why is this an issue? You see, I don’t get asked what brand of scuba gear a pro should get, or where is a good dive travel destination to take customers, or what light wand to get for visual cylinder inspections. That’s because we usually know things about our profession or can easy get answers. But when it comes to professional liability insurance, it’s complex, mysterious even, and ever changing.
In this episode we’re gonna cover what you need to know about professional liability insurance and I’m going to teach you what to look for in a policy which will help you select the right policy for your needs. This is where the saying “give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime” comes in to play. I won’t tell you which of the three insurance programs in our industry you should go with – because I can’t! Everyone has different coverage needs. But what I can do is teach you what to look for, that way if a policy changes or a broker goes away or a new one comes along, you have the tools to make the right choice for you. So hang on, this is going to be a longer than normal episode, but its chock full of helpful information.
Thank You Insurance Pro’s
Right off the bat, I want to thank the top executives with the three insurance programs in our industry. They each spent tons of valuable time with me describing their programs. I spent hours with them asking questions and getting clarifications. So a huge thank you to Brian Jondle Vice President of Vicencia & Buckley HUB International, Peter Meyer with First Dive Insurance Owl Underwriting Agency, and Shelli Wright Manager of Professional Programs of Divers Alert Networks Risk Retention Group. Thank you all for your assistance.
Why Do We Need Professional Liability Insurance As Dive Pro’s?
Okay, to start properly we have to set a foundation. There are many listening who are becoming dive pro’s and don’t understand this topic. And there are others, who don’t remember their lectures on insurance from their divemaster or instructor courses. So here’s a quick foundation.
First, if you’re a newbie you may confuse professional liability insurance with dive accident insurance. Actually I hear this quite often, especially with new dive masters who say they have their own insurance. Only to find out they meant they have dive accident insurance. So… dive accident insurance is coverage for just that – injuries that take place in association with diving activities, such as policies offered by DAN and DiveAssure. However, professional liability insurance is necessary at all professional certification/membership levels in the diving industry to assist in defending legal claims against you.
So why the need for professional liability insurance? Well, diving is a recreational activity, but it has risk. Because of that risk there needs to be proper equipment used, proper training and proper supervision. So when something goes wrong in diving there is a dichotomy. A family member might say, It’s a fun sport, my husband loved it and was good at it, but he died or got injured doing it. What went wrong? Who is to blame?” Then a lawsuit is filed also known as a “claim” against those who had a connection to the incident. These parties could be the divemaster leading the dive, the dive boat, or even the original instructor who first trained the husband.
Because this is a typical response in our litigious society when an injury or death or some other type of damages as its called, takes place, the dive professional needs to have a team of investigators and defense attorneys ready to assist when a claim is brought. But, most dive professionals would not be able to afford the legal fees associated with defending a lawsuit against them. Depending on the complexity and severity of the case, this could be tens of thousands to hundreds of thousands of dollars. Not to mention the payouts that can occur.
These payouts are negotiated or ordered to help offset the damages that have taken place to the injured or deceased person – often it is that person or a family member who is the claimant or plaintiff – the person bringing the legal claim. So damages can get awarded. Sometimes its just to pay small medical bills – hundreds or thousands of dollars. But other times it could be substantial medical bills, or lifelong medical services, or in the hypothetical scenario I mentioned, the fact that the husband was the breadwinner of the family and now the wife and three kids have a massive reduction in income due to the husband’s death.
Now these payouts can escalate into the hundreds of thousands and even millions. In one case involving a diver who was left at sea there was a $3 million dollar payout. And, our industry’s highest payout involved two divers getting severely injured by boat propellers. That payout was $12 million. I don’t know about you, but I ain’t got that kind of money.
Defending A Negligence Claim
So when someone brings a claim against you, they are saying you were negligent in your duties, that you had errors or omissions in not delivering the proper standard of care. You need a policy that will assist you, defend you in these claims. Because you see, in my hypothetical example, a negligence claim was brought by the family against the divemaster, the dive boat owner and the original instructor. But after all the motions, depositions, and other investigations it is concluded that the husband most likely had a cardiac event at depth. No one was negligent, and because of his underlying medical condition he could have just as easily had his cardiac event at the bowling alley. But the fact is, these dive pro’s got sued and needed the proper legal team behind them to defend the negligence claim. And guess what, because of professional liability insurance, the defendants (those dive pro’s) didn’t have to pay a dime for those professional legal services. So that is what professional liability insurance is all about and why it is mandatory in our industry.
Disclaimer
Okay so let’s dig into our professional liability insurance policies. So first some rules. This will not be a head to head comparison where I point out features in each programs policy. The reason for not doing that is there will be people that listen to this episode a year from now or two years from now, and those details may radically change. I may mention something unique to one of the programs here and there as needed, but not a head to head comparison.
BUT. I have created a resource for you to do your own comparisons. My Professional Liability Insurance Policy Worksheet is a downloadable PDF that you can print out and follow the prompts of the things I’m mentioning in this episode to look for in a policy. Then you write in the details of each policy you want to compare. This will help you do as best of an apples to apples comparison and it’s based on YOUR needs. Simply go to ScubaGuru.com and find this episode number 42 of The Dive Locker Podcast and click the link for the Professional Liability Insurance Policy Worksheet then enter your email address to have the worksheet delivered to you.
The other thing to note is that I’m not an attorney nor an insurance agent, so what I’m saying may sound very authoritative because of my experience and research, but please note this is not professional legal advice nor insurance advice.
Who Are The Insurance Companies?
Let’s start by noting the main diving industry insurance players as of the time of this recording in June of 2020. They are Vicencia & Buckley HUB International, First Dive Insurance Owl Underwriting Agency, and Divers Alert Networks Risk Retention Group. V&B as we will call them HUB International is an insurance broker who is underwritten by a large carrier called Tokio Marine Specialty. It’s a family run company providing diving insurance since 1984.
First Dive Insurance Owl Underwriting is a managing general agent for a group of Lloyds of London syndicates, and they have two brokers with online portals Johnson, Kendal and Johnson as well as Assured Partners. They also work with other licensed agents or brokers anywhere in the US. Now if you’ve been in the industry for a while you may note that Assured Partners is Witherspoon and Associates, so many of you have quite possibly worked with John and Dixon Witherspoon over the years, they are great guys.
And then DAN’s Risk Retention Group is just that – a risk retention group. Risk retention groups RRGs are treated differently from traditional insurance companies. They are exempted from having to obtain a state license in every state in which they operate, and also are exempt from state laws that regulate insurance. Risk retention groups are mutual companies, meaning that they are owned by the members of the group. In this case the insured’s are the members of the group and their premiums go into a large coffer in the event of paying claims. Another interesting thing about RRG’s is that technically if the coffers are wiped out, the members are responsible for paying more into them to cover any shortfalls. This may sound ominous, but DAN has assured me that not only is there enough set aside for such events, they even have a re-insurance, which insures them if those funds were to ever not meet payouts. The other point DAN makes is that profits in the RRG are put back into other diving safety initiatives of DAN.
Training Agency Endorsements
Some scuba training agencies will have a preference of an insurance program for their members, they call this an endorsement. This has changed a bit over the years. Although there may be a preference by your training agency, you still have a choice. You may find out however that an insurance broker may require you to be a certain agency member to be accepted, you may be multi agency certified, but you must have XYZ agency to be insured. That is not the case will all of the insurance programs.
Insurance Ratings
So since we’re on the topic of the insurance companies, their rating is something to consider. You may have heard A, A+, A++ for things like life insurance, well thats what we’re talking about, the rating. Now here’s what to consider some places that you conduct your professional services at like a pool or a resort, they may ask that your insurance is rated A or higher. So check their ratings for that, however don’t be dismayed if the RRG does not have that type of rating to get into the facility of your choice, often after a conversation with the program manager of an RRG, the facility would accept the policy. Not always, but often.
A Note About Premiums
So let’s continue, the next item we’ll address is the premium. That is the price of the annual policy. Well, actually it’s the last thing that should be considered. and if you’ve already downloaded the Professional Liability Insurance Policy Worksheet you’ll see that the premium is the last item on the list. Now why would that be? It’s because the premium is often the only consideration that some dive pro’s pay attention to when selecting a policy. That’s so wrong. These program policies are only a hundred maybe two hundred or so dollars different in premiums, but your selection should be based on the totality of all elements of a policy.
Take for example a phone call comes into your dive center, and the caller asks, “How much is your Open Water Diver course?”. You say “It’s $350.” and then the caller says “Thank you” and hangs up. Now they call another store and they say “$199”. The caller says great, sign me up. Hopefully you have been trained to know that you never give the price first, instead you tell them that your classes are on Mondays and Wednesdays for three weeks, then you go diving the last weekend of the class where you will go to a lake and the next day on a dive boat in the ocean. Your class includes the books and materials, the rental equipment, the lake fees and the boat fees, and includes your certification card as well. All of this for $350.
Now the caller knows what to ask about in their next call. And when they hear $199 after they have spoken to you, now they know other things to ask for. “Does it include equipment? What about the dive boat?” “Yes, to the equipment but no you have to pay extra for the dive boat, that’s $100 per day of diving extra.” “What about books?” “No, you have to pay for those extra.” Now the diver realizes that the $350 class is a better value! But that only happens when you don’t let them compare by price alone.
That’s how this works with professional liability insurance, premiums should be last on your list.
Liability Limits
Our industry has made a standard minimum of one million dollar policy limit for being a dive professional. You must hold at a minimum a one million dollar professional liability insurance policy coverage. Now let me ask you this. What is a life worth? What is a debilitating injury worth? You see billboards of people holding up cash saying my law firm got me $150,000 or $500,000 or $1 million. We are in a litigious world, especially those of us in the US. And it is the ethical responsibility of a plaintiffs attorney to get the most for his or her client. As well, it is the responsibility of the defendants attorney to keep payouts to a minimum because they are hired to defend you by the insurance company. Over the decades payouts have increased as well as legal costs. We are seeing payouts which go beyond the policy limits.
Take my hypothetical example of the dad who had a cardiac event diving. What if it was not a cardiac event? Instead what if he was on a guided dive with a divemaster and he swam away from the group, ran out of air and died. Now, there could potentially be negligence on the part of the divemaster – oh and by the way this dad was also a surgeon who made $240,000 a year. That one million dollar policy will hardly cover the family’s loss. There are tons of other examples that can be used here, the point I want to make to you is you may want to consider increasing your policy limits. Some pro’s are getting up to $2 million, some do $5 million some even more for their coverage. Also, you might conduct your pool sessions at the local YMCA and their the only pool in town and they might require a $2 million dollar policy coverage. So that’s another reason.
Now part of this is that you never want a burden to befall you. I’ve heard dive boat owners say if I get sued they can have my boat, because that’s all I got. Well, there goes your livelihood and your dive boat might not be enough for lifelong medical payments of the plaintiff.
Are Legal Fees Taken From The Claim Limits?
Another thing to look for when selecting your policy limits is language regarding the payment of defense legal fees. Some agencies have whats called an eroding policy whereby the costs to defend the claim come off of the policy limits. Of course each case is different in scope, so the costs are different accordingly. But you can easily have legal costs in the tens of thousands and hundreds of thousands of dollars. With this type of policy, higher limits may be advisable.
Annual Aggregate
Part of the language in policy limits is “per claim limit” what we have just been talking about and also “annual aggregate”. The annual aggregate means that if you have more than one claim, the limits on all claims combined cannot exceed the annual aggregate amount. So pay attention to those numbers. And if you decide to go with higher policy limits your premiums will increase, but not by much.
Prior Acts Coverage
There’s another area to consider and it’s called prior acts coverage. All of our diving industry professional liability insurance policies are called “claims made policies”. A claims-made policy refers to an insurance policy that provides coverage when a claim is made against it, regardless of when the claim event occurred. For this reason that is why you still want to keep professional liability insurance going even after you have decided to hang up your fins for good. You want to keep coverage until your statute of limitations for negligence claims in your state has expired. If an incident happened a couple years ago, you could be served papers for a lawsuit today. That’s why you hold coverage because it will cover when the claim came in, not the date of the incident.
So back to prior acts coverage. Let’s say you want to switch insurance policies. Some policies will cover your prior acts for incidents that happened when you were not insured with them. Since it is a claims made policy they are now covering you for the claim that just came in. However, pay attention to the rules with this. Policies may state that there can be no gaps in coverage for this to take place. Well, if you renewed your insurance late one year, that could be a gap in coverage, rendering the prior acts coverage void.
Renewal Dates
And speaking of renewals and changing policies. Check to see the policy dates. Some have a master renewal date like June 30th of each year, and others start your annual policy the date coverage was bound. Traditionally this has led to making accounting practices happen to be able to pay the entire premium at renewal. However, I’m happy to report that all three insurance programs are now offering payment plans for your annual premiums. This is awesome, and spreads that premium over time making finances a little easier.
Coverages
Next up is Coverages. What exactly does your policy cover? Well you can actually select “endorsements” to add to your main policy. For instance your main policy may cover dives up to 130 feet or 40 meters, but you’re a technical instructor and want to teach technical diving at depths greater than that. So you would want to get a technical endorsement to properly cover you for those areas of teaching and supervision. These endorsements can come for associated areas like freediving, swim instruction and even product liability coverage just to name a few.
Additional Policies
Another area to consider under coverage is your potential need for more than just a professional liability insurance policy. What if you have a dive shop? What about a dive boat? How about your dive shop’s van? All of these entities need to be insured. Now these will be in the form of general liability policies, not professional liability policies. But the point here is to look and see if you can bundle policies with the insurance company. Not all of our insurance options offer this, but those that do can be quite beneficial. Just like you can bundle your home, auto and life insurance, you can do the same with professional liability, store, vessel and auto and this may lead to savings.
Bundling Policies
Now, if you do one insurance company to cover your boat and store, and you do another insurance company to cover your professional liability – whether group or individual- you need to know that they may not work with the same forensic diving accident investigators nor defense attorneys. And this could lead to challenges when claims arise. Here’s a hypothetical example. Let’s say you have a diver who was exiting the water after a dive and he dropped his camera when he was on the platform. When he quickly bent down to get it, he fell in. But the boat had gone into reverse since the divers were out of the water and the clear signal was given. Now the boat is backing down on the diver who gets injured when he hits the rudder. Soon thereafter a claim comes in. Do you send the claim to your dive vessel insurance company or do you send it to your professional liability insurance company. The answer is both, but the issue is that they can duke it out to see who will cover the claim. Was it a diving event or a boating event? This is another reason for bundling your policies.
Exclusions (Super Important To Know)!
And now we’re on to an area of major importance when selecting your professional liability insurance policy. That is the area of “exclusions”. Exclusions are the cases for which the insurance company does not provide coverage. These are the conditions excluded from the insured event to avoid losses to the insurance company. Now of course there are exclusions like what you might see for home and auto, they include exclusions if there are criminal acts, war, terrorism and asbestos. And now by the way, everyone is adding exclusion language about viruses and communicable diseases – thanks to COVID -19 of course. In other words if someone makes a claim that they got coronavirus from taking your class, well, you would not be covered in that claim.
But really the vitally important parts of exclusions are how they can impact your professional duties and responsibilities. All of the professional liability policies have language that says:
- you will not have coverage if you do not get a properly executed waiver, release and assumption of risk agreement
- you will not have coverage if you leave divers unattended in water
- you will not have coverage if you go deeper than 130 feet or 40 meters unless you have a technical endorsement
Those are all pretty common exclusions among all policies. However, here’s were exclusions can get tricky. - another common exclusion is you will not have coverage if you do not get a medical statement for your students, and that if a yes is given there must be physicians approval. Well one of the policies states that it must be a physician who performs the evaluation and signs the document. But according to some agencies a physician’s assistant can sign the medical statement.
- in another exclusion introductory courses like discover scuba can be unique. Some policies state to do whatever the RSTC standards are for student to instructor ratios which is at the time of this episode a 4 to 1 ratio. Four students to one instructor. Yet, another policy says that you must be on a 2 to 1 ratio for introductory/discover scuba courses.
You see these are two examples where the exclusions in a policy can actually trump the training standard. So you would need to amend your training standard to ensure that you are insured.
Now I personally see where this could be an issue for someone that is not paying attention to their policy, and when it comes time to do their first Discover scuba class in a couple years, they turn to their agencies standards and procedures manual to find ratios, etc. But they have forgotten about the exclusion in their insurance policy. This could lead them to be extremely exposed for no coverage. However. I’m also a very conservative dive professional. I actually like the idea of having students get a physician’s signature instead of a physician’s assistant, and I can’t argue that reducing the ratios in a discover scuba is potentially safer. So if your policy has exclusions that are different than your agencies standards, you just have to do a good job of making sure your following the exclusions.
Now if you actually look at the exclusions in total, the ones involving diving not asbestos, you’ll find that they are the areas of potentially high payouts. In other words these are the areas that are hard to defend when they go bad. So if you forget to have a waiver and release signed, guess what, you might not have insurance for a claim from that event. That is why it is so very important to focus on the exclusions and make sure you know what’s on your policy.
Standards Violations and Insurance Coverage
And here’s my final point about exclusions. When I first became an instructor in the 1980’s I was told that if you violate any training standards, that you will not be covered by your insurance. Then in the late 1990’s when I was a national training agency director I learned that professional liability insurance was more like a medical malpractice insurance policy. It was there to cover the professional when they messed up. If a surgeon leaves a scalpel inside a patient, that’s an obvious standards violation in the medical community, but the malpractice insurance is there to defend and payout the claim so that the surgeon doesn’t lose his home, car, yacht and summer home.
So too in some respects was it with diving professional liability insurance. However, over two decades our industry has suffered serious payouts that have occurred due to some really egregious standards violations. That has caused major shifts in policy coverage as well as soaring premiums. This is the reason why now you will see two of the three programs have exclusion language that states no coverage is provided for any claim where the insured failed to meet training agency standards.
In other words, if you violate standards you may not be covered by your insurance. Wow, that’s huge! These insurance companies are putting this language into policies to protect the future of professional liability insurance for our industry, by tightening up on the importance of following standards. Again, this is a sign of the times. But you absolutely need to be in the know about your policy’s language.
The Premium (Revisited)
And finally, the premium. Well, I’ve said it already don’t focus too hard on the premium between policies. It is more about the services, the customer support and the program offerings that you want to focus on. Once you start adding endorsements and maybe bundle policies, it then becomes difficult to do apples to apples comparisons on premiums. But still you should be able to get quotes to help with your comparisons.
Your Resources To Select The Right Policy
So what now? This is the busy renewal season for most dive professionals. So you may be deciding right now which policy to go with. So here’s what you do. Now you know what to look for, so request the actual policy from the insurance companies. At the time of this episode DAN has there’s readily available for download on their website. For the others just contact them and make the request for their policy.
Then use my Professional Liability Insurance Policy Worksheet to fill in the sections and compare the policies. Again go to ScubaGuru.com and go to The Dive Locker podcast episode 42 and click the link for the worksheet. This will help you to focus on your needs and what is important to your diving business and professional services.
Now You Know!
Well there you have it. I hope you are now more knowledgeable than you’ve ever been about professional liability insurance. In fact I know you are. Use this knowledge to make good decisions about your coverage. And share this episode with others, especially when someone asks you “what insurance should I go with?” now you have a resource to point them to and you have a broader knowledge on the subject as well. Congratulations, you’re a better dive professional for sticking it out and listening to this episode.
Thanks For Listening!
That’s it for today, everyone. Thank you so much for listening. Remember to subscribe to this podcast on iTunes, Google Play or Stitcher, that way you’ll be notified of new episodes as soon as they go live and please leave a rating. Items talked about in this episode can be found on the show notes Page at scubaguru.com and there you can also click the microphone and leave us a comment. Thanks again. We’ll see you in the next episode. Safe diving and take good care of my friends.
Episode Sponsor
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