It feels like a simple question, right? You probably scoffed a bit when you read it in the title. I don’t blame you! But the truth is, when it comes to insurance matters like covering a worker for their own on-the-job injury or for their negligence in a participant’s injury, there is more to the story. This is true especially when it comes to the contracted workforce of a climbing gym.
Tax Status vs Insurance Status
Often, operators will think about their workforce by breaking them into a few different categories:
- W2 workers, seen as “employees”
- 1099 workers, seen as “independent contractors”
- (and then there are volunteers, an entirely different puzzle to solve)
While this line of thinking is accurate, the W2/1099 status of an employee versus a contractor is only that worker’s tax status. The line of “employee” or “not an employee” shifts a bit when it comes to insurance purposes specifically. There’s a primary question you can ask yourself to see if someone qualifies as an “employee” under your Worker’s Compensation policy:
- Are they under your team’s direction and management while on site? Or do they come in and do their own thing without receiving much direction?
If you’re finding that someone is under your team’s direction (like a paid guest routesetter working under the direction of your head routesetter), then that worker can be identified as an “employee” by your Worker’s Compensation policy even if they’re a 1099 “independent contractor” when it comes to tax status.
Let’s review some more common climbing gym scenarios to discuss where workers might fall and what kinds of actions you may need to take in your working relationship with them.
Before we get too deep into the weeds here, let’s get this out of the way:
- Worker’s Compensation laws vary by state.
- The way insurance policies are written vary by carrier.
- I am providing my summary of the insurance industry’s perspective, in general, on the employee/not-an-employee conversation. I am not an attorney and I am not a CPA. Their industry’s definitions of an employee may differ from the insurance industry’s definitions.
While I’ve taken as broad of an approach as possible to this article, there are too many unique situations to be able to cover them all in one summary article. Anytime you have a question, make sure you are having these conversations with your agent so carrier-specific policies and state-specific laws can be addressed!
These are your standard employees, which makes finding answers a bit more straightforward than the other sections:
Worker Injury – This is exactly what Worker’s Compensation (WC) is made for! If a paid W2 employee of yours is injured while on the job, they should be covered for their injury under your WC policy. If they are injured at your gym while they are not on the job, Worker’s Compensation will not apply. Before participating off the clock, they should complete your gym’s waiver.
Participant Injury – If your W2 worker is responsible for a participant’s injury at your gym, as an employee they should be automatically covered for their negligence under your General Liability (GL) policy. (Meaning if that worker is specifically named in the lawsuit, the worker’s portion of negligence will be covered under your GL policy and they won’t need to source their own coverage for it.)
“Independent Contractor” Workers
These are the workers classed as “independent contractors” by their tax status. However, the way they interact with and work with your team might class them as “employees” of your gym when it comes to insurance status. This will be the most complicated section and the one that most directly necessitates this article.
Worker Injury – Let’s first identify whether your 1099 worker qualifies as an “employee” of yours or not.
The question you should ask yourself here is – is this worker under my team’s direction and management? Or do I give them a job, they come in and fulfill it on their own time and in their own way? If you call an electrician to come in and fulfill a project, they bring in their own tools and you don’t direct how they do their work – they just get the job they were given done. That’s an example of an independent contractor.
But if you have a guest routesetter come in and you, a manager or your head routesetter direct the work and how and when it is done, that worker is in more of the “employee” category. If that worker falls under the employee category, any on the job injury they sustain should be covered under your gym’s WC policy. If they are injured at your gym while they are not on the job, Worker’s Compensation will not apply. Before participating off the clock, they should complete your gym’s waiver.
If that worker truly falls under the independent contractor category, they will probably be covered under their own WC policy. Before you work with them, you’d want to get a Certificate of Insurance (COI) from them with proof of their WC coverage. If they don’t have their own WC policy in place, you may be responsible for providing it for the worker and would need to include their payroll in your own WC reporting.
Participant Injury – Before your 1099 worker is responsible for a participant’s injury at your gym, you want to have a clear understanding and agreement of where that liability would fall. If the worker is a true independent contractor and does not fall in the “employee” category as defined above, you need to have a contract in place with them! Any contract should be reviewed or drafted by your attorney, but insurance implications in contracts should be reviewed with your insurance agent.
Depending on the scenario and what your contract with the worker outlines, you may want to require that they name you as additionally insured on their policy…or they may come to you asking that you name them as additionally insured on your own policy. When you get named additionally insured on someone else’s policy, you should have them prove it by providing you with a Certificate of Insurance for GL, generally showing at least a $1 million per occurrence limit on it. Being named additionally insured on someone’s else’s policy means that their coverage is extended to you in certain situations. (PS: Being named “additionally insured” is an entirely different thing from being an additional “named insured” – but that topic is for another day! In this article, we are discussing being named “additionally insured”.)
“Independent Contractor” Scenarios
Let’s take a look at some real-life examples to make this easier to understand:
Let’s say you have an individual guest routesetter come in to help your team with a large routesetting turnover, and the guest routesetter is under your head routesetter’s direction. That makes them an “employee” of yours (even if just a temporary one), which means they should be automatically covered for their negligence under your General Liability (GL) policy if they are responsible for a participant’s injury. A contract may not be required in this case.
In another scenario, let’s say you have a contracted yoga instructor who comes in and facilitates classes a few times a week at your gym. We’ll assume that the way this relationship is run, the yoga instructor is a true “independent contractor” and is not deemed an employee of your gym. You would want to have a contract in place with this instructor outlining exactly where the responsibility falls if a participant were to become injured in their class. Ideally, the independent contractor instructor would have their own GL policy and would accept the liability for any participant injury sustained while in their class. This agreement would be made via your contract and the instructor would name your gym as additionally insured on their GL policy. In this scenario, if a yoga participant at your gym gets injured and decides to sue both the yoga instructor and your gym due to the yoga instructor’s negligence, that additionally insured status means that your gym is covered under the yoga instructor’s GL policy and that your own GL policy doesn’t need to respond to the claim.
Sometimes, to reduce the necessity of contracts and to pro-actively accept the liability for any guest routesetters or instructors when they are acting on your behalf, you can get something added on to your GL policy that automatically covers that specific set of independent contractors. Limited carriers can provide this as an option. While this addition makes managing your independent contractors easier and can reduce the need for contracts, it also has the potential to put more strain on your GL policy and your limits since you are assuming the liability for the contracted worker’s acts.
Worker Injury – If a volunteer gets injured while “on the job”, their injury is most likely excluded from WC benefits. Your WC premium is based on payroll, and a volunteer isn’t getting paid anything!
Another option to check for volunteer injury coverage is your GL policy. Volunteer injuries are probably excluded from your GL policy as well, but you may be able to work out coverage here with the GL carrier (prior to an injury occurring) if you really want to provide coverage for any volunteer injuries.
Yet a third option here, and most likely the easiest to work out, is having a Participant Accident policy in place. It might even be something you already have! A Participant Accident policy is coverage a gym might choose to use to cover an injured participant’s medical bills as an act of goodwill. While it is intended to help with an injured participant’s medical bills, it is often extended to volunteers as well. Discuss with your agent to see if you have a Participant Accident policy that covers injured volunteers or if that is something you may want to consider adding on.
Participant Injury – If a volunteer acting on your behalf is responsible for a participant’s injury, they should be automatically covered for their negligence under your General Liability (GL) policy.
Worker Injury – Let’s say you are Gym ABC and you are “borrowing” a guest routesetter from Gym XYZ. You pay Gym XYZ for the work done, and in turn Gym XYZ compensates their employee. In this scenario, the guest routesetter should remain under Gym XYZ’s WC policy, even while they are under your team’s direction and management. You’d want to get a contract in place with Gym XYZ clarifying your agreement, and you’d also want to get a COI from Gym XYZ with proof of WC coverage. If the other gym doesn’t have WC in place, you may be responsible for providing it for that guest routesetter, even though you aren’t paying their wages directly.
Participant Injury – If the worker described above is acting on your behalf and is responsible for a participant’s injury, they should be automatically covered for their negligence under your General Liability (GL) policy, by the definition of a “leased employee”.
Where to Go From Here
Have a headache yet? Coverage nuances can get complicated, and that’s what makes it so important to have an agent you can lean on for clarity. Hopefully this article has cleared some of the mud for you, but make sure you are discussing any specific concerns or talking through any questions with your agent!
About the Author
Ruthie Lile is an Adventure & Entertainment Risk Consultant on the Granite Insurance team. She specializes in providing risk management and insurance solutions to the nationwide climbing gym industry and, in her past life, she was an operator in the at-height adventure tourism industry. Contact her at email@example.com if you have any questions or would like a review of your risk management program.
Granite Insurance’s client approach is to understand the unique needs of your business and tailor a risk management and insurance program that is designed around those needs. Granite is a part of Keystone Insurer’s Group, which is one of the largest insurance agency organizations in the United States. This resource, combined with their industry-specific expertise, makes Granite Insurance highly qualified to design and implement a risk management and insurance solution for your climbing gym. Granite has formed climbing gym-specific programs with nationwide carrier partners, and they advocate for the climbing gym community in the insurance world by focusing on client and carrier education.