Insureon Blog

Case Study: How Good Contracts Can Protect You From Legal Trouble

7. August 2014 08:01

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Good news for gym owners: your contracts just may spare you the full wrath of a lawsuit. Here’s the scoop.

According to The Pennsylvania Record, a legal journal, LA Fitness was sued by one of its members who sustained injuries on the gym’s premises. The plaintiff, Cornelius Lister, claimed that four men assaulted him during a basketball game at LA Fitness’s Philadelphia branch. Lister offered proof that the court was only open to members at the time, but a club employee allowed non-members (who participated in the attack) to enter the gym.

So far this sounds like the makings of a viable negligence lawsuit, right? After all…

But there’s a twist: Cornelius accepted the risk of physical injuries when he signed the membership contract with LA Fitness. Turns out, the agreement contains an “exculpatory clause” that protects the gym from liability over bodily injuries related to accidents, club activities, and exercise.

Though Lister argued that the clause is too vague and doesn’t apply to reckless conduct, the judge thought the contract was pretty straightforward and threw the case out.

It could have easily gone the other way, though. Let’s take a look at what you can learn from this case and how gym owner insurance can cover the costs associated with a meritless lawsuit.

How Contracts Make or Break Your Business in Court

If LA Fitness’s contract did contain ambiguous language in its liability clause or if that clause was unreasonable, chances are the suit would have moved forward. This is a good reminder to review your membership contract and ensure that it…

Sometimes situations fall squarely in gray areas, which may mean your contract can’t keep you from going to trial. But even if a lawsuit gets thrown out early, you’ll still spend money on the legal proceedings leading up to that judgment.

Why Frivolous Lawsuits Are the Mosquitoes of the Legal World

Sure, a dismissed claim won’t bleed you dry the way a case that goes to trial has the potential to do. But even though LA Fitness “won,” it still had to pay for legal counsel leading up to the judgment summary. That may not be a big deal for an established fitness club, but for small-business owners, spending $2,000 to $5,000 just to have an attorney answer a claim is a considerable investment.

That’s why, as a failsafe, you should carry adequate Errors & Omissions Insurance. This coverage can spare you from lawsuits that allege your business…

E&O Insurance can cover attorney fees associated with meritless lawsuits, and if the case progresses, it can also pay for settlements or judgments.

Read more about how small business insurance benefits gym owners in our blog post, “How General Liability Insurance Can Protect Fitness Instructors, Athletic Trainers, and Personal Trainers from Freak Accidents.”

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Tags:

Allied Health Insurance | Errors & Omissions | Errors and Omissions Insurance | Lawyers | Risk Management | Small Business Risk Management

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