What’s on Dec? | Episode 17 | Sports liability

What do loss trends look like in the sports and recreation sector?

Listen as Andrew Poulton, Markel Canada’s vice president of sectors, and Jeff Smith, the insurer’s senior vice president of claims, share their perspectives on sports liability risk. The two will dive into recent loss trends in the sector and explain how social inflation is influencing claims trends.

Andrew and Jeff will also discuss what’s unique about underwriting sports liability risk. They’ll examine how the courts view the risk, touching on Miller v. Cox, a liability case regarding an injury caused by a soccer slide tackle.

Other hot topics include coaching practices, parental conduct at games, waivers, and the voluntary assumption of risk.

Audio transcript

Intro: You’re listening to What’s On Dec?, the Canadian Underwriter podcast, focusing on the hottest topics in the P&C community, featuring insights, analysis, and interviews with subject matter experts throughout the year.

Pete Tessier:

Hey everyone, welcome to another edition of What’s On Dec?, the Canadian Underwriter podcast. I’m Pete Tessier, here with Curt Wyatt, and we’re from the Insurance Podcast and we’ve got another great episode today because we’re diving into some niche liability. And we all know that liability and the specialized coverages that come with it are a really important facet in the insurance sector.

Curt Wyatt:

And Pete, in the insurance sector, we have organizations that are becoming specialists, right? I mean, it’s existed all along, but we’re becoming even more specialized. We’re seeing this in the MGA space. We’re seeing this with carriers coming up from other jurisdictions, and today we have two of those individuals as well.

Pete Tessier:

Yeah, we have Andy Poulton, who’s the VP of sectors and Jeff Smith, the senior VP of claims for Markel. And we’re going to talk about sports liability and some of the nuances that come along with underwriting it, providing coverage, and what happens when you get a claim, which no one really likes.

Curt Wyatt:

Hey, there is no lack of sports in Canada. We are a passionate bunch of people.

Pete Tessier:

Yes, we are.

Curt Wyatt:

And whether it’s at the rink, at the pitch, at the diamond, you name it, we get into it. And that’s one of the things that makes Canada great is that we have the opportunity as Canadians to let our kids and our teens develop in sports. But it creates its challenges because there are times where that energy gets misfocused.

Pete Tessier:

Yeah, it does. And we’re going to get Jeff and Andy to talk about that and a few other things, including some of the unique underwriting traits of sports liability risk, some of the trends that they’re seeing and experiencing. Of course, we’ll talk a little bit about the case law with Cox v. Miller as well. Hey, let’s bring Andy and Jeff in here and get on with the show.

So hey, now we’ve brought in Andy Poulton and Jeff Smith, and Andy is the VP of sectors for Markel Canada. And Jeff Smith is the senior vice president of claims. So Andy, Jeff, welcome to What’s On Dec?, the Canadian Underwriter podcast and thanks for joining us.

Jeff Smith:

Thank you very much.

Andrew Poulton:

Yeah, thanks very much for having us.

Pete Tessier:

Hey, you’re very welcome. So look, let’s talk a little bit about some of the trends and everything that’s going on with sports underwriting and liability risk. Obviously there’s a lot of focus on this class for various reasons across the landscape, whether you’re professional, amateur and where you sit in the sporting landscape and how you view things. But as insurance professionals, what’s unique about sports underwriting liability risks? How can you sort of describe it in relation to the other things we encounter?

Andrew Poulton:

I guess I’ll start off with that one from our side, Pete. I think the biggest thing that presents challenges for underwriters from our standpoint is the variety. Obviously there is inherent risk to undertaking any sporting activity, but those risks can vary quite substantially from one sporting activity to another. So the real challenge for our underwriters is to make sure that they really understand what a particular sport or activity, whether it be an organized sport or a recreational sport, what that means and what those exposures could mean to us as insurers in this space. And the big thing for us is to specialize in those areas to make sure that we have a deep understanding what those exposures mean to us. So I guess the biggest thing for us, as I say, is variety and the variety of different exposure that we see.

Pete Tessier:

Jeff, when it comes to underwriting and then sort of how the underwriters work and then how you look at claims and everything, is there different sort of strategies that you need to look at when you’re underwriting the different classes that Andy mentioned and how that affects claims?

Jeff Smith:

Yeah, I mean I think the biggest challenge or distinction with sport liability risks is really ensuring that we’re not taking on the inherent risk of the sport. And this is a challenge. Sports are inherently risky. They naturally result in injuries as a result of those risks. And as an insurer, our intention is not to take on that risk. So what we’re trying to do is parse out the inherent risk of sport and incidental risks that an insurer would take on. And there’s lots of different ways we can do that, but traditionally it’s been recognized in society that there is an inherent risk of sport and participants are willingly assuming that risk by engaging in those sports.

So there was a tendency that we wouldn’t see claims arising from the inherent risk of sports. What we’ve seen is a trend over time of sort of watering down that understanding of the inherent risk of sport. And it’s a result of social inflation where society’s perception of a compensable injury has changed. And there is a tendency for society to think that almost any injury is compensable, even if it arises out of that inherent risk. So another way that we combat that shift is through the use of waivers and making sure that our insureds are having participants sign waivers that clearly outline not only what the inherent risks of the sports are, but that they’re waiving their legal right to sue if they are injured from those inherent risks.

Pete Tessier:

Go ahead.

Andrew Poulton:

Sorry. And just to further that point, I mean I think from, as Jeff said, the onus or the responsibility of organizations which insure is to continue to review that and how they manage that risk and how they’re mitigating against that risk. And that puts more responsibility on the leadership of those organizations as well. And in a lot of cases, these organizations are run on a volunteer basis, so there is a lot of support that’s needed. So those organizations, those people providing sporting opportunities for people in Canada, but there is an increasing onus on those organizations to make sure they’re doing that, which again comes with its challenges and more responsibility for them for sure.

Curt Wyatt:

That’s really interesting because as the industry, we’ve watched the hard market and we’ve come through what we think has been one of the hardest markets in a long time. And as you guys are talking, like you say, you’re trying to underwrite this, you’re trying to get the people buying the insurance to understand what it’s really meant to cover, and all through that process, what has it been like then to place coverage for say, recreational sports? Is it hard, is it soft? Is there appetite out there to do this stuff or is it just the opposite? Because like you described, these sports are inherently risky.

Andrew Poulton:

Yeah, I mean from our standpoint, I mean just going back just two or three years, the pandemic as it was for a lot of sectors, you feel like was incredibly hard and it was incredibly hard for everyone. But for the sport and recreation sector, it was a bit of a double whammy from an insurance perspective because we saw participation levels drop off the face of the cliff because of the pandemic, but also that was exacerbated then by the hard market as well. So organizations were seeing rates and premiums increase, but their participation numbers and subsequently the revenues going into those organizations decreased quite substantially as well. So that was really tough.

From our perspective, we’ve been ensuring sports and recreation in Canada for over two decades. So we’ve got extreme amounts of longevity in this space and we fully intend to be in it for the next two decades. So from our perspective, yes, we saw hard market conditions, rates increase, certainly limits, particularly in areas of coverage such as abuse liability reduce quite substantially over the recent years or even to the point where some insurers were completely withdrawing the offer of that coverage.

In the last 12 to 18 months, we’ve certainly seen more competition come back into the marketplace. We’ve seen more appetite to increase limits and particularly in abuse liability areas, and we’ve seen rates come under competition from our perspective. So I would say that we refer to the market in Canada as somewhat transitioning, if you like, between hard and soft, and that can be particularly very soft in certain pockets or certain areas of coverage. D&O as an example, we’ve seen capacity return quite substantially, particularly from excess lines, but in what we refer to as [Markel] Play for Markel Canada being sport, recreation and fitness, we’ve definitely seen increased competition and we’ve had to respond to that and there’s definitely increased appetite to take on risk and offer higher limits for sure.

Pete Tessier:

Thinking about amateur sport and how that means, there’s a lot of umbrella associations and things that come into this. What are the courts’ views when it comes to sports liability risks with amateur sport and how the voluntary assumption of risk when particularly youth are playing sports and stuff like that? How does that look at things because there’s a lot of heightened attention by parents and guardians and things on kids and where they fit, whether they’re younger or into that middle-aged teenage thing? How do courts view some of the ramifications of loss when that happens?

Jeff Smith:

Broadly speaking, across the country, the courts have been fairly consistent in upholding the voluntary assumption of risk in particular when it’s highlighted to participants in advance of their participation in a sport or recreational activity. Now as mentioned previously, this is most effectively done through a waiver of liability form, but we have seen courts uphold just the general voluntary assumption of risk when those risks are highlighted to participants. And we’ve seen actually narrative in decisions from the courts highlighting the importance of sports and recreational activities to the economy in Canada. We are a country that values that in our economy, and in order to make that viable, for amateur sport, for small businesses that participate and offer recreational activities, in order for it to be viable, we have to have this agreement that if you want to participate in something that’s fun but is also risky, you are going to have to give up certain rights and accept that an injury that arises from those inherent risks are not compensable and the courts are fairly consistent across the country.

It’s very important, though, that these organizations highlight those risks, whether it is to the participant or to parents themselves. Now with respect to amateur sport and sports involving youth, there is a heightened awareness, there is a higher standard of care and higher need to outline those risks to the participants, including the parents.

Now, parents and children, anyone under the age of 18 or 19, depending on the jurisdiction in Canada, are not able to waive their legal rights. So a waiver of liability is not enforceable. That said, it’s still a useful mechanism to highlight the risks of sports to both the parents and the children involved in those sports. What are the consequences of participating in hockey or gymnastics? And it’s important to make this real because we see claims involving catastrophic injuries in some of these sports, and we’ve paid multi-million dollar claims as a result of that. But it is a rare occurrence, but it’s the reality of those sports that these are real consequences that do happen, and it’s important that participants understand that.

Curt Wyatt:

That’s interesting you bring up hockey because as most Canadians, I’m a hockey dad, and there’s no question that the sport in Canada is played a certain way and knowing that it’s played a certain way and knowing that the kids are watching the same professionals the night before their game, Saturday night hockey, and now next thing you know they’re on the ice Sunday morning. And the parents have also partaken in that and have a sort of disposition towards how the professionals play the sport, and then they show up at the rink and everyone’s heard the conversations from the stands, I mean, parents are even thrown out of the game, so how is it though that this attitude is sort of taken because it’s like this is what we watch on TV and now we’re showing up at the rink and my kid’s going to be the next Gretzky and the pressure’s on because of what the community sees as this is the way the sport’s supposed to be played based on the professionals? What are you guys seeing? How do you manage that expectation?

Andrew Poulton:

Do we mean in terms of the conduct of the parents?

Curt Wyatt:

Yeah, no, the conduct of the players more than anything, but just the fact that the parents have a certain disposition because they are watching what they think the game should look like based on what the professionals are doing. And now we’re talking more ensuring recreational leagues, but how do you change that attitude? It’s a slippery slope when everyone perceives what the sport should look like and it doesn’t matter, not just hockey, but really any sport.

Andrew Poulton:

Yeah, I mean, it’s an interesting question because I’m heavily involved in soccer or football as we call it in the United Kingdom, so I’m heavily involved…

Curt Wyatt:

As it should be called. Yes.

Andrew Poulton:

Yeah. Okay. And I coach, I coach two young youth teams, and I think that the responsibility for the organization, whether it be the team, the league or the particular association that child or young person is playing is firstly to communicate what the expectations are in terms of conduct. And it’s really easy for parents, ’cause I’m one, I watch both my children play or two of my children play sport, and as you say, you have an expectation that you watch a game on a Saturday night, whether it be hockey, soccer or any other sport, and that your child’s going to go out and do that on a Sunday morning or whatever and have the same expectations. And frustrations can come in really quickly. Or if there is a foul that’s not given, parents can get very agitated quite quickly. I think the responsibility of the organization is to ensure that they communicate what they expect in terms of conduct, and that should be in line with whoever the regulatory or licensing body is of that particular sport.

But then for the individual coaches to then also remind those parents what their expectations are in terms of how their child and how they should conduct themselves when spectating or playing the sport. And I think the challenge there for a volunteer coach, and invariably, depending on what level it may be, that a lot of times that’s a parent coach, and that’s tough for a parent coach to go and speak to, it may be a friend, it may just be another parent of another child who’s playing in that particular team, to go and remind them that, hey, you can’t act like that and you shouldn’t be talking like that, and you need to lower your tone or be less aggressive when you’re spectating that sport. That’s difficult. But the clubs themselves or the teams or the association or the league should have, and most do have mechanisms in place to support that and deal with the sanctions should parent or child conduct not be befitting to that particular sport.

Have all the best mechanisms in place. Sport is sport, adrenaline can fly and stuff will happen, but I think the duty of the association or the league or the team is to ensure they’re communicating it and they got proper mechanisms in place to sanction the particular people that aren’t acting in the way in which they should. So yeah, it’s a tough one though because parents have invested in their kids. We all are.

Pete Tessier:

You’ve both talked a little bit about the inherent risks and the assumed risks that come with playing sports, particularly in amateur sports and stuff. What can you say about the recent caselaw relating to the Cox v. Miller decision that highlights some of those risks? For those who don’t know, in the Cox v. Miller case, it’s a case between two soccer players, adults, where the B.C. Supreme Court was tasked to determine standard and duty of care during the match on what was a reasonable level of care for a player to take. And it’s kind of a fascinating look at how liability can be determined within amateur sports even at the adult level.

Jeff Smith:

Yeah, I mean I think this decision is certainly one we’re following closely. I think while it strays slightly from the consistency of the courts in upholding the inherent risk of sport, I think the intention of that decision is to somewhat on the heels of the discussion we just had, is making sure we’re as a society encouraging safe sport wherever possible. So even though a trip tackle in football is an inherent risk of the sport, there are ways that players can engage that will result in less of a chance of an injury like that. And I think it’s incumbent upon sports organizations, especially those sports organizations like soccer, hockey, that have higher risk of injuries and have a tendency, even like hockey as we were discussing, that not only has a higher risk of injury from the ordinary playing of the game, but higher risk of violence, if we’re honest, to really challenge those organizations to limit that and make sure that sports is safe.

And this is in line with sort of the federal government’s initiative and the introduction in Canada’s universal code to prevent maltreatment in sport, really establishing a standard of care for all sports organizations to ultimately encourage safer participation in sport in spite of those inherent risks.

Pete Tessier:

Jeff, Andy, this has been fantastic. I don’t think enough people really think about some of the nuances with sports liability, particularly in the insurance sector and distribution. And obviously you’ve outlined some things that many are not thinking about probably actively, which is the inherent risk and assumed risks that participants take and how that affects the liability coverage and the coverages those associations and stuff may purchase. So thanks for jumping on What’s On Dec? with us. Really appreciate your time and we’ll look forward to seeing more of what comes down the pipe with products and the changes from Markel.

Andrew Poulton:

That’s great. Well, thank you very much for having us. Thank you.

Jeff Smith:

Yeah, thanks very much.

Pete Tessier:

Curt, that was pretty interesting because while liability isn’t always everyone’s cup of tea when it comes to discussion points, Andy and Jeff really illustrate a few key things, and I think one of the ones that we should focus on is the role of the courts. They made it really clear that the courts are clear on where they stand in terms of adjudications and their role in resolving liability claims and lawsuits. And I think that’s very important for people selling coverages to understand.

Curt Wyatt:

You go to the rink, you go somewhere, you’re signing something that you think maybe protects the team or what have you, but when things go wrong, as Canadians, it doesn’t stop us from having the right to take legal action and there’s a cost to that, and at no point should that cost then be something that’s passed along to the other players or potentially a volunteer, and that’s where insurance comes in ’cause things go wrong and we need to protect ourselves for those mistakes.

Pete Tessier:

Yeah, I think one thing that everyone who’s selling liability, particularly sports liability, should think about is the waiver of liability. So what Jeff and Andy said was parents are hyper-aware now in the amateur sector, they’re aware of what’s going on, they’re enthusiastic, so they’re actually a captive audience when it comes to risk management. And now we have to get organizations to think about risk management because they have aware entities who are participating. So make them understand that waivers, well, they’re information, but they should illustrate risk, not just assume you can waive your rights away, which we found out you cannot. I think that’s a very important thing for any insurance broker selling sports liability to remember.

Curt Wyatt:

Pete, in addition to that, what I really enjoyed was the dialogue around the effect professional sports have on the overall community, the overall culture of sports, and how important it is for those professionals out there to make sure that what they’re doing meets what we want in our communities. And we’ve all listened to them get interviewed, we’ve all seen the fights on TV and what have you, and we all get wrapped up in it. It’s exciting, there’s lots of energy there. But when it starts to translate to potential risks within a small neighbourhood where a child’s hurt for some reason, I think those are things that we have to think about. And I think it’s good that organizations like Markel, in addition to providing the coverage and the ability to transfer the risk, they’re also now getting involved in the risk management piece of it, which is saying, okay, how do we properly educate and make sure people are aware of what’s going on here so that we reduce that and keep it fun?

Pete Tessier:

Yeah, sports are supposed to be fun. Let’s not let insurance get in the way. Hey everyone, thanks again for listening to another episode of What’s On Dec?, and we’ll be back with more great content soon.

Outro: Thanks for listening to What’s On Dec?, the Canadian Underwriter podcast.