Whether we like it or not, we live in a culture where people tend to sue more than we might expect. And the bad news is that because you have assets (i.e. your studio or gym), you’re a target for lawsuits. Thankfully there are ways to tighten your liability and limit your risk.
If you don’t have an attorney, you should find one now. It’s never a bad idea to be prepared for the worst, and taking the time to research and interview legal counsel ahead of time will minimize the sting should you get sued down the road. You want to find someone who has experience with fitness clients and who lives and breathes liability law in your state.
How to find the best lawyer for you? There are multiple ways—Google is a great start, word-of-mouth inquiries are always reliable, and calling your chamber of commerce will certainly land you a list of local options. While you might not be able to afford to keep an attorney on retainer, try to work out a deal with them for answering legal questions and being available in the event of a claim.
ASSESS YOUR BUSINESS STRUCTURE
To avoid having your personal assets at stake, you need to separate your business from yourself. If your studio is sued and your business is a sole proprietorship, your cars, homes and savings will be fair game. Consider transferring ownership of your business to a trust that you manage to prevent this from happening. There are legal loopholes to jump through in order to do this (you have to file a separate tax return, for instance), but once it’s done, your personal property would be exempt (in most cases) from any claims made on your business.
Another way to safeguard yourself is to create a formal business structure like an LLC or a corporation. Consult an attorney to see which option is best for you.
BOOST YOUR COVERAGE
Small business insurance is essential, as it will protect your studio in the event of a natural disaster. Say a hurricanes hits and floods your property, this insurance will protect your equipment and furnishings if they are damaged.
The next, more important type of insurance you need to have is liability insurance, which will shield your business against unexpected injury claims—whether someone is hurt in a class or slips and falls on your stoop. Hiring an insurance consultant to tailor a policy to your exact business needs is a good idea, as is running that policy by your legal counsel to ensure there aren’t any gaps in coverage that leave you vulnerable against a claim. Extra coverage is also an option, like an errors and omissions policy, which would protect in the event of a claim that you didn’t live up to your contract.
MEMBERSHIPS & WAIVERS
In general, all gym membership contracts should contain liability waivers that the client signs before being allowed to work out on the premises. These forms prevent a member from suing you if they get injured in your studio or during one of your classes. (Note: Waivers don’t always hold up in court, so the added protection of liability insurance is imperative.) In the event that a prospective client comes in and asks to try out a class last-minute—do not let him or her into one of your classes unless they have signed your liability waiver. If a student says they don’t feel comfortable signing a waiver, well unfortunately you can’t let them participate. It really is that black and white when it comes to protecting your business. The good news is that these waivers can be enforced whether a member has read them or not.
You also want your membership contract to include an exculpatory clause, which will protect you from being liable for another’s wrongdoing—like if a student gets into a fight with someone in your locker room and breaks his shoulder.
Have your legal counsel review the specific wording of your waivers before opening the doors to your studio—it’s crucial you do this, as many lawsuits are won each year due to weak or ambiguous language in a contract. Meet with your attorney annually to ensure the forms remain airtight.
SAFEGUARD YOUR SPACE
Save yourself from legal headaches by staying ahead of your studio’s maintenance. Train your staff to have eagle eyes when it comes to potential safety hazards. If your lobby carpet is bunched up, straighten it out; if there’s a spill by the water cooler, clean it up; if your awning is hanging too close to the entryway, have it fixed immediately. If you live in a snowy climate, hire a plow ahead of time to clear your driveway and sidewalks prior to opening time.
Your liability waivers are in place to protect you from dismissing a claim or winning a lawsuit—but you’ll still be spending money on legal bills in the process (expect to $2,000 to $5,000 in fees to have an attorney answer a claim). Avoid this by running a tight ship where risk is limited.
Extra scrutiny should be placed on safety when interviewing potential trainers—just as important as high energy and a great personality is an instructor who understands limitations and conducts safe workouts. Once you’ve got your team of trainers in place, shadow their classes often to ensure they’re maintaining the standards you expect, and consider holding safety- and injury-related workshops once a quarter.
All businesses are vulnerable to discrimination lawsuit claims, gyms even more so. Your employee handbook should include a section on discrimination, with a code of conduct that is expected when dealing with both clients and fellow employees who may be disabled, overweight, part of the LGBT community, etc. Reminder: As the head of this company, you ultimately set the standard here.