VAULT Insurance Stack

Owner: CSO for framework, GM for day-to-day certificate management once operating. Broker of record: Marsh McLennan Charlotte office (primary) or Aon Charlotte (backup). Recommend Marsh given their fitness and hospitality practice depth. Carrier posture: A-rated carriers only (AM Best A or better). No non-admitted carriers except for the pandemic named-peril rider where the surplus lines market is the only path.

1. Why This Stack, Not a Business Owner’s Policy

The default advice for a small business is a BOP (Business Owner’s Policy) bundling general liability, property, and business interruption at 3,000 to 6,000 per year. That is appropriate for a shop selling t-shirts.

VAULT is a physical club with: - Inversion apparatus (pole equipment) at height, risk of falling - Cold plunge and sauna, cardiac risk to members with pre-existing conditions - Retail with inventory, apparel supply chain - Café with food service and food-borne illness exposure - A branded competition with athletes, broadcast, and hospitality - Corporate wellness contracts with Bank of America and Truist-scale clients who require certificate of insurance at aggressive levels - W2 employees plus 1099 instructors and PTs - Member data covering biometric intake, medical history disclosures

A BOP does not carry this. The proper structure is 8 distinct coverages carried across 4 to 5 carriers, coordinated by a broker who understands the fitness and hospitality categories. That is Marsh.

2. Coverage 1: Commercial General Liability (CGL)

Purpose: covers third-party bodily injury and property damage on the premises. Slip in the lobby. Water pipe burst into a boutique below. Guest injured in the parking lot.

Recommended limits: - Per occurrence: 2,000,000 - Aggregate: 4,000,000 - Personal and advertising injury: 1,000,000

Estimated premium Charlotte fitness luxury: 14,000 to 24,000 per year.

Carrier candidates: Chubb, Travelers, Hartford. Chubb has the strongest luxury hospitality track record.

Endorsements to add: - Assault and battery coverage (some CGL policies exclude, always add back) - Sexual misconduct coverage (add specifically) - Trip and fall in wet areas endorsement (specific to sauna, cold plunge, and locker rooms)

CGL exclusions typical: professional services (that is what professional liability is for), employment practices (EPLI), auto, workers comp.

3. Coverage 2: Professional Liability for Instructors and PTs

Purpose: covers claims arising from instruction or programming that a member alleges caused injury. Different from CGL because it covers the professional service, not the premises.

Recommended limits: - Per occurrence: 1,000,000 - Aggregate: 3,000,000

Estimated premium: 8,000 to 14,000 per year.

Carrier candidates: Beazley, Philadelphia Insurance, Markel. Markel has a strong fitness practice.

Structure options: - VAULT carries a master professional liability policy that covers 1099 instructors as additional insureds - Each 1099 instructor also carries their own professional liability at 1M/3M minimum

Recommended: both. Master policy for VAULT primary coverage, instructor policies for backup and to demonstrate arms-length independent contractor posture (supports the 1099 classification).

VAULT can offer group-rate professional liability to instructors at cost through the broker, roughly 700 to 1,100 per instructor per year.

4. Coverage 3: Property Insurance

Purpose: covers physical assets and improvements. Fire. Water damage. Theft. Vandalism.

Coverage scope: - Building improvements and betterments (build-out): typical Charlotte luxury boutique fitness build-out is 350 to 550 per square foot. At an assumed 15,000 sq ft club, insurable improvements value 5,250,000 to 8,250,000. - Contents and equipment (pole apparatus, sauna, cold plunge, mirrors, sound systems, POS, computers, boutique inventory): 800,000 to 1,400,000. - Business personal property: 200,000 to 400,000.

Replacement cost basis, not actual cash value. This is non-negotiable at this tier.

Estimated premium: 22,000 to 40,000 per year.

Carrier candidates: Chubb, Zurich, Liberty Mutual. Chubb preferred for the hospitality context.

Endorsements to add: - Ordinance or law coverage (upgrades to code post-loss) - Utility interruption (loss of power extending business interruption) - Equipment breakdown (sauna, cold plunge chillers, HVAC catastrophic failure) - Contamination cleanup (if the cold plunge system fails and contaminates the space)

If PropCo owns the building rather than leasing, an additional property policy at PropCo level covers structural. Landlord-tenant policies coordinate.

5. Coverage 4: Business Interruption with Pandemic Named-Peril Rider

Purpose: replaces lost income when a covered event forces closure. This is the coverage that broke the fitness industry in 2020.

Standard business interruption covers events tied to a physical property loss (fire, water). Standard policies exclude pandemic. Post-2020 the market bifurcated: standard policies still exclude, but a growing surplus lines market offers named-peril pandemic riders at a real premium.

Recommended limits: - 12 months of gross income replacement, 4,500,000 to 6,000,000 for VAULT scale - 6 months extended period of indemnity for reopening ramp - 90-day waiting period (shorter waiting periods multiply premium)

Base business interruption premium: 8,000 to 14,000 per year for standard covered perils.

Pandemic named-peril rider (surplus lines): 24,000 to 55,000 per year. This is the expensive line and there will be pressure to skip it. Do not skip it.

The rider is specifically written to trigger on a governmentally-mandated closure of the specific facility type (fitness clubs) in the specific geography for a named pandemic. Coverage is narrow but real.

Carrier candidates: pandemic riders are surplus lines. Marsh will place with Lloyd’s syndicates or with specialty carriers like Aspen, HDI Global, or Ascot.

The lesson of 2020 is that a 55,000 rider is trivial against the alternative. VAULT pays this without argument.

6. Coverage 5: Workers’ Compensation

Purpose: statutory coverage for W2 employees.

North Carolina requires workers comp for employers with 3 or more employees. VAULT will exceed this from Day 1.

Payroll categories: - Clerical (front desk, admin): rate roughly 0.28 per 100 of payroll - Retail (boutique associates): 0.85 per 100 - Fitness club employees (GM, ops staff): 1.85 per 100 - Café staff: 1.20 per 100 - Instructors are 1099, not covered

Estimated Y1 W2 payroll: 800,000 to 1,100,000 across categories.

Estimated workers comp premium: 12,000 to 22,000 per year Y1.

Carrier candidates: The Hartford, Travelers, Liberty Mutual. State Fund is available in NC as backup.

Endorsement: waiver of subrogation for any client requiring it (banking and healthcare corporate wellness clients will).

7. Coverage 6: Directors and Officers (D&O)

Purpose: covers Managers of the LLCs (Taj, Trill) and Board of Advisors members against claims arising from governance decisions. Also protects the entity for defense costs when Managers are named.

Recommended limits: - 3,000,000 per claim, 3,000,000 aggregate Y1 - 5,000,000 by end of Y2 as the pipeline scales and outside capital enters

Estimated premium: 6,000 to 12,000 per year Y1.

Carrier candidates: Chubb, AIG, Beazley. Chubb has the strongest small-cap D&O offering.

Add employment practices liability (EPLI) coverage in the same tower, 1M per claim aggregate. Covers wrongful termination, discrimination, harassment claims. Premium roughly 4,000 to 7,000 for EPLI layer.

If outside investors enter Y2, D&O tower needs a Side A DIC (Difference in Conditions) coverage to protect executives when the entity cannot indemnify. Y2 conversation.

8. Coverage 7: Cyber Liability

Purpose: covers data breach, ransomware, business interruption from cyber event, notification costs, regulatory fines.

VAULT holds: - Member payment data (via Shopify and Mindbody, mostly tokenized, but there is still exposure) - Member medical intake and biometric data (weight, injury history) - Corporate wellness client HR data (employee lists, engagement data) - Guest photography and video

Recommended limits: - 2,000,000 per incident, 2,000,000 aggregate - Include ransomware coverage (many carriers now sub-limit, negotiate for full limit) - Include social engineering fraud (wire transfer scam) coverage - Include regulatory action defense - Include PCI fines and assessments

Estimated premium: 8,000 to 16,000 per year.

Carrier candidates: Beazley, Coalition, At-Bay. Coalition and At-Bay have modern underwriting posture and better claim experience.

Notification services included by carrier: preferred vendor list for breach response.

9. Coverage 8: Event Liability for THE VAULT INVITATIONAL

Purpose: covers the annual competition specifically. General CGL may exclude or under-cover a major branded event with athletes, hospitality, and broadcast.

Recommended limits: - 5,000,000 per occurrence for the event - Athlete injury coverage separately (see Athlete Agreement referenced in 02_CONTRACT_TEMPLATES) - Cancellation coverage (event cancelled by force majeure or venue failure): 500,000 to 1,000,000 - Sponsor and hospitality third-party coverage

Estimated premium per event: 18,000 to 32,000.

Carrier candidates: Take1 (specialty entertainment), K&K Insurance (sports and entertainment specialist), Beazley.

Additional insured schedule: every sponsor, every partner, every venue if the event ever moves off VAULT’s floor.

10. Not Included Y1 (Y2 Consideration)

• Kidnap and ransom (not warranted at this scale)
• Political violence (surplus market, not warranted at this scale)
• Environmental impairment (only if building purchase and older site with environmental history)
• Fine art (only if Taj brings substantial art into the space, then evaluate)

11. Certificates and Compliance

Certificates of insurance issued to: - Landlord (if leased) - Every corporate wellness client (banking and healthcare will require) - Every event sponsor - Every wholesale retail partner - Every large vendor - Payment processor

Certificate management: broker maintains a certificate portal (Marsh has ClientLink or equivalent). GM issues certificates on demand from the portal. No manual PDFs.

Additional insured schedules: standard endorsements for landlord, key clients, and Board of Advisors. Named schedules for competition sponsors.

Renewal cadence: full stack renewal aligned to fiscal year, single Marsh renewal package. Do not stagger renewals across the year, it complicates budgeting.

12. Estimated Y1 Total Insurance Premium

Line item: - CGL: 18,000 - Professional Liability: 11,000 - Property: 30,000 - Business Interruption (base): 11,000 - Pandemic Rider: 38,000 - Workers Comp: 17,000 - D&O plus EPLI: 14,000 - Cyber: 12,000 - Event Liability (single event Y1): 24,000

Y1 total: roughly 175,000.

Marsh broker fee: 12,000 to 18,000 per year, or commissioned on the carriers (typically included in premium).

Y2 estimated total insurance premium: 225,000 to 275,000 as the club matures, adds employees, and expands corporate contracts.

Y3 estimated: 290,000 to 360,000 as competition grows, apparel scales, and D&O tower increases.

Deductibles: structure to 5,000 to 25,000 per line to keep premiums manageable. VAULT self-insures small claims through cash reserve rather than pushing every incident through carriers.

13. Loss Prevention Discipline

Insurance is the last line. The first lines are operational:

• Daily wet-area inspections in locker rooms and around sauna and cold plunge, logged
• Monthly apparatus safety inspection on pole rigs, floor pads, mirrors, sound systems, logged
• Quarterly full facility safety walk with GM and Marsh loss control representative
• Instructor certification file maintained per instructor (safety training, first aid, CPR current)
• Incident log per every reported member incident, no matter how minor
• Weekly staff safety huddle led by GM
• Annual formal risk assessment with broker

Marsh provides loss control support included in the broker relationship. This support materially reduces claim frequency and improves renewal terms.

Deductible reduction over time is earned through claim experience. First 3 years of clean claims history can reduce premiums 15 to 25 percent by Y4.

14. Governance

Every insurance decision over 25,000 in premium change or over 500,000 in coverage change requires CSO approval.

Every claim over 10,000 in reserve requires CSO notification.

Every coverage renewal requires Board of Advisors review starting Y2.

Insurance is a strategic function, not an admin function. Treated accordingly.