Chapter 16 RiskManagementDr. Ronald KaiserTexas A & M University

Ken RobinsonRisk Manager

City of Cleveland

Law is pervasive in every managementfunction. Selectedlegal conceptsare incorpo-rated into the various chapters (see, e.g.,enabling legislation in chapter 2; propertyacquisitioninchapter8; maintenancein chapter9; equityin employmentin chapter13; andlawenforcementinchapter17). Thischapterfocusesuponnegligencelaw andrelatedliabilities.

In this chapter,as well as all others with legalinformation, the intent is to provide practicalinformationandgenerallegal conceptsapplicabletoparkand recreationorganizationsand not tofurnishlegal advice.Statelaw varies,especiallyin thefield ofnegligence,so alwayscheckwith an attorneyin yourstatewhenseekingspecificlegal advice. Most oftherisk transferstrategiesrequire the assistanceoflegalcounsel.Someacademiccurriculaoffer aseparatecoursein legalaspects.Thebasiclegal conceptsset forth in this chapter should be furtherexplainedanddetailedinsuchcourse.Thisis anoverviewonly.

Risk managementis a partof the everydaybusiness of park and recreation agencies,associations,and businessenterprises, notunlike customerservice,maintenance,person-nel, and marketing.The processof managingrisk neednot be daunting, overwhelminglydifficult, or complex.However,it is anongoingprocessrequiringtime and commitmentfromtop managementand all employeesof theorganization.

Whatrisksarebeingmanaged?Risk managersgenerallydefinerisk asthe

possibility of sufferingharmfrom a hazard thatcan cause personal injury, death, propertydamage, economic loss, or environmentaldamage.Essentiallytherearetwo types—riskof

financial loss to the agency,association, orbusiness enterprise, and risk of injury toparticipants,users, visitors, clientele, volun-teers,or employees;

The emphasisof this chapteris on risksassociatedwith possibleinjury to participants,how to reducetheirfrequencyandseverity,andhowtominimizerelatedfinancialloss.Reducingthe frequency of accidentsand severity ofinjuries is a shared responsibility betweenparticipantsandparkand recreationorganiza-tions. Although negligencelaw may makeproviders accountablefor injuries, it hasnotmade them absoluteinsurers of participantsafety.Negligencelaw requiresprovidersto actwith reasonablecareandprudenceto preventunreasonablerisks of harm to participants.Correspondingly,participants must exercisereasonablecareand foresightto avoidknowncircumstances,hazards,andsituationsthatposerisksofharm.Risk managementdoesnotseektoeliminateall risk within an organization,butprovides a framework for balancing andunderstandingthe risks inherent within theprogramsand servicesof theorganizationandfor empoweringstaff to makegoodchoicesindealingwith thoserisks. The basicprinciplesoutlinedapplyto federal,state,andlocalpublicagencies, as well as to private for-profitenterprisesandnonprofitassociations.

Whatisriskmanagement?

Risk managementis a processwith threephases:(a) risk identificationandassessment,(b)risk responsestrategies,orwhatto do abouttherisks, and (c) managementto reduce thefrequencyandseverityof therisks throughanoperationalplan. Thesethreephases,together

Chapter16—713

with pertinentlegalconcepts,aredetailedin thischapterandaredepictedin exhibit 16-1.

In therisk assessmentphase,thevarioustypesof hazardsassociatedwith park andrecreationservicesareidentifiedandcategorized.A hazardis an activity, event,or condition that posesapossibility (risk)of harmto personsorproperty.For example,failing to install orrepaira safetyfeatureona pieceof recreationequipmentmayresultin a hazardto a participant.Thereis nospecificmethodfor risk identificationthatsuitsall entities;themethodandtoolsusedwill varyaccording to the nature and extent of theoperation.Whatis important,however,is thatasystematicprocedurebe establishedto assuretotal assessmentin order to avoid unexpectedlosses.Riskanalysisshouldutilize anyorganiza-tion managementinformation database,andincludeidentificationof risksand estimationoftheextentof therisks.

Phasetwo, risk responsestrategies,coversthevariousapproachesto controlthe activity risksandtechniquesto financetherisk. Risk controlapproachesinclude avoidance,reduction,andtransfer,whilerisk financingtechniquesincluderetentionin theprovider’sbudgetandtransfertoa third party, such as indemnification orinsurance.Organizationsshould identify alter-nateapproachesfor thecontrolof risksandtheexpectedimpact of each.Managementmustselectanapproachto addresstherisksidentifiedand assessedin phaseone,andsetforth relatedpolicies.

Themanagementphaseaddressesformulationofanoperationalplanto implementandmonitorthe approachesselected. It details theorganization’spolicies and procedures,whichshouldbesetout in arisk managementmanual.

Whoshouldengagein riskmanagement?

All organizations, regardless of size or type,should havea current risk managementplan. Forsmall organizations,the plan need not becomplex,but it mustbe thoroughandcovertherange of programs, services, and facilities,including specialeventsand partnershippro-grams.For largerorganizationswith a greaterscope,scale,anddiversity of facilities, services,

and programs, the plan must reflect thiscomplexity. The plan should be tailored toaccommodatethe structureand style of eachprovider.Thereis no standardmodelplanthatcanapplyto all organizations.Someofthebasicprinciplesaregivenin thischapter.

Whyriskmanagement?Risk management adds “value” to an

operationin four dimensions:

• Enhancesparticipantexperiences.Thequality of customers’ experiencesin-creases,especiallywhen providing forsafety, and less fear of risk providesgreaterfreedom for participation.Theparticipant experiencedeterioratesindirectrelationtotheextenttowhichheorsheis exposedto unreasonablerisksforinjury. Safetyof participantsshouldbeaparamountgoalofall organizations.TheNationalSafetyCouncil suggeststhat85percentof all accidentsarepreventable.Also, thesaferaprogramis, themorethestatureandpublic imageof theorganiza-tion is enhancedin thecommunity.

• Provides good stewardshipof assets.Financial, physical, and human re-sourcesareprotectedandconservedbygood risk managementpracticeswhichreduceliability exposures.Further,riskmanagementdeterminesthe mostcost-effectiveoperationalstrategiesnot onlyto reducethefrequencyandseverityofits potentialliabilities,but alsoto financethem.

• Forestalls problems, including legalactions. Risk managementforestallsproblems, and helps an organizationhave a betterprepareddefenseif it issued. A risk managementprogramshoulddealwith thelegal risksin awaythatprotectstheproviderandthosewhoserveit from undueliability exposure.

• Encouragesprofessionalpractices.Riskmanagementembodiesexcellent pro-fessionalpractices,which result in amoreeffectiveandefficientoperation.Italso increasesemployeeand volunteer

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Whofacilitatesriskmanagement?Thesize,type,andcomplexityof aparkand

recreationorganizationdictates the internalprocessfor preparingand implementingriskmanagement.However,whateverthenatureoftheorganization,thereshouldbearisk manager,an organizationrisk managementteam, andsupportivepolicymakersandadministrators.

Risk manager.Thereshouldbeanemployeewith risk managementresponsibilityand theauthorityto carryoutthepoliciesestablishedforrisk management.It is essential to assignresponsibility for this vital act so that thefunction of risk managementreceives thecredibility andorganization-wideacceptanceitwarrantsandneeds.It must not be perceivedonly asinsurancepurchase.

Therisk managermustbegivenauthoritytocarry out policies and proc~dures,both withemployeesandwith theadministration.Theriskmanagerworkscloselywith thebusinessofficerof the organizationin facilitating the financialapproachesdeterminedto bemostappropriate,andworkswith theadministratorsandsupervi-sorsof theprogramsandservicesin obtainingessentialemployeeperformanceas relatedtoreductionof programmaticrisks.

The structureand sizeof the organizationwill determine whether the risk managerdoublesasfinancialofficer, recreationdirector,the enterprisemanager,or the like, or hasnootherresponsibilities.Particularlylargerorgani-zationsandbusinesses,or agenciesthatarepartof a largeparentorganization(suchasa city),may have staff devoted exclusively to riskmanagement,under which the parks andrecreationunit works. In others,it maybe anadjunct responsibility of a businessmanager,safety officer, administrator, or other staffmember.Whateverthe arrangement,someonein theorganizationshouldbe identified asthelead personresponsiblefor developing andimplementinga risk managementplan. It isessentialthat the tasks of a risk managerbeassignedspecificallyto oneperso1~.This isnot toimply thatriskmanagementis ao~e-personjob,but that onepersonshoulidbe the leaderof ateam effort to reduce and manage risk.

“Everyone’sresponsibilityis no one’sresponsi-bility!”

Further, the risk managershould not bemerely a safetydirectorwith a moresophisti-catedtitle. Safetyis not theonly concernof theposition—there also are the financial riskmanagementaspectsand the issue of compli-ancewithpersonnelandenvironmentalrequire-ments.However,a safetydirector or specialistmightworkundertherisk managerorin asmalloperation,bothfunctionsmight begiven to thesameperson.

Most Tort ClaimsActs providethat publicentitiesmayparticipatein joint riskmanagementwith otherpublic agencies,suchasmunicipali-ties, schools,or counties.An inter-organizationjoint risk managementsystemmaybe formed,whichhasamanagementteamwith representa-tion from eachmembermunicipalityordistrict,aswell asitsownmanagementpersonnel,whichwill establish,implement,and monitor proce-dures to reduce the current level of losses.However,eachindividualagencystill musthaveits owndesignatedrisk manager.

Risk managementteam.While one personmay be given specific responsibilities foradministeringa risk managementprogram,noperson should be expectedto facilitate theprogramalone.Therisk managershouldrecruita multidisciplinaryteam,includinglegal coun-sel, insuranceproviders,safetyspecialists,andprogram, maintenance,and financial staff.Together they should examine risk issues,consideroptionsforcontrollingrisks,contributeto the risk managementplan, and serveas acatalystfor action.

Therisk managementteamshouldreviewallaspectsof organizationalpolicies, operations,and procedures that impinge on theorganization’srisks. Typically the teamwouldbeexpectedto:

• Recommendgoals and objectives foradoptionby thepolicy body

• Guide management in setting riskmanagementpolicy

• Establishchannebof communicationonall mattersrelatedto risk management

• Examineall critical risks

• Developstrategiesfor controllinglosses

716—Risk Management

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• Providepromptaidation areas, roads,and trails. Although theimproperdesign, layout, and constructionofareasandfacilities canposea hazardto users,infrastructurehazardsmore often arise fromimproper inspectionor maintenance,makingsafelydesignedor constructedfacilities defec-tive and dangerous.(See chapter9 for moreinformationaboutmaintenanceandinspection.)The more common risks result from suchconditionsas:

• Slippery/unevensurfaces

• Stairs/stepsnot in goodcondition

• Protrusions/sharpedges

• Moving parts

• Overheadobjects

• Design/layoutdefects

• Fences/otherbarriers not in good

conditionor thelackof themProgrammatichazards.If notorganizedand

conductedproperly,programscanput partici-pantsat risk forinjury. Hazardscanresultfromfailure to:

• Properly supervisebasedon location,competency,andnumberofsupervisors,orthenatureoftheirsupervision

• Developandenforcesafetyrules

• Properlytrainsupervisorsandinstructors

• Adequatelyinstruct• Ascertainparticipantfitness

• Furnish proper safety devices andequipment

• Select appropriate activity for age,experience,andability

• Warn

Emergencycarehazards.Park and recre-ationorganizationshavealegaldutyto provideemergencycare and first aid to visitors andprogramparticipants.Many factors influencethe type of careto be rendered,including thenatureandlocationoftheprogramorfacility, theattributesofusers,expectationsregardingrangeof injuries associatedwith programsorfacilitiesandproximity to medicalfacilities. Someof themore common bases for negligenceclaimsincludefailure to:

• Employ trainedpersonnel

• Properly superviseor equip personnelrenderingaid

• Provideappropriatetreatment

• Transportinjuredpersonsappropriately

Transportation hazards. A number ofrecreationprogramsrequireparticipant trans-portation. This posesadditional hazards toprogramsponsors.Liability canbeavoidedonlywhenno transportationis provided.However,risks canbe managedand liability reducediftransportation hazards are identified andminimized.Hazardsassociatedwith transport-ingparticipantsincludefailure to:

• Usetheappropriatetypeofvehicle

• Properlymaintainvehicle

• Determine if the driver has a properlicense

• Trainandsupervisedriver

• Have a policy regarding participants

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Partiesatrisk

While thefocusis oftenonorganizationrisk,it is importantto recognizethat otherparties(board members,employees,volunteers)whoare involved in providingpark andrecreationservicesalso are subjectto varying degreesofrisk (liability) while engagedin their respectiveduties.Many lawsuitsarebrought againstallpossible parties, including employees andvolunteers,eventhoughtheymayhavelimitedability to pay substantial damage awards.However,the individual parties-at-risk,whenacting within their scope of authority andresponsibility if found liable, usually areindemnified by the organization. The riskmanagementplan shouldconsiderthe respec-tive interestsof all at-riskpartieswhenformingrisk managementstrategies.

The Park andRecreationEntity

General rule: The park and recreationentity,whethera public agency,nonprofitassociation,orfor-profit enterprise,is liablefor the negligentactsofits

Chapter16—719

board members,employees,volunteers,and agentsunlessliability protection is extendedby statelaw.Underthedoctrineof respondeatsuperior(let thesuperiorrespond)andthelawofagency,liabilityis imputedto theentityprovidingtheparkandrecreationservices.

Immunity.Immunity iswhenanentityis notliable for its acts, usually acts of ordinarynegligence.Forexample,if achild is injuredonaplayground becauseproper supervision islacking and the city offering the playgroundprogramis in a statethatprovidesimmunity tocitiesfor recreation,thecity would notbe liablefor thedamages(injury) to thatchild.

Immunity is normally conferredby statute.Thereis verylittle commonlawimmunitytoday,suchasgovernmentalimmunityfor schoolsandmunicipalities,which,prior to the1960s,manystateshad.Commonlaw is law establishedbycourt precedence,not legislators. Almost allstatesnow havea Tort Claihis Act, which setsforth the liability and immunity of publicagencies—state,county,municipal,andschools.In afewstatesthereis liability only to theextentofthe insurancecoverage.

Eachstate’slaw is slightly different; thereisno model law. However,most statesprovideimmunityfor discretionaryactsandliability fordangerousenvironmentalconditions, such asbuildings. A discretionary act is one thatembodiespolicy/planninganddecisionmaking.Theentityandthepolicy-makingboardmembershave immunity for injury resulting from theirpolicy making.Inthelate1990s,dependingonthenatureof the state’sTort Claims Act, therehasbeenincreasingapplicationof discretionaryactimmunityto administrativepolicydecisionsatalllevelsof governmentto further protectgovern-mentalentities.

The doctrine of charitable immunity isprimarilyajudicialdoctrine(i.e.,decreedbycaselaw, rather than by statute). And, just likemunicipalities,mostcharitableorganizationsinthe mid-1950s were protected by charitableimmunity. This immunity was basedon theconcept that these associations held thedonationsfrom the peoplein public trust andthereforethemoneyshouldnotbeusedto payforliability. However,by themid-1990sonly onestate,Arkansas,had generalcharitableimmu-

nity, but this wasbeingquestioned.In a fewstates,thereareremnantsofimmunity,althoughthe extentof immunity maybe only to certaintypesof claims,to aspecifieddollar amount,orto insurancecoverage.As offall 1998,Alabama,Colorado,Georgia, Maine, Maryland,Massa-chusetts,NewJersey,SouthCarolina,Tennessee,Texas,Virginia, and Wyoming offeredlimitedliability protectionfor qualifying associations.

Staterecreationaluserstatutes.To encour-age private landownersto make their landavailable to the public for noncommercialrecreationuse,all butonestate(NorthCarolina,whosestatuterelatesonlyto trails)haveenactedstatuteslimiting landownerliability for injuriessufferedbytherecreationuser.Thesestatutesdonot provide immunity to the landowner,butrather reducethe standardof carerequiredtowardtheuser.Whereasthe recreationuserisusually classified as an invitee, licensee,ortrespasser,under these statutes, a fourthclassificationhasbeenestablished,the “recre-ationaluser,” with its own standardof care.Ineffect, thestatutesprovidesignificantly greaterliability protectionfor the landownerthan isavailableatcommonlaw. A landowneris undernoduty to:

• Inspectthepropertyto discoverhiddendangers

• Warn the recreation user of hiddendangers,exceptknown ultrahazardousconditions

• Keepthepropertyreasonablysafeforuse

• Provide assurancesof safety to the

recreationuserWhile landownershavevery little liability

riskexposuretogratuitousrecreationusers,theystill have someobligations.Landownersmustavoidinjuring therecreationuserthroughgrossnegligenceorwillful andmaliciousmisconduct.Willful and maliciousmisconductis whenthelandowner’sconductis intentionalandin totaldisregardofaknownandobviousrisk, makingithighlyprobablythatharmtotheuserwill follow.It is conductthatshowsanutterindifferenceto,orconsciousdisregardfor, thesafetyof others;forexample,if alandownerstretches(perhapsat“neck level”) awire, cable,or ropeacrossa trailwheremotorbikesorsnowmobilesareridden.

720—RiskManagement

Grossnegligenceis the failure to exerciseeventhat carewhich a carelesspersonwoulduse,falling just short of recklessdisregardofconsequences.It differs from ordinary negli-genceonly in degree,not in kind, andis of anaggravatedcharacterasdistinguishedfrom themerefailure to exerciseordinarycarewhich isthestandardof ordinarynegligence.

To qualify for protectionunder the recre-ationaluserstatutes,thelandownerisprecludedfrom receiving“consideration,”orsomethingofvalue. That is, the usemust be gratuitous;noeconomic benefit can be derived from therecreationaluse. However, the definition of“consideration”variesfrom stateto state.Somestateshavechangedtheirlaw (or interpretation)to “no feefor theuseof thepremises,”andthenhavedeclaredthat the “fee” is not for useofpremisesbut for a servicesuchas parkingorrentalof acanoeor raft.

While theoriginal targetof thestatuteswasprivatelandowners,andtheystrictly appliedtooutdoorrecreationonnaturallandsandwaters,somestateshaveextendedapplicationto stateandlocal public landsand waters.In all states,the statuteshave been applicable to federallands,becauseunderthe FederalTort ClaimsAct, thefederalgovernmentis to betreatedas“aprivateindividual.”

Further,in thelate 1990s,alimitednumberofstateshavealsoencompassed“urban”recreationon outdoorareas,suchassports.The“consider-ation” questionis againat issueasto whetherasportregistrationorentryfeeis “consideration,”or merelydefrayingthe costsfor maintenance,officials, andincidentalexpenses.

Sharedresponsibilitystatutes.In order toprovide more recreation opportunities forpeople,especiallythe so-calledrisk or adven-ture/challengeactivities,with areducedfearofliability by the provider, many stateshaveenactedstatuteswhich sharetheresponsibilityfor injury betweentheproviderof the facilityand the participant engagedin the activity.Essentially,theprovideris liable for negligencerelatedto thefacility thatcausesinjury, while theparticipant bears responsibility for knowinghowto engagein theactivity. Thisappliesto therecreationaluseof a facility, not to instructionalclasses.A few states,such as California and

Illinois, have a law entitled “HazardousRecreationActivities” that gives protectiontoboth the public entity and public . employees.These statutesencompassa broad range ofoutdooractivities.

Moststatutesareactivity specificandapplyto all sectors— public, nonprofit, and privatefor-profit. For example,nearlyone-halfof thestateshaveaski responsibilitylaw, definingtheoperators’dutiesandtheskiers’responsibilities.

In general,whenparticipantshaveknowledgeandunderstandingof anactivity, theyassumetheinherentrisks,thatis, thoseintegralto anactivity,without which the activity would not exist. Forexample,if oneis playingsoccer,onemustexpectto getkickedin theshinsoncein awhile,stumblewhenrunning,or perhapsreceivea faceor headinjury whenattemptingto heada ball. It is thenatureof thesport.

Comparativefault statutes.Nearlyall statesnow havecomparativefault statutes,whereinthenegligenceof theprovideris comparedto thecontributory fault (referred to as secondaryassumptionof risk) of the participant. Anymonetaryaward to the injured participant isreduced by the percentageto which thatparticipantwas“at fault.” In aboutone-hallofthe states,if the contribution of the injured(plaintiff) is 50 percentormore,thentheinjuredreceivesnothing.Thejury determinespercent-ageoffaultattributedtotheprovider(defendant)and the injured (plaintiff). The managermustkeepexcellentrecordsinordertobeableto provethe contributionof theparticipantto his or herown injury, and therebyendeavorto documentthattheinjuredplaintiff did in fact contributeapercentageof fault towardtheinjury.

BoardMembersGeneralrule:Boardmembersare not individu-

ally liablefor thecollectiveactionsofthe boardor forthe tortious acts of organization employees.However,boardmemberscanbe individuallyliablefor:

• Thosecollectiveactsoftheboardorthoseindividualactsofboardmembersthatareoutsidetheirlegalscopeof authority

• Breachesof statutoryand/or fiduciaryduty or violation of participant/em-ployeeConstitutionalrights

Chapter16—721

• Intentional torts, such as assaultand

battery,slander,or libel

Employees

Generalrule: Employees,including adminis-trators and supervisors,are individually liable fortheirown tortiousmisconduct;however,administra-torsandsupervisorsarenot liablefor thetortiousactsoftheirsubordinateemployees.

Managersandsupervisorsareliablefortheirownnegligenceandthefailureto carryouttheirownsupervisoryor administrativeresponsibili-ties, which might enhance a subordinate’slikelihood ofbeingnegligent.Forexample:

• Failing to employcompetentpersonnel

• Failing to trainemployeesproperly

• Failing to providepropersupervision

• Failing to establishand enforcesafetyrules

• Failing to staffadequately’

• Failing to warn of, remedy,or removedefectiveanddangerousequipment

• Failing to follow the standardsof areasonableprofessionalasrelatedto aspecificprogram,activity, orservice

• Failing to properly facilitate mainte-nance,afternotice of dangerouscondi-tions (seechapter9)

• Deliberatedisregardwhen complaintsaremadeof sexualharassmentor childabuseby anemployee(seechapter13)

• Negligent hire, that is, failure to doproper background checks for anapplicant’spropensityfor violence (seechapter13)

TheimmunityaffordedpublicentitiesundertheTortClaimsActs,for themostpart,doesnotgiveprotectiontopublicemployees.A fewstateshave sought to extend limited immunityprotectionto governmentalemployees.How-ever, most tort claims acts do authorizeindemnification of employees, particularlythroughcarryinginsurance.In somesituationsthere is “qualified immunity” and “absoluteimmunity” becauseof the natureof the taskbeing performed by the employee. This isparticularly applicable to law-enforcement

personnelandsomeadministrativeor supervi-soryresponsibilities.

A few statesmay provide some damagelimitations for employeesof nonprofit associa-tions. In Texas, for example, the CharitableImmunityandLiability Act limits anemployee’sliability to $500,000in damagesfor eachperson,$1,000,000for eachsingleoccurrenceof bodilyinjury or death, and $100,000 for propertydamage.Employee liability is not limited forintentional torts (assault,battery,falsearrest),willful and wanton misconduct,gross negli-gence,orfor actscommittedbeyondthescopeofemployment.

VolunteersGeneralrule: Volunteersofpublic, nonprofit,

andprivatefor-profit organizationsareliablefor theirown tortious misconduct,unless they can qualifyunderthefederalVolunteerProtectionActor a statestatute, and such negligence is imputed to thecorporate entity under the doctrine of respondeatsuperior.

More than one-half of the states haveprotection laws for volunteers in nonprofitassociations.Of these,tenspecificallyreferenceyouth sport, including both coaches andofficials. A few of theseyouthsport laws havethecompletionof a trainingcourseprerequisiteto theprotection.NewJerseyhasoneofthemostextensivelawsin this regard.Thelawsprotectvolunteersfrom civil liability for certainactsoromissionsresultingin death,damage,orinjury ifthevolunteerwasactingin goodfaithandin thecourseandscopeofhisorherduties.Protectionis only for ordinarynegligence;the individualremainsfully liable for any grossnegligence,willful and wantonmisconduct,or intentionaltort.Thelawsusuallydonotcoverinjuriesduetomotor vehicle accidents. Usually the lawsprovidethat volunteersmayacceptexpensestocovertheirservices,butnotanyhonorarium.

In 1997,theFederalVolunteerProtectionAct[P.L.105-19,11 Stat. 218] waspassed.It is verysimilar to thestatelaws,butcoversvolunteersofboth governmental entities and nonprofitassociations.

Notwithstandingprotectivelegislation,mostagenciesandassociationsprovideindemnifica-tion or insurancecoverage. The difference

722—RiskManagement

betweenindemnificationand insurancecover-age should be noted. When an individual isindemnified, the organizationpaysthe judg-ment (award)after the awardhasbeenmade;whenan employeeor volunteeris coveredbyinsurance,theinsurancecarrierdefendsthesuitfrom its initial filing, which is of considerablebenefit to individual employeesor volunteers,who otherwisewould haveto securetheirownlawyerto defendthemselves.Individualsatriskmaycarry their ownprofessionalinsurance.Anumber of national organizationsmake thisavailable at a nominal cost, suchas NRPA,AAHPERD,stateteachereducationassociations,andsomeassociationsfor specificsports.

Step2.AssessmentofRisks

A fter theriskshavebeenidentified(step1),they must be evaluated by the risk

managementteamasto (a) “risk probability,”orfrequencyof occurence,and (b) “consequenceseverity,”ortheseverityofinjury to participantsand the financial impact on the organization.Sinceno two risksarealike, theymusteachbeevaluatedindividually. For example,statisticssuggestthat therearefar more accidentsandinjuries on playgrounds than at swimmingpools. The severity of playground injuries,however,is oftenlessthanat pools. Therearebasicallythreesourcesof dataon whichto basetheassessmentof probabilityandconsequence.

Organizationaldata.Anorganizationshouldhaveaninformationordocumentationsystemaspart of its risk managementplan. It can thenaccessits own dataabout the frequencyandseverityofrisksin ordertodevelopariskprofilefor the organization. Incident and accidentreportsareveryimportantandshouldbeusedtodevelop hazard profiles for facilities andprograms. (See Phase III, Adoption andFacilitation,in this chapter.)

Staff assessment.Staff with experienceinparticularfacilities and programscanexercisetheirown judgmentin estimatingprobabilitiesandconsequencesin order to evaluateagencyrisks.Thisis particularlyusefulwhenfrequencyand severityare low, whenthere is not muchdataavailable,or whenan activity orserviceis

newto theorganization.Staffshouldbeutilizedto gatherbothqualitativeandquantitativedata.Of course,therisk managementteamwill haveexcellent insights into risk assessment.Inaddition to the profiles, the risk managementteamshouldranktherisks,assigningpriorities.

National and similar organizationdata.When one doesnot have an experiencerecordwith a particularprogram,facility, or service,then, if available,nationaldatamaybe used,oronemayconsultwithprofessionalcolleagueswhomanagesimilarprograms,facilities,or services.

Riskprobability(frequency)

Probability reflects how frequently a riskoccurs. Many organizationsrate risks as high,medium,or low. This representsa simpleway tocharacterizeandunderstandrisks.Seeexhibit 16-3.

The threecategoriesof frequencycouldbefurther delineatedby using a point scale, forexample,a three-or five-pointscale.Regardlessof the scaleused,the comparativefrequencydesignation should reflect sound judgmentbasedon thebestavailabledata.

ConsequenceseverityTo determinehow severethe consequences

couldbe,onemustconsiderboth theseverityofthe injury asrelatpdto the participant,and itsfinancial impacton the organization.It canbeuseful to expressinjury and financial severityalso on a scale. The scale for injury severityusuallyrangesfromfatalto low. Seeexhibit16-4.Userinjuriesmayfinanciallyaffecttheproviderandits ability to function.Themoreseveretheparticipant’s injury, the more profound thefinancialconsequencesfor the providertendtobe.Seeexhibit 16-5.

Usingtheratingsfor thevariousrisksonthethreescales(e.g.,low-low-minimal), theriskmanagementteamcanprioritize therisks.

PHASE tI~RISK RESPONSE STRATEGIES

Once the risk management team hasidentifiedtherisksanddeterminedtheprobabil-

Chapter16—723

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~&c&urriPg morn dft&iAhan d&~intin,

~i6~dPntv~IhePrit~4% .<Substantahrijune Though nonThfa4hrearriQtei$oraryAls~U~itiancl/oRd uncxpochd PnuUu~ly 2hqsp~taI~ ~won PAUl

MinorjAy r~d con sof ~ho~nskq cm Injtmes that require fncorsider.inaavaiiabk> tick vQSpoflsC stratcght~. ThP~I~~tdjY ~h6d~te~atd~h&ndorLT.h~ stral:egies can be ci ~ssihd ~srisk contvoi(wtxorks to dQa] wiTh the isk itaeh) mU n~kf~nand.ng (techniquer~ for p~xying foi liv resuPQt Low

Ifl(iC~QfltlAW YiSlK).

Risk Control Stratcgies ______________________________

Vli’ arPtkreebasit.stL~ 1~ gins Aw, ~bteto timTpark mU recreahono;gamnhen,waidancs, ExWbtt

him must uscs,1b19dw9 . Fin~t~ O~hs~tienc~S~a~proft~ssiw~M jtidgrncnt to sehct rick cQntPolstntegies The~{hibtacsof (he or~drn20t1ond$ ~InTSSlOYI, And Pt fmmqW 4amsmustbem~K h~d Losses Mt a ufro major tax or

¼dh 1¾fype fteqtw~wy ~nd scvenfy of risk ~nCrCas>p~iVat~4ntafpflseWOUk~ declaExposures ankru

~Critftd.

• OneW~W to malfldgct ccrtmnusk~ts tcvavowf may W9~ ;Wr~. .rnakr.tN m~ Alihougit the hws sornednie,repnre cutback~Th6~gan~zaton,~acfiitycIos~ngrnd~0fl)rogranwanci=il~toflsjp~endesto cilia cPrt~in SCYR ( Math wEnch

0comecert~i.nrisks, for th~ mostpat oigirnn Modetatetioris choose whM rl½k,tt y ~Sst~fflt IO~ Temporary senhoe retflons minor%xrnpk& a paik dejmrtmcnt nrn\ ho L( qtm~ U by hicre~es, ~r11h~ndra~~ealiocatkrn,Thw to own and manage lantl btt tim dctWPw’,and sotv.Kes offered on 11w Mad dW ~dthed saetion of the park department Ukwisc if ~ Losses can he ab~cwbed withnm~tng home,~Vhe~Iierp¾±ihox pmate,want’, 4rat~H+6&~nues,No pvngrmm r~ductk>ncci Lain sk~tefimdi.ng, and. to qtldhfy Ii mu’4 h3w ______________________________________________________

~ k\t*

an activity director andoffer recreation,thenitmustoffer recreationactivities,but thechoiceofactivitiesofferedis discretionary.

Thereare two forms of avoidance.Thefirstform is not offering an activity or service.Forexample,manypublic recreationagenciesdonotoffer challenge/adventureactivities because,theysay,ofthehighliability risk.Thesecondformofavoidanceis discontinuingaparticularactivityorservicebecausetherisk in termsof frequencyandseverityis deemedtoo great.For example,trampolineswere removedfrom schools, andcertain types of playgroundequipmentwereremovedfrom playgroundswhentheschooloragencycould not afford the type of surfacingrecommendedby the ConsumerProductSafetyCommission(CPSC)standards.

When consideringavoidance, park andrecreationprovidersshoulduseabenefit! harmtest.Underthis test,thequestionis whethertheamountofsocialharmthatis doneplusthecostof transferringtherisk is greaterthanthebenefitderivedfrom thefacility, program,or services.

RiskreductionThis strategy seeks to reduce both the

frequencyandtheseverityofarisk. Forexample,frequencymaybe reducedby risk prevention,suchas installing a railing on a stairway,orseveritymay be reducedby providing timelyfirst aid to someonewho fallson thesteps.

Areas and facilities. Organizations canpracticearea and facility risk preventionandreductionby:

• Anticipating the occurrenceof “risky”activities

• Inspectingareasandfacilitiesto discoverhiddendefectsandhazards

• Warningusersof hiddenrisksoncetheyarediscovered

• Instituting timely repairs of hiddendefects

• Removing facilities or equipmentfromservice if repairscannotbe madein atimelymanner

Theseare someof the risk reductionandpreventionpracticesthat therisk management

teamcanconsider.Theyarebasedonahistoryofpark andrecreationlitigation andoutlinebasiclegal obligationsfor providersof servicesandprograms.

Recreationprograms.Recreationprogram

risk preventionandreductionpracticesinclude:

• Hiringcompetentpersonnelto superviseand conduct activity programs (thisincludesinsuring that they possesstheappropriatecredentialsbasedon educa-tion, experience,andcertificatons)

• Communicatingexpectedperformancemeasuresandsafetyobligations

• Inspectingfacilities and equipmenttodiscoverdefectsand removinghazard-ousfacilities andequipmentfrom use

• Monitoring conformity to performancemeasuresandsafetyobligations

• Correctingimproperperformance

• Providingsafetytrainingandeducationto staff

• Establishingand enforcingsafetyrulesandregulations

• Providing the appropriatelevel of first

aidto injuredusers/participantsWhile this list i~ notexhaustive,it presentsa

startingpointfor furtherrefinementofprogramrisk preventionandreductionpractices.

Thefocusofa risk managementoperationalplanis on reduction.SeePhaseIII — ManualofPoliciesandProcedures— in this chapter.

Risktransfer

This strategy involves the contractualtransferof risk to athird party.Thatthirdpartythenbearstherisk consequencesassociatedwiththeoperationand useof the recreationareaorfacility or the conduct and provision of anactivity. Threeof the commonlyusedtransferstrategiesare:

• Leasing

• Independentcontractors

• Liability waivers

Chapter16—725

Leasingandrentalagreements.It is commonpracticefor aparkandrecreationorganizationtoallow othersto useareasandfacilities, oftenbyjustsigningup foratimereservation.However,itwould be desirableto transferliability with awritten rental agreementor lease.Unlesstheagreementor lease specifically transfers thecustodialcareand maintenanceof the areaorfacility tothelessee,theproviderremainslegallyresponsiblefor the condition of the facility.However,onemaytransfertheliability for theactivitybeingconductedonanareaorinafacilityto therenteror lesseeby so stipulating in thewritten agreement or lease. Further, it isdesirableto includeastatedtransferof liabilityfor thebehaviorsof theparticipantsengaginginsuchactivitiesto theorganizationthatis rentingor leasingthe areaor facility. With thesetwoprovisions,the providerof the facility/areaisliableonlyfor theconditionofthefacility orareaitself.

A commonpracticeforfinancialrisk transferis to include an indemnificationagreementorclauseorrequireacertificateofinsurancein theleaseorrentalagreementandrequireadditionalinsuredstatuson the leasee/renter(s)liabilityinsurancepolicy. (SeeFinancialRisks)

Independentcontractors.Usinganindepen-dentcontractorto conductanactivityorprovideaprogramor serviceis anotherwayto transferrisks. For example,an organizationcan retainaerobic or weight training instructors asindependent contractors to conduct fitnessclassesin their communitycenter,or a golf ortennisprotogivegolfandtennislessons,orsportofficials, or a physicianto servicea camp asindependentcontractors.Thesepersonswouldbe responsiblefor theliability thattheirserviceoccasions(e.g.,anyparticipantinjuries),andforany insurancecoverage for themselves.Theorganizationdoesnot haveto paybenefitsforthesepersonsandtheyarenotcalledemployees.Onecaution,however:someorganizationscalltheemploymentan independentcontract,whenit is not. (Seechapter13.)

It is essential that the individuals arecontractedto providea designatedprogramorservice,and the contractcanprovide certainparameters,butoncecontracted,theindividualsare totally responsibleand the organization

mustnotinterfere.Anyeffort to directorcontrolthe mannerin which theprogramor serviceisconducted would negate the independentcontractorstatus.

A secondtype of independentcontractorisanotherorganization,usuallyaprivatefor-profitor nonprofit entity, that provides either aprogramoraservice.Forexample,manypublicand nonprofit organizationsdo not wish toassumetheliability risksof adventureactivities(horsebackriding,rafting,ropescourses,climb-ing, etc.),and thuscontractwith a private for-profit enterpriseto provide thatserviceto theirconstituency.Or, an organizationmay wish tocontract for services, such as concessions,premisesmaintenance,orsecurity.

However,for liability to betransferredto anindependentcontractor,reasonablecaremustbeusedinselectingcompetentindependentcontrac-tors. Thecredentialsof theindependentcontrac-tor,for whateverserviceisbeingcontracted,mustbecarefullyandsystematicallychecked.

Liability waivers.A liability waiveris atypeof fault-freeingor risk-transferringagreementthat relieves one party (the provider) of itsresponsibilityto anotherparty(theparticipant).

A waiver presentsa conflict betweentwofundamentallegaltheories:thecontractfreedomto bargain for behavior,and the negligencetheorythatoneshouldbe responsiblefor hisorhernegligentacts.Waiversgenerallyaresignedby programparticipantsandstipulatethattheygiveupanylegalrightstorecoverdamagesfromtheorganization,its staff, or volunteerscausedby theirordinarynegligence.For example,if anadultis injuredwhileonaraftingtrip dueto thenegligenceof theguide,awaiverwould relievetheguideandemployingentity of liability andtherafterwould notbeableto obtaindamages.Waiversarecommonlyusedby fitnesscentersand providersof adventureactivities, suchasmountaineering,skiing, andwhitewaterrafting.(Note: while the terms waivers, releases,holdharmlessagreementsandindemnificationclausesareoften used interchangeably,they do havedistinct legal differences.Seenext sectiononRisk Financing.)

A waiver may be an effective strategytotransferliability risk. Whenwritten correctly,it

II

III

726—RiskManagement

is valid for adultsparticipatingin recreationalactivities.Becauseof theconflictin contractandneglig~ncetheory,a numberof statesexaminethe contract either “vigorously” or “moder-ately,” while othersarelenient in regardto thevalidity ofawaiver.

Thereareseveralprincipleswhich mustbefollowed for awaiver to bevalid. Thewaiver:

0

0

0

Must be signedby an adult; a waiversignedby a minor will notbe enforced;parentscannotsignawayachild’srights,butcansignawaytheirownrightsif theirchild is injured;minor mayratify uponreachingmajority.

Mustbevoluntarily signed.

Must bevery explicit, in clearlanguagethat statesthat the waiver is for thenegligenceof the provider and is notmerelyacknowledgingacceptanceoftheinherentrisksof theactivity; awarenessandunderstandingof the activity is notnecessaryif thestatementis clear.

• Must make the exculpatory clauseobvious;participantmustbeawarethatit is awaiverbeingsigned.

• Cannotbeagainstpublic policy; this isnot to beconfusedwith public entity, aspublic entities can use waivers in thesamemannerasanynonpublicentity.If awaiver seeksto releasetheproviderfrom intentionalor willful and wantonacts,or grossnegligence,this would beagainst public policy and make thewaiverinvalid.

For minors,sincewaiversarenot valid, it isrecommendedthat anacknowledgmentof riskform or an agreementto participate form beused.Such a form describestheinherentrisksandthusgivesanexpress,writtenverificationbytheparticipantregardingsuchrisks.A participa-hon form alsoshouldsetforth the expectationsof theparticipant,the requirementsto partici-pate, the behavioral expectations,and theresponsibilities,which, if violated,gives someevidenceof secondaryassumptionof risk andthuscontributionundercomparativefault laws.Theseformsshouldbesignedbytheparticipant,whethera minor ornot, andif a minor,alsobytheparentorguardian.

RiskFinancing Strategies

p ayingfor thelossesthat do occuris anothercomponent of risk management. Risk

financing involves either retention (paying forlosses out of the organization’sbudget) ortransfer (a thirdpartypaysfor theloss).

RetentionThere are several retention techniques

availabletoparkandrecreationproviders:

Currentexpensing.This is alsoknownasthepay-as-you-go”system.Theorganizationpays

for thelossesasthey ariseout of theirongoingbudget.This workswell if thelossexpensesaresmall; however, it may result in insufficientfundsto respondto unexpectedlylargelosses.

Unfunded reserves.An accountingtech-niqueknownastheunfundedreservemayhelprespondto largelossesby notingthelikelihoodof future losspaymentson the organization’sbooks. It keeps managementawareof futureexpensesfor financiallosses.

Fundedreserves.Moneyis set asidein theprovider’sbudgetto payfor future losses.Theuse of funded reserves requires a strongcommitment from the organization’s seniormanagementandpolicy boardnot to usetheseseemingly“idle funds” for otherprojects.Withthehelpof actuarytables,therisk managementcommitteeshould be ableto demonstratetheamountneededfor futurelosses.Justaspensionprogramsneedsubstantialassetsfar in advanceof the time benefitsare to be paid, fundedreservesdo too.

Borrowing.Whenan organizationdoesnothavesufficient assetsto pay for losses,it canborrowmoneyfrom otherinternalor externalsources.It is oftendifficult to borrowfrom anexternalsourceto respondto a loss,andsothisstrategyis limited and generallynot recom-mendedin theindustry.It alsomaybenecessaryfor apublicentityto levy taxesorfloatabond,ifa damagesawardis in themillions of dollars.

Self-insuranceand joint pooling. Moststates in their Tort Claims Acts authorizemunicipalities and schools to not only self-insurebutalsoparticipatein joint pooling.Mostjoint pooling is done throughan intergovern-

Chapter16—727

mentalcontractualagencywhichself-fundspre-determinedlevels of loss with provision forcatastrophiclosses through the purchaseofexcess and reinsurance and, if necessary,issuanceof bonds.

TheParkDistrict Risk ManagementAgency(PDRMA), which services the park districts,forestpreservedistricts, and specialrecreationassociationsin Illinois, is oneof thelargestandmost extensivelydeveloped.It has about 125members.Its comprehensiverisk managementprogram provides broad liability coverage,including property, fidelity, crime and suretybonds, auto, general liability, employmentpractices, liquor, police professional,ownersand contractors,public officials errors andomissions,andworkerscompensationcoveragefor employers.However,it doesmuchmore— italso providesextensivelosscontrol and safetyinformationandservices,staffrisk managementtraining and education,claims a~dministration,legaldefense,andlossexperiencereports.

Thewayajoint pool works is thatthereis aformula for the annual base membershipcontribution.Thenattheendof theyearthereisa debit or credit applied to this annualbasecontribution basedupon how the individualmember’s lossescompareto the group as awhole.

Transfer offinancialrisk to athirdparty

It is commonto divide transfertechniquesinto twocategories:(1)transfersto partiesthatarenot commercialinsurancecompanies,but areinsomewayapartytotheprovisionof services,and(2) transfersto commercialinsurancecompanies.

Contractualtransfers:releasesand indem-nification agreements.A releaseis anafter-the-accidentcontract.It ordinarily establishesthataparticipantis giving up an existing claim, andusually is used in out-of-court settlements.Releasesare intended to bring closure todisputesbetweenparticipantsandproviders.

There are two types of indemnificationor“save-harmless”clauses,onerelatingto apartici-pantandtheothertoanentityofferingservicesorusing the facilities of another. The first isfrequentlyfound in a waiver form, .wherethe

signeeof thewaiveragreestocoveranylossthattheproviderincursasaresultof theparticipant’sinvolvement in the program or service. Theyseldom are enforced and in limited courtdecisionshavebeenheld unenforceablewhensignedby aparentasa “conflict of interest.”

Inthesecondtype,anindemnificationclausein a leaseorrentalagreement,the lesseeoruserof the areaor facility agreesto indemnify theproviderof thefacility orareafor anylossesdueto their use. Sometimes rather than anindemnificationclause,or perhapsin additionto, the providermay requesta “certificate ofinsurance”(proofof insurancecoverage)or askto bea“co-insured”oraddadditionalinsuranceon the lessee’sinsurancepolicy. Whereasonemust suffera lossto be indemnified,insurancecoverageassuresthatthereis financialcoverage,and if a “co-insured,” that the insurancecompanywill pickup thedefenseimmediately.

Commercialinsurance companies.Liabilityinsuranceis a cornerstoneof most park andrecreationriskmanagementprograms.Throughthepurchaseofinsurance,aprovidertransferstothe insurancecompanythe financial risks itcannotafford for a premiumit canafford. Theproviderpaystheinsureraknownamountatthestart of the policy year in exchangefor thepromise that the insurer will pay losses ofpotentiallymuch largeramountsfor theentirepolicy year.While thepremiumsmaybe lowerthanthelossespaidin certainyears,they willusuallybehigherthanthelossesin anaverageyear.Overanextendedtime frame,purchasinginsuranceis generally the most costly riskmanagementstrategy.However,becauseof thereliability of commercialinsurance,it remainsone of the most popular techniques fortransferringfinancialrisk of loss.

Insurancedoesnotprotecttheproviderfroman injury or damageoccurring, nor does itprotectagainstpersonalanxietyorprofessionalembarrassment.It onlyprotectstheinsuredfromthefinanciallossesarisingfromthecoveredrisk.It mustbenoted,though,thattheamountwhichan insurancecompanywill pay is only to thelimits oftheinsurancecoverage.Forexample,ifa courtawardwas$5 million andthecoveragewasfor only $2 million, theinsurancecompanywould payonly the$2 million.

728—RiskManagement

Determiningtheinsuranceneedsfor a parkand recreationorganizationis a complextaskthat canbemadeeasierby therisk managementprogram.Somerisksaresosmall(low frequencyand low severity) that the organizationmaychoosenot to insurethem,whileothersmaybesolargethatinsuranceor avoidanceis theonlyreasonablestrategyfor theprovider. Insuranceadequacyshouldbereviewedannuallywith aninsuranceagent,broker, or risk managementconsultant.

While mostentities(public, nonprofit, andfor-profit) include their employeesandvolun-teers, when acting within the scopeof theirresponsibilities,within their insurancepolicy,some professionalsdo take out their ownpersonalinsurancecoveragein addition.

Manyorganizationsadoptanadministrativepolicy to limit exposureto lawsuitsby settlingclaims rather than litigating them. Manyinsurancecompaniesalsotakethis approach—

i.e., settle a claim, eventhough theremay betechnically no liability — becauseit is moreeconomical to do so. It takesa greatdeal ofmoneytopreparematerials,investigate,andpayattorneys’fees— in otherwords,to litigate. Forsmallclaimsit is usuallymuchlessexpensivetosettle.Thereis alsothepublicitythatgoeswith atrial,which usuallyis unfavorableto theschool,municipality, nonprofit association,or privatefor-profit enterprise.Ontheotherside,however,is thepsychologicaltraumaof theemployee,inan injury suit, of havinga settlementinferringnegligenceand guilt whenthereis none;and,some individuals, knowing an entity issettlement-prone,will file justto getmoney.Thepolicies establishedfor claims settlementarevery important to discouragingunfoundedclaims, to protecting the morale of theemployees,andto providingthebestfinancialbenefitfor theorganization.

Somewhatsimilar to claimssettlement,butmuchmoreformalizedandsetforthin theinitialagreementor contract,is arbitration, sometimesreferred to as ADR, Alternative DisputeResolution.A provisionin a lease,acontractforservices,or aparticipantform maystatethatforany dispute (including an injury claim) thepartieswill go to arbitration,ratherthanbringalawsuit.In arbitration,eachpartypresentstheir

“case” and a third person arbitrates ordeterminestherightsofeach.Arbitrationmaybelegally binding. This should be distinguishedfrom mediation,which is not binding, but aneffort by athirdpersonto negotiatebetweenthetwo parties.Therearefirmswhichengagein thebusinessof arbitration,and thereis a profes-sionalorganization,the American ArbitrationAssociation.

kj PHASE III: Ti~ RISK ~1!~ MANAGEMENT PLAN <

PhasesI and II provide the backgroundanalysisnecessaryto createa risk managementplanwhich canbe operationalized.Therearethreeaspectsto phasem:

• Adoptionandfacilitation

• Manualof policiesandprocedures

• Monitoringperformanceof theplan

Adoption and FacilitationT’he policy body of theentitymustadopttheI underlying policies on which the risk

managementplan is based in order tooperationalize the plan. These especiallyinclude the financial transferof insuranceorother strategiesand the risk control transfersrelated to leases and rental agreements,independentcontractors,andwaivers.

The organizationmust commit financialresources.Seniormanagementmust accepttheplan and supportemployeeeffort to facilitateand operationalize it. Budgeting and riskmanagementare flip sides of the samemanagementcoin.Fundingto undertaketheriskmanagementprocess, along with financialresourcesto purchaseinsurance,fund contin-gencies, or to pay damageclaims must beincludedin theprovider’sannualbudget.

The implementationof the plan dependsuponmanagementand staff. To be successful,employeesmust acceptthe plan and feel thattheyaretrulyapartoftheriskmanagementteamwith opportunity for valued input. For thisreason,the managementteamshouldhave a

I

Chapter16— 729

processforstaffinputanddevelopatrainingandeducation program for employees, whichincludesgoing overpoliciesandproceduresinthe manual, and organizational structure.Employeesshouldbe involvedin thegoalsandobjectivesof theplan.

The risk managementplan should involveactive interaction between employeesat alllevels andwith administratorsor supervisors.This interactionis essentialbecauseall facetsofthe operationmustbe included,and theline-level employeeshaveinsightsto risks and arecritical to implementationof risk managementprocedures.Employeesmustbeassuredof theirimportanceto successfulrisk management,andunderstandtheoperationalprocedures.

There must be commitment by bothmanagementand employees.Just as it isdesirabletohavethepolicyboardinvolvedin theestablishmentof risk managementpolicies, somustemployeesbeinvolved indeterminationofdesirable practies in implementing policies.Particularlyin medium-to large-sizedagencies,an employeerisk managementcommitteeis highlydesirableto augment the risk manager.Thecommittee

• Continuouslymonitorstherisk manage-mentprogram,recommendingchanges

• Reviewsoperatingsafetymanualsandemergingplans

• Fostersasafety-consciousattitudeamongemployeesandencouragesparticipationin stafftrainingincludingfirst aid

• Reviewsaccidentsandclaims,analyzingnature thereof and possible action toameliorate,andthecostthereof

• Makesperiodic inspection/tourof pro-

gramsandpremises.In especiallylargeoperations,theremightbe

practices to pinpoint problem areas andrecommendchangesand to projecttrendsandpossiblefuturelosses.It mustbemadeveryclearto employeesthat the practicesrequestedandrecommendedare not only to provide a’ safeprogramsoparticipantswill notbe injured,butalsofor theirownwell-being.

An information/documentationsystemmustbemaintained,not only to havedataavailable

for riskmanagement,butalsoto haveit availableshould one become involved in a lawsuit.Responsibilitymust beestablishedfor input oftheinformation/documents,formaintainingthesystem,and for determiningthe method andformat of recordkeepingand for how long itshouldbe kept. The recordsshouldbe keptatleastuntil thestatuteof limitationshasrunout.This systemshouldincludesuchdocumentsas:

• Registrationidentificationinformation

• Accidentforms

• Healthforms,if appropriate• Participationformsandwaivers

• Rentalagreementsandleases

• Programdataanddocuments

• Operationsinformation

Policiesand ProceduresManual (The OperationalPlan)

I t is onethingto adoptpoliciesbasedonPhasesI andII, but just whatdoesthat meanto the

employees,andjustwhatis it thattheyareto doto managetherisks?It is onething to saythatreductionis the strategyto be usedto controlrisks, but how are the risksto be preventedorreducedin frequencyandseverity?Themanualsystematicallysetsforthproceduresfordoingso.Often aninsurancecompanywill havespecificproceduresthat must be conformed to forinsurancetobeprovidedonaspecificactivityorfacility to be covered.The public entitiesmaybelongto a risk managementauthority, eitherspecificto parksandrecreation,suchastheParkDistrict Risk ManagementAgency(illinois), orrelatedto theparentorganization,for example,the Michigan Risk ManagementAuthority formunicipalities in the state.Nonprofit entitieshave a national resource in the nationalNonprofitRisk ManagementCenter.

Theaccreditationstandardsof theAmerican• Camping Associationfor camps and of the

Association for Experiential Education foradventureorchallengeprogramsprovidesomespecific proceduresfor conductingthesepro-

I

I

730—RiskManagement

grams.However,mostaccreditationstandardsarenotsodetailed.Therearealsoaconsiderablenumber of manualsand books on specificservices,such as fitness and health centers,aquatics, and golf courses.The professionalpersonnelin chargeofconductingtheseservicesshouldknow of theseresourcesandbe abletodevelopthesectionofthemanualrelatedto theirservice.Maintenanceandsecuritystaff canalsohelp develop procedures for reducing thefrequencyand severityof risks (seechapters9and17).

RISK MANAGEMENT IS NOT ONLYPREVENTING PARTICIPANT INJURIES, BUTALSO INCLUDES PRACTICESRELATED TOEMPLOYEES, BUSINESSOPERATIONS,ANDPROPERTY. Some call the manual a “safetymanual,” but it is much more than that. Themanual should be the operating proceduresforcarrying out risk managementpolicies.Andassuch,all administrative and supervisorypersonnelshouldhavea copyand otheremployeesshouldhavethesectionspertinenttotheirresponsibilities.

Specific operational procedures are animportantelementin a risk managementplan.Guidelinesfor operationalizingtheproceduressetforthfor theapproachestobeusedshouldbeputtogetherinto arisk managementmanualtoprovideanauthoritativeguideandimmediatelyavailablereferencefor all levels of employees.The manual should cover such operationalinformation as what automobile insurancecoveragethe organizationhasand, if a car isrented,what insuranceshould be purchased;periodic inspectionsregardingrisk potentials;supervision system, emergency plans, theaccidentand incident reporting system;andmanyotheraspects.

Particular attention should be given toemergencyplansandproceduresfor suchlarge-scalenatural disastersas earthquakes,torna-does, hurricanes, forest fires, and floods.Evacuationprocedures,inventoryand locationof equipmentandmaterials,displacementplansfor facility residentsandactivities,andpsycho-logical aid for staff affectedby an emergencyshould be included. Plans also should bepreparedfor civil disturbances,for emergencycareat specialeventswith a large numberofparticipantsand/orspectators,andfor ongoing

activities in the park and recreationfacilities.Special cooperativearrangementsshould bemadewith public departmentsand agencies,private contractors,and communityorganiza-tions.

Ofcourse,anagency,association,orbusinessenterprise must focus the manual on theservices,programs,facilities andareasunderitsjurisdiction or control. However, all sharecommonelements,and exhibit 16-6 is a generictable of contentsto be adapted in accord with thenature of the provider and the programs/services/facilities it offers.

Monitoring Performance()nce the plan is adoptedand put into

practiceit shouldnotbeforgotten.Theplanshouldbeassessedat leastannuallyto measureprogress toward the purposes, goals, andobjectives.(Seeexhibit16-2.)Theperformanceofrisk managementprogramsis oftenassessedbysettinggoals at the beginningof the year andcomparingthemwith theoutcomesattheendoftheyear.Whenrisk managementoutcomestakelonger than a year to assess, incrementalmeasuresmay help determine whether theprogramis on trackto meetexpectations.

Risk managementeffortsshouldbe judgedby a combinationof proceduralandresultsgoalsandobjectives.

• Proceduralgoalsandobjectives.Thesearemeasuresof actionstakento achieveprogramgoals,withoutconsideringtheactual results.For example,“All play-ground equipmentwill be inspectedquarterly” to reducethe risk of injuryfrom defectiveequipment.This meansthatthestandardis metif theequipmentis inspected,evenif injury isnotreduced.Becausethesegoalsandobjectivesfocuson theprocedure,whatpeoplehavebeendoing,ratherthanon aspecificoutcomeoftheseefforts, theyoftenneglectactualcostsavingsfor theorganization.

• Results goals and objectives. Thesemeasuresusuallyfocuson adecreaseinthe severityor frequencyof accidents.For example, “Playground accidents

I

Chapter16—731

~xhibit16-6

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732—RiskManagement

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CaseStudies

CaseStudy #1: Risk Identification andAssessment,andResponseStrategyYouarethedirectoroftheCitycommunitycenter.Thereis no riskmanagementplanin place.You

havejustbeennotifiedby theCityManagerthatall facilitieswill now havearisk managementplanpertinentto theirprogramsandservices.Charttherisk identificationandassessment,thensuggestpossiblerisk responsestrategies.Havethreecolumnsto yourchart:

First column Step1: Identificationof risks

Usingthelegal-basedclassesof loss,list asmanyrisksasyou canundereachclass.

Secondcolumn Step2: Assessmentofrisks

Subdividethiscolumninto threesubcolumnsandfor eachof therisks listedin Step1, assessthefrequency,theseverity,andthefinancialconsequences.

Thirdcolumn PhaseII. Risk responseassessment

Foreachrisk identifiedandassessed,suggestpossiblerisk controlstrategies(avoidance,reduction,typeof transfer)andrisk financingstrategies(retention,typeof transferto third party)

CaseStudy #2: Risk ManagementPlanningYou havejust becomea managerof a facility. Upon taking over you spendsometime going

throughexistingmanualsanddeterminingwhatneedstobedone.Oneofthethingsyounoticeis thatthereareno emergencyactionplans.Selectanexistingfacility withwhichyou arefamiliar. Youwantto updatetherisk managementmanual.Developthechapteror sectionon emergencyaction. Howwould you, asmanager,implementthisaspectof theplanwith yourstaff?

Chapter16—735

CAPRA Standards

9.0RISK MANAGEMENT

Commentary:Many local governmentshavea risk managementdivision with a designated!specificrisk manager.In suchsituations,parksandrecreationshouldbeapartoftheoverallplanandits implementation.If theoverall planwith implementationmeetsthefollowing standards,thentheagencymeetsthe requirementsof this section.This sectionsetsforth only the essentialelements.ThroughouttheStandardsaremanyadditionalimportantaspectsof risk management,suchasaninspectionsystemfor areasand facilities, emergencyprocedures,accidentrecording,competentpersonnel,supervision,andvisitor protection.

9.1 Statementof Policy

Thereshouldbea policyfor risk management,which isapprovedby theagencypolicyentity.

Commentary: Theagencypolicy entitymustsetthedirectionandgiveappropriateauthorityfor

theimplementingoperationalpracticesandprocedures.

9.2 RiskManager

Thereshouldbean employeewith risk managementresponsibilityandauthority to carry out thepoliciesestablishedfor risk management.

Commentary:Theremustbeaggressivelosscontrolmanagementandmonitoring.It isessentialtoassignresponsibilityforthisvitalactsothatit receivesthecredibilityandinstitution-wideacceptanceit warrantsandis neededandis notperceivedonly asinsurancepurchase.Operationally,for mosteffectiveimplementation,a risk managershouldbe designated.Therisk managermust be givenauthorityto carryout thepoliciesestablishedregardingrisk management,bothwith theemployeesandtheadministration.Therisk managerwill workcloselywith thebusinessofficerofthecorporationin facilitatingthefinancialapproachesdeterminedto bemostappropriateandwith theadministrator!supervisorsoftheprogramsandservicesin obtainingessentialemployeeperformanceasrelatedtoreductionofprogrammaticrisks.Thestructureandsizeofthecorporateentitywill determinewhethertherisk managerdoublesasfinancialofficer, is thesamewith therecreationdirector, theenterprisemanager,etal., orhasno otherresponsibilities.Whatevertheappropriatearrangement,it is essentialthatthetasksof arisk managerbeassignedspecificallyto oneperson.“Everybody’sresponsibilityisno one’sresponsibility!”

Further,theriskmanagerisnotasafetydirectorwith amoresophisticatedtitle. Theriskmanageris asafetydirectorin ageneralsense,but is muchmore.Safetyis not theonly concernof theposition— therealsois thefinancialrisk managementaspect.However,a safetydirectororspecialistmightworkundertherisk manageror in asmalloperation,bothfunctionsmaybegivento thesameperson.

Theremaybeintra-agencymanagementwith anoverallrisk managerforthewholemunicipalityor entity. Where there is an inter-organizationrisk managementagency,such as a joint riskmanagementsystemformedby severalmunicipalities,suchagencywill havea managementteamwith representationfromeachmembermunicipality,aswell asitsownmanagementpersonnel,whichwill establish,implement,andmonitorproceduresto reducethecurrentlevel of losses.

736—RiskManagement

9.3 Plan

Thereshallbea riskmanagementplan reviewedannuallyandupdatedtoreflectnewinformation,operationaltechniques,andservices.

Commentary:A comprehensiverisk managementplan,which encompassesboth financialandprogrammaticriskmanagement,is essentialto minimizelegalliabilities andpersonalinjuries.A riskmanagementplan systematicallyanalyzesthe servicesofferedand facilities/areasmanagedforpersonalinjury andfinanciallosspotentialandselectsapproachesto handlesuchlosses.It setsforthbasicpoliciesandtheimplementingoperationalpracticesandproceduresof the approacheswhichwill beutilized to managetheidentifiedrisksof loss. (See9.6.)

A plancannotbestatic;it is dynamicandneedsto be regularlyreviewedfor updatingregardingservicesoftheorganizationandchangingapproachesto controllinglossesin keepingwith changingneedsand capabilitiesof the organizationand opportunitieswhich becomeavailablewithin thefinancialindustryaswell aswithin theorganizationitself.

9.4RiskAnalysisandControlApproaches

Thereshould be risk analysissystematicallyperformedannually and with approachesto control of risksclearly identified.

Commentary:Thereis no specificmethodfor identificationof risks suitablefor all entities;themethodandtoolsusedwill varyaccordingtothenatureandextentoftheoperation.Whatis important,however,is that a systematicprocedurebeestablishedto assuretotal assessmentin orderto avoidunexpectedlosses.Risk analysisshouldutilize anyagencymanagementinformationdatabase,andincludeidentificationofrisksandestimationof extentoftherisks.Alternateapproachesfor controlofrisksandtheexpectedimpactof eachshouldbeidentified,with theselectionofapproachesto controlspecificrisks thenclearly identified.9.5 EmployeeInvolvement

The risk managementplan should involve active interaction betweenemployeesat all levels andadministrators/supervisors.

Commentary:Thisinteractionisessentialbecauseall facetsoftheoperationmustbeincluded,andthe on-line employeesboth have insights to risks and are criti.cal to implementationof riskmanagementprocedures.It is theemployeeswhichmustbeassuredoftheirimportancetosuccessfulrisk management,aswell asunderstandtheoperationalprocedures.

Theremustbecommitmentbybothmanagementandemployees.Justasit is desirableto havethepolicy boardinvolved in the establishmentof risk managementpolicies, so must employeesbeinvolvedin determinationof desirablepracticesin implementingpolicies.Particularlyinmediumtolarge-sizedagencies,anemployeerisk managementcommitteeishighly desirableto augmenttheriskmanager.It continuouslymonitorstherisk managementprogram,recommendingchanges;reviewsoperatingsafetymanualsandemergingplans;fostersasafety-consciousattitudeamongemployeesand encouragesparticipationin staff training including first aid; reviews accidentsand claims,analyzingnaturethereofandpossibleactionto ameliorate,andthecostthereof;andmakesperiodicinspection/tourofprogramsandpremises.In especiallylargeoperations,theremightbepractices,topinpointproblemareasandrecommendchanges,andto projecttrendsandpossiblefuture losses.Itmustbemadeveryclearto employeesthatthepracticesrequestedandrecommendedarenotonlytoprovideasafeprogramsoparticipantswill notbeinjured,but alsofor theirownwell-being.

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9.6OperationalProcedures

There should be a manual of operating proceduresfor carrying out the risk managementplan. Alladministrativeand supervisorypersonnelshall havea copyof themanual and other employees’procedurespertinentto their responsibilities.

Commentary:Specificimplementingoperationalproceduresareanimportantelementinanriskmanagementplan.Guidelinesfor operationalizingtheproceduressetforth for theapproachesto beusedshouldbeput togetherinto a risk managementmanualto provideanauthoritativeguideandimmediatelyavailablereferencefor all levelsof employees.Not all employeesneedafull copyof themanual,but it shouldbeavailable,andpertinentaspectsdefinitely shouldbegivento theemployeesin accordwith theirresponsibilities.Themanualshouldcoversuchoperationalinformationaswhatautomobileinsurancecoveragethecorporationhasandif a car is rented,what insuranceshouldbepurchased;periodicinspectionsregardingrisk potentials;supervisionsystem,emergencyplans,theaccidentand incident reportingsystem(see 3.4.2.3); and many other aspectsset forth in otherstandards.

Particularattentionshouldbegivento emergencyplansandproceduresdirectedtowardlarge-scalenaturaldisasters,suchasearthquakes,tornadoes,hurricanes,forestfires,andfloods,andincludeevacuationprocedures,inventoryandlocationof equipmentandmaterials,displacementplansforfacility residentsandactivities,andpsychologicalaidfor staffaffectedby emergency,etal.Plansalsoshouldbepreparedfor civil disturbances,aswell astheusualemergencycarebothforspecialeventswith a largenumberof participantsand/orspectatorsand for on-goingactivity in the parksandrecreational facilities. Special ceoperativearrangementsshould be made with other publicdepartmentsandagencies.privatecontractors,andcommunityorganizations.Parkandrecreationagenciesshouldbe integralto anycommunityemergencyplan.

9.7 RiskAccounting

The risk managementplan shouldbemonitoredin termsofthedollar costs.

Commentary:Risk managementis anongoingprocess;notonly mustit beintegratedinto theveryfiber of anorganization,but alsoits effectivenessmustbesystematicallyevaluatedandadjustmentsmadeasappropriate.Neither theimplementationof the plannor its effectivenessassessmentjusthappen— “everybody’sbusinessis nobody’sbusiness.”Responsibilitiesmust be assignedandstructuresetinplacetofacilitateriskmanagement.Whileaprimarypurposeofriskmanagementis thesavingsof lives,it is essentialthattherisk managementplanbemonitoredin termsofthedollarcosts— is it payingoff financiallyandif not,whynot?Incalculatingthecostsofrisk, onemustaddtogetherthecostsof insurance,uninsuredlossesthat comefrom theoperatingbudget,the losseswhichmaycome from the fundedreserve(self-insurance),the administrativecostsof maintaining the riskmanagementoffice/personnelandits operation,andthesafetyandlosscontrolexpenses,includingpersonneltraining.If thisamountis overfivepercentoftheoperatingbudget,seriousevaluationoftheriskmanagementplanmustbeundertaken;costsusuallyrangefrom two to threepercent.However,in termsof effectivenessof theplan,calculationofsavingsalsoshouldbemadeon reductionof theindirectandhiddencostsof accidents,suchastime lost from workby injuredemployees,damagetoequipmentandfacilities, failureto provideservicesandthuslossof income,etc.Initially, to establisha soundrisk managementplan, a financial investmentmayneedto be madeto implementgoodpractices;but,it is anelementofsoundfinancialmanagementto spendinitially to obtainsubstantiallong-termsavings.

Manyagenciesadoptanadministrativepolicy to limit exposureto law suitsby settlingclaimsratherthanlitigating claims. Many insurancecompaniestakethis approach— settlea claim,eventhoughtheremaybetechnicallyno liability, becauseit ismoreeconomicalto doso. It takesagreatdealof money,in termsofpreparationofmaterials,investigation,timeofattorneys,etal,to litigate,andforsmallclaimsit is usuallymuchlessexpensiveto settle,Here,also,is thepublicity attendantto atrial,

738—Risk Management

whichusuallyisunfavorabletotheschool,municipality,or leisureagency.Ontheotherside,however,is the.psychologicaltraumaof the employee,in an injury suit, of havinga settlementinferringnegligenceandguilt, whenthereis none;and,someindividuals, knowing anentity is settlement-prone,will file just to get somemoney.The policies establishedfor claims settlementare veryimportantto discouragingunfoundedclaims, to protectingthe moraleof the employees,and toprovidingthebestfinancialbenefitfor theorganization.

Park, Recreation,& Leisure ServicesCurriculaAccreditation Standards,1999Edition

8.39 Understandingof theprinciplesof risk managementplanning,andtheability to participatein thedevelopmentandimplementationofa risk managementplan

9A.03 Understandingoftheuseof thelaw in managementof leisureservices,including landmanagement,personnel,humanrights,financing,andrisk management

Chapter16—739

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740—Risk Management

Contributors

Specialthanksto thefollowing reviewerswhotook the time from their busyschedulestoreviewthemanuscriptandto offerconstructivecomments and reviews that helped improvethis chapter.

Dr. ArthurGraham,SUNYComegeatBrockportBetty Kutska,Manager,ParkDistrictRisk

ManagementAgency(Illinois)Dr. RobertLeeJr.,PennsylvaniaStateUniversityDr. DougKennedy,Virginia WesleyanCollegeJamesPeterson,IndianaUniversityDr. DeanZoerink,WesternIllinois University

Tom Coles, Risk Manager, ClevelandMetroparks

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