Guides, Outfitters Question Liability Insurance Requirements

A number of Grand Teton National Park concessionaires are raising red flags over rising liability insurance requirements for outfitters and guides.

In recent years, the National Park Service has begun requiring smaller companies involved in high-risk activities, such as rafting and climbing, to buy general liability coverage of up to $5 million.

That number is unreasonably high, says a group that includes Exum Mountain Guides, Grand Teton Mountain Guides and the American Outdoors Association.

Exum President Nat Partridge protested any increases in liability insurance requirements during an Aug. 2 hearing before the House Subcommittee on National Parks, Forests and Public Lands.

“It is reasonable to assume that increasing limits to $5 million will increase a concessionaire’s premiums by at least 50 percent,” Partridge said. “This increase will put us out of business.”

Liability insurance requirements for concessionaire contracts, typically 10 years in length, are set on a case-by-case basis using consultants, Kurt Rausch, the Park Service’s contract management team lead, tells the Jackson Hole News & Guide.

There are no predetermined requirements for any type of contract, he said.

In the hearing, Peggy O’Dell, the Park Service’s deputy director, countered critics by pointing out that competition for outfitter and guide contracts remains strong. That indicates that the $5 million requirement – currently in place for a number of Grand Teton rafting companies – still provides for a pro?table business opportunity, she said.

“In the case of the contracts issued in 2010 for Grand Teton National Park rafting companies. the PricewaterhouseCoopers Risk Management Division recommended per-occurance and aggregate liability coverage minimums of $5 million,” O’Dell said. “These insurance minimums were provided in the draft contracts. The winning offers agreed to the requirements as contract terms.”

The same year, the Park Service conducted a financial analysis of four of the Grand Teton rafting companies using actual insurance rate data, O’Dell said.

“Results showed that the concessionaires’ internal rates of return with the new insurance requirements were well above the industry benchmark,” she said.

For small concessionaires with low risks, liability insurance requirements start around $1 million, O’Dell testified. But for companies involved in backcountry operations, which are deemed to carry higher risk, “expert analysis typically results in insurance coverage requirements that are signi?cantly higher,” she said.

Partridge testified that a $5 million requirement would be overkill given the record of claims against his company.

“In the last three years, Exum has guided an average of 5,700 client days in each summer with an average of 10 incidents,” Partridge said. “We have a resultant accident rate of .002, which is statistically insignificant.

“Historically, the highest claim paid was $30,000,” he said.

Dan Heilig, general manager of Jackson Hole Mountain Guides, said his business could be hit with the higher requirement when his company’s contract expires at the end of the year.

Jackson Hole Mountain Guides’ existing contract carries a $1 million requirement, Heilig said. At his request, his insurance company provided an estimate for a $5 million policy.

The rise in premium “was substantial,” Heilig said.

“I believe it was a 36, 40 percent rise in premium. That would make it more difficult to do things that we want to do with the company. The park also regulates the rates we can charge, so we can’t just recoup it from customers.”

Rausch, with the Park Service’s contract management team, said that companies do typically recoup higher insurance costs indirectly through lower franchise fees and other contract stipulations.

“Essentially, any extra insurance costs are a wash for the operator,” Rausch said. “It’s considered in the analysis for the franchise fee.”

The Park Service’s assurance of an offset was news to Heilig, who still was apprehensive.

“We’re worried about the future,” he said. “My agent actually took the time and effort to write a letter. He’s an insurance expert. The upshot of his letter is that the increase in minimum insurance requirement does not appear to be necessary.”

In the question-and-answer portion of the subcommittee hearing, the Park Service could name only one instance where a claim exceeded a concessionaire’s coverage, Heilig said.

“What’s the need for this?” Heilig asked. “It seems to me if they’re going to raise the rates they should have a reason for it.”