The Real Cost of Being Underinsured: A Family Entertainment Center Horror Story

I got a call last year from a family entertainment center owner in Florida. Great facility. Laser tag,
arcade, bumper cars, mini golf, snack bar. Annual revenue around $800K. They'd been in business eight
years, no major claims.

Then a kid broke his arm on the bumper cars. Parents sued for $650,000. Medical bills, pain and suffering,
loss of future earning capacity. The usual.

The FEC had insurance. $1 million in general liability. Sounds like plenty, right?

Wrong.

Here's What Went Wrong

The policy had a $1M per occurrence limit. But it also had a $100,000 sub-limit for "amusement device
injuries." Bumper cars qualified as an amusement device. The carrier paid the sub-limit and walked away.

The owner didn't know about the sub-limit. His agent never explained it. He thought he had a million
dollars in coverage. He had $100,000.

The case settled for $425,000. Insurance paid $100,000. The owner paid $325,000 out of pocket. He took
out a second mortgage on his house. Maxed out credit cards. Borrowed from family.

Two years later, the FEC closed. Not because of the lawsuit directly, but because the debt from settling
the claim crushed their cash flow. They couldn't recover.

The Sub-Limit Problem

A lot of cheap FEC policies have these hidden limits. You think you're buying $1M in coverage. You are,
for most things. But not for the stuff that actually matters.

Common sub-limits I see:

• $50,000 for trampoline or inflatable injuries
• $100,000 for amusement devices (go-karts, bumper cars, mechanical rides)
• $250,000 for climbing wall or ropes course incidents
• $50,000 for food-related claims (food poisoning, allergic reactions)

These limits are buried in the policy. Page 37, Section 8, subsection C. Your agent might not even know
they're there.

How to Avoid This

Read the entire policy. Not the dec page. The actual policy document. Look for the word "sub-limit" or
"per occurrence limit for." If you see dollar amounts that are lower than your overall limit, ask why.

If you operate multiple attractions, each one needs adequate coverage. Laser tag, go-karts, climbing
walls, inflatables. They're all different risk exposures. A blanket $1M policy with $50K sub-limits is
worthless.

Ask your agent directly: "Does this policy have any sub-limits on specific activities or equipment?"
If they don't know, demand they find out. If they can't answer, find a new agent.

Consider higher limits. $1M sounds like a lot. It's not. A serious injury claim can blow past that in
legal fees alone. We recommend $2M per occurrence for most FECs, with higher limits for climbing walls
or ropes courses.

Add an umbrella policy. $2M to $5M in excess coverage is shockingly cheap compared to the protection it
provides. For a typical FEC, you're looking at $1,500 to $3,000 per year. That Florida owner would still
be in business if he'd had umbrella coverage.

The Bottom Line

Cheap insurance is expensive when you actually need it. That Florida FEC saved maybe $2,000 per year on
premiums by going with a bargain policy. It cost them their business.

Read your policy. Understand your limits. Don't assume you're covered just because you're paying for
insurance. Ask questions. Be annoying. Your business depends on it.