Tips & Insights

Limiting Your Downside

Are the bighorn sheep on your property a potential cash cow? Does the idea of making some good money off that stretch of blue-ribbon fly-fishing sound too good to pass up? You already know there’s good money to be made – your neighbors have been bragging about what they’re making off their leases – but before you jump into the business be sure you put in place a comprehensive risk management program, one tailored specifically to recreational property.

Identifying the risks, determining acceptable and cost effective ways to minimize them, and establishing a realistic amount of liability insurance as a fallback is not optional; it’s mandatory for any investor who is considering leasing his recreational property or even just bringing out guests to night over.

Writing such a policy is definitely not the domain of your typical insurance agent; it requires a highly specialized practitioner. Your best bet is to work with someone who already writes policies for lodges, resorts, hunt clubs, or guides. This type of agent knows the land. Better yet, he’ll know how to protect land owners.

In almost every case an agent will recommend a commercial general liability policy. “Keep in mind that the primary purpose of a commercial general liability policy is to provide for your legal defense whether the claim against you is legitimate or not. Indemnity or negligence may be a secondary consideration. Or it may not,” says Tim Reed of OutdoorsInsurance.com in Wheeling, West Virginia.

Liability insurance can be bought in increments of $100,000 subject to a minimum annual premium, but any agent worth his salt will tell you that $500,000 is a bare minimum. “I generally never write anything for less than $1,000,000 because attorneys just keep on adding zeroes when it comes to a lawsuit,” says Reed.

Actual costs can vary enormously. Are your lessees going to hunt with a high-powered rifle, or are they shooting with a telephoto camera lens? Will they be using your horses, or are they bringing their own? Length of the season, number of visitors, and of course location always play a part. It goes without saying that the activity itself is a crucial factor.

“The toughest thing to insure out there right now is ATVs - ATV tours, rental of ATVs. You’re just asking for trouble,” says Reed.

Don’t fall for the false security of a signed release. Though a signed and dated and properly filled-out release is a necessity, battle-tested insurance agents and hard-nosed attorneys will be the first to tell you that no contract eliminates your legal liability.

“The release itself is a whole other issue. How a judge interprets it and what a jury awards is a case-by-case situation. You can have the tightest contract and release, and the judge may throw one or both out the window,” Reed says.

Signage that indicates an owner is not responsible for accidents is wishful thinking. It may make a tenant stop and think, and it also may discourage an injured party from pursing legal action. But it does not offer legal protection of any kind.