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PUBLIC LIABILITY AND THE OUTDOOR / LEISURE INDUSTRY

The insurance industry in Australia as well as worldwide is cyclical in nature. Over the last few years, the market and access to insurance products has ‘hardened’ – that is to say, it is more difficult to obtain and more expensive. No area has been more affected than that of Public Liability Insurance.

The current cycle began in 2001 with the collapse of HIH Insurance, which was followed by a hardening of the Australian market place and then by the events of September 11 in the United States. Many of the major players in Public Liability Insurance were forced by their re-insurers to amend their underwriting guidelines and unfortunately, decline all lines of business which are normally ‘hard to place’ ie. had a higher potential (both real and perceived) of claims.

The outdoor recreation profession was one of these sectors that became ‘hard to place’. This adversely affected the industry and left many businesses with only one player in the market place – some businesses exited the industry entirely.

Public Liability insurance was vital for the survival of these operators due to several factors:

• Required protection from potential litigation for themselves, partnerships, volunteers and employees
• The strength of legal disclaimers was questionable
• The high risk nature of the activities caused a massive increase in litigation
• Many Government bodies would not accept insurance that was not Australian Prudential Regulation Authority (APRA) approved for those operating on Crown land.

All peak bodies have spent considerable efforts and resources to work with insurance brokers, underwriters and government to demonstrate the profession’s commitment to risk management and the implementation of more intensive operational procedures to reduce risk.

These efforts have created a better understanding of the activities in risk areas. Such areas include: accommodation, walking, vehicle based tours, fishing, kayaking and camping through to corporate training, snow activities and surfing.

Businesses that focus on activities in the high risk areas such as rock climbing, abseiling, adventure activities, white water rafting are increasingly able to access insurance products once again.

In short, the reality now gives the industry as well as the participants much more confidence in the activity and minimises losses to insurers.

Insurance Programs

Insurers will generally require strict adherence to guidelines in the following:

• Maintenance equipment log books
• Use of disclaimers (to be signed by course/ activity attendees)
• Minimum criteria for experience and qualifications of leaders
• Staff training manuals and operating guidelines
• Use of signs and information sheets with respect to activities
• Specific licensing requirements
• General safety procedures
• Emergency procedures
• Risk management audits

(Note: In Victoria, an indemnity of $10M is required by Parks Victoria and other State bodies as part of the Victorian Government general contractual conditions. This level of cover may be available under some of the policies and programs offered by insurers or brokers).

Contractors

The majority of insurance policies exclude all contractors and subcontractors that must self-insure for these activities. (Note: It is critical that employers/ business operators confirm contractors hold policies).

A grey area may occur when leaders/guides ie as freelance guides, are contracted instead of employed. Under some insurance programs eg ZIB Insurance Brokers, the insurer has been known to include subcontractors under the one policy, but only if all work done is for that (single) operator. (Note: However this contracting arrangement does have tax implications under the Australian Taxation Office’s 80:20 rule for contractors and consultants).

Further information

• For more specific industry information/ advice contact industry bodies such as the Tourism Alliance Victoria or Australian Camps Association
• The Department of Treasury and Finance has released a comprehensive summary of reform of liability insurance law in Australia (February 2004). Check out the full report at treasury.gov.au/documents/799/PDF/complete.pdf.

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