 |
|
|
Playing the numbers game
|
In February of 2001, Warringah Golf Club, an 18-hole public course in Sydney, New South Wales, Australia, that sees 75,000 rounds a year, discovered it had a problem.
While performing repairs to a tractor sprayer, then-superintendent Craig Coggins discharged the pesticide Gusathion onto an uncontained concrete wash pad that drained directly into nearby Brookvale Creek, which then fed into Manly Lagoon. Gusathion’s active ingredient, azinphos-ethyl, is highly toxic to aquatic ecosystems, and by the time anyone realized what had happened, the discharge killed more than four tons of fish and waterfowl, including an estimated 10,000 fish alone.
Government officials and environmentalists alike were aghast, and in November of that same year, Australia’s Environmental Protection Agency officially brought separate charges against Coggins and the golf club. In June 2003, more than two years after the accident, both were found guilty of criminal negligence, having violated the nation’s Protection of the Environment Operations Act 1997. Coggins was sentenced to 250 hours of community service and later lost his job. Prosecutors and the court called Warringah “the site of an accident waiting to happen” and chastised the club’s higher-ups for contributing to a lax ethic that allowed Coggins’ error to happen in the first place.
Then, in a move meant to send a strong message to the country’s golf industry about the importance of environmental responsibility, the Land and Environment Court of New South Wales ordered Warringah to pay fines and cleanup costs totaling more than U.S. $600,000.
Keeping risk under control
News of the court case reverberated throughout the international golf community. It was a harsh lesson in risk management and liability. Risk — also known as “something bad happening on or around your golf course” — and its magnitude boils down to a simple two-part equation: probability (how likely is it to occur?) and severity (how bad will it be if it does?). Reduce one or both, and you’ll successfully reduce your risk. Allow them to remain high, and you’re an accident waiting to happen.
And if that accident happens, and if you’re found liable (responsible for making good any loss or damage that has occurred) it’s most often not a matter of if you’ll pay, but rather how much. Ethical arguments in favor of environmental stewardship aside, there’s much at stake for your course financially when it comes to environmental liability.
There’s plenty of potential liability to go around. Since 1970, the U.S. EPA has documented an exponential growth in major federal regulatory environmental laws, including the Clean Air Act; Clean Water Act; Comprehensive Environmental Response, Compensation and Liability Act; Endangered Species Act; and Resource Conservation and Recovery Act, to name a few. And that doesn’t even begin to capture wetland regulations and state and local regulations.
It all amounts to a vast and complex network of regulations in which to get mired with liabilities. Those regulations are designed in the best interests of human health and the environment — noble and worthy aspirations, for sure. But they also demand that a superintendent has a higher degree of regulatory and environmental literacy than ever before, with the added side effect of a greater chance for a possible infraction that could result in liability.
In August 2001, for example, a group of volunteer citizen stream monitors in Arlington County, Va., discovered hundreds of dead eels in a creek about a mile upstream from the creek’s confluence with the Potomac River. Hazardous materials teams followed the trail of dead eels upstream to the property of a local golf facility, where the herbicide-fumigant Basamid G was being used during a turfgrass renovation of the course. An afternoon thunderstorm dropped heavy rains that washed contaminated surface water runoff into the creek, resulting in the kill. In late 2005, after four years of negotiations with the National Park Service and U.S. Fish and Wildlife Service (debating primarily whether the storm that caused the runoff could have been reasonably expected or not), the facility agreed to pay $145,000 for the damages.
More recently, during the first half of 2006, Massachusetts’ Department of Environmental Protection levied nearly $50,000 in fines (in addition to mandatory environmental remediation measures) against three golf courses for violations of the state’s Water Management Act and Wetlands Protection Act.
Certainly, such examples are the exception, rather than the rule. But they do happen, and in an industry and an age defined by regulation and litigation, protecting your golf course financially is only prudent.
 |
Ethical arguments in favor of environmental stewardship aside, there’s much at stake for your course financially when it comes to environmental liability. |
Degrees of protection
Traditionally, golf courses have employed a two-pronged protection strategy: improving environmental stewardship (reduce the likelihood that something bad happens in the first place) and securing liability insurance (be covered financially if it does), which sounds straightforward and logical enough.
“When we go onto a golf course, environmental management is the No. 1 thing we scrutinize because it’s the highest risk,” explains Mark Farrell, executive of corporate hospitality operations for The Westfield Group, which provides insurance for roughly 100 country clubs throughout the United States. “Golf courses’ No. 1 exposure comes from the handling of chemicals, largely because it can impact more than just the golf course, especially when we start talking about the contamination of streams and water.”
But how well does your insurance really protect you? Is your course putting its faith in protection that isn’t really there? In truth, environmental liability coverage is far from standard. “Ninety-five percent of policies will exclude that type of coverage,” says Ken Robinson, president of LRA Golf, which represents Zurich North America, one of the nation’s largest providers of liability insurance for golf courses. “Environmental risk is one where coverage typically isn’t bought nearly as much as it should be.”
Most courses, he says, purchase an additional environmental policy that covers herbicide and pesticide applications on a limited basis — extremely limited. “For example, if you spray (a pesticide), a golfer touches his ball, and then has a rare allergic reaction,” explains Robinson. “What courses need to be looking at is a broader environmental policy that picks up third-party liability for pollution and contamination to property and water and the resulting cost of cleanup.” This is most commonly referred to as environmental impairment liability.
Surprised? Don’t be. According to “Insurance and Pollution Prevention: How to Reduce Insurance Costs Through Pollution Prevention,” published by the Hazardous Waste and Toxic Reduction Program of Washington State’s Department of Ecology, responsibility for environmental management is too often separated from responsibility for financial affairs. As a result, few environmental managers — and by extension, superintendents — have any involvement in negotiating insurance, and few have knowledge of their actual insurance coverages and costs.
Robinson’s experience backs up this finding. “We almost never deal with the superintendent,” he says. “It’s almost always the club manager, owner or financial controller.”
So what’s a well-intentioned, environmentally responsible superintendent desiring financial protection for his or her golf course to do?
Accentuate the positive
Maximizing your protection against liabilities starts with maximizing your environmental management, quite simply because good environmental management has the net effect of mitigating risk by reducing the probability and severity of potential environmental mishaps. Three positive outcomes flow directly from reducing your environmental risk:
- Increased protection against exposure to liabilities for which you’re not covered under insurance.
- Opportunities for rebates on your existing insurance premiums (more on this in the next section).
- Eligibility for expanded insurance policies that provide more comprehensive environmental coverage beyond that of your standard policy (more on this later as well).
No golf course has insurance coverage that protects against every possible liability. This is especially true if your course is one of the 95 percent of courses that Robinson says don’t have the added environmental policies that provide the type of coverage t need. In the offensive against unnecessary or unacceptable liability, the best offense is a good defense. Investments in good environmental management today make it much less likely that you’ll be faced with the financial penalties of environmental liability tomorrow. And when those financial penalties will be coming out of your course’s own pocket, avoiding them in the first place can be one of the best business decisions you make.
Farrell recommends starting at the top with big-picture questions. “It all starts with attitude and being conscious of the environment,” he says. “What is the risk management culture at your course? Are your employees knowledgeable about environmental issues?”
Next, estimate your environmental exposure. What are the potentials for environmental damage and liability at your course? Implementation of comprehensive best management practices naturally comes next, since good BMPs can directly reduce your environmental exposure.
Then, document your improvements in environmental management, especially those changes and improvements that have taken place since your course last purchased insurance. When it comes to hazardous materials such as pesticides, distinguish between the improved management of those materials and reductions in their use, recommends Washington’s Department of Ecology (WDEC).
Finally, if you desire outside help, consider hiring a risk management consultant, or participating in a third-party environmental certification program. “Don’t be afraid to look to your insurance agent and treat them as a partner to work through mitigating and minimizing your risk,” adds Farrell.
 |
With good BMPs already in place, a self-contained, closed-loop wash pad with a reclamation station “opens the door to expanded (environmental insurance) coverage,” according to one industry expert. GCM file photos |
The art of negotiation
If you’re going to save some green by being green, you’ll need to start by working with your club manager, financial controller or whomever handles insurance decisions at your course. Learn about the extent of your current coverage and expand it if necessary based upon your environmental exposures. Most of all, be prepared to roll up your sleeves for a round of good-spirited financial wrangling as you demonstrate your good environmental stewardship as a means for leveraging the reduced rates or expanded coverage you’re after.
“A large majority of firms which have reduced their potential environmental damages and liabilities … have failed to request or demand corresponding reductions in insurance costs,” notes WDEC. Case studies across a variety of industries have shown that those reduced rates can add up to 20-30 percent, potentially no small chunk of change. But leveraging your environmental stewardship for reduced insurance premiums starts with understanding how your insurance carrier calculates your rates.
The Westfield Group, for example, starts with a baseline template of exposure assessment and insurance coverage premium rates for every course it works with, known as the Individual Risk Premium Modification Plan. A course is then assessed across a broad range of categories, including management, location, premises and equipment, building features, employees, and of course, environmental protection.
Then, based upon the assessment in each category, the golf course receives a series of credits or debits adjusted to the baseline template that raise or lower the overall rate. “If you’re doing good things environmentally,” says Farrell, “point them out to your agent and discuss credits based upon that.”
Demonstrating responsible environmental management also can make you eligible or able to negotiate for the expanded environmental coverage, although standard insurance policies frequently lack this type of coverage. Robinson at LRA Golf points to the wash pad as a case in point. With good BMPs already in place, a self-contained, closed-loop wash pad with reclamation station “opens the door to expanded coverage,” he says. “Then, for a typical 18-hole golf course, you could buy a broad environmental policy for $2,500-$3,500 that provides comprehensive coverage well beyond the limited herbicide/pesticide policy.” But Robinson and others are quick to point out that exemplary environmental stewardship is the price of entry for getting such policies.
The bottom line here is that ultimately, being a good environmental steward at the golf course is a numbers game where it pays to stack the odds in your favor: risk, probability, severity of hazard, exposure, financial liability. Whether it’s reducing your exposure to limit the possibilities of liabilities for which you’re not covered, negotiating reduced rates on your existing insurance policies, or earning eligibility for expanded environmental policies that offer better protection in the long run, investments in environmental responsibility today are better for your course tomorrow. And that’s as good a policy — insurance or otherwise — as any.
Resources
GCSAA has numerous resources for helping members become good environmental stewards. Visit www.gcsaa.org for links to these resources, including education, the Environmental Management Program and Edge, the Environmental Institute for Golf’s Web-based environmental education tool.
RECENT issues
 |
 |
January |
December 2006 |