Nonprofit Insurance Coverages

General Liability

This is the foundation of all nonprofit insurance programs.  Nonprofit general liability insurance provides a wide variety of coverage for claims and lawsuits associated with bodily injury to a third party, damage to someone’s property, personal injury, or advertising injury. The insured must be negligent (or legally responsible) in order for a claim to be valid.

 

3 reasons your Nonprofit needs this coverage

  1. Your legal costs are covered by your General Liability policy: You can be sued at any time for virtually any reason and regardless of whether or not there was any wrong doing you will still have to pay the legal fees to defend yourself.
  2. You have grants or rent venues for events: Most grantors and most venues will require that you have General Liability insurance at a certain level.
  3. People make mistakes: Any one of your employees or volunteers could make a simple mistake that could cause injury to another person or another person’s property which could result in damages and have an adverse effect on your budget.

This could happen to your nonprofit

Slip and Fall:

A nonprofit has meetings, events and tours at their various sites. On one occasion, they forgot to put out warning cones on a wet floor after a rainstorm. A visitor suffered   a torn ligament in her right knee and a right wrist sprain. The nonprofit had the right protocols in place, which included the use of warning cones, but forgot to use them. The claim was settled at mediation for $50,000. Legal expenses were more than $17,000.

Wrongful Eviction:

A nonprofit runs a transitional housing program for clients recovering from alcohol or substance abuse. The clients are required to pay subsidized rent and actively participate in the recovery programs. One client was not doing either, so with the approval of its legal counsel, the nonprofit had the client removed. The client, acting as his own attorney, filed suit in both Federal and State courts, claiming $10 million in emotional distress. The case went to a jury and based on the nonprofit’s clear records and a subsequent compliance finding by the funding agency, the jury found in favor of the nonprofit. However, legal costs were more than $95,000.

Negligent Supervision:

A nonprofit had an annual event that included a zip line for children, which ran from hay bales stacked eight feet high down to the ground. It was supervised by a volunteer who, against his better judgment, allowed an 8 year old boy, who was very anxious and fearful, to ride. He fell off as soon as he left the hay bales and suffered a leg fracture that had to be surgically repaired. Concluding that the nonprofit was legally responsible, a  structured settlement was negotiated with the family’s attorney that provided for future medical care, pain and suffering, and attorney fees. The loss cost was $60,000 and the expense was minimal.

Directors & Officers Liability

Non-profit directors and officers (D&O) insurance provides coverage for protection for exposures that are not covered by your non-profit general liability policy or related policies. Non-profit directors and officers insurance covers claims and lawsuits associated with the actual or alleged bad management decisions made by the board of directors. The coverage can include the mismanagement of the non-profit’s funds, failure to provide particular programs or services, etc.  Most (but not all) non-profit directors and officers insurance policies also cover employment related practices claims and lawsuits. The coverage can include claims of harassment, discrimination, wrongful terminations, etc. Note that the coverage extends to claims made by volunteers and third parties as well as employees.

3 Reasons Your Nonprofit Needs this Coverage

  1. You want the best board possible: Many members of the community that have skills beneficial to your organization may not be willing to serve if you do not have this coverage in place.
  2. Volunteer protection Laws are not absolute: While your board members may have some protection under state and federal volunteer protection laws many claims fall outside of those protections, and D&O coverage fills in those gaps.
  3. You can’t please everyone: The board can make decisions that they think are in the best interest of the organization but unknowingly cause harm or at least perceived harm which can lead to a claim.

 

This Could Happen to Your Nonprofit

Misrepresentation of Financial Status

The board of directors of a foundation was sued by a group of donors claiming misrepresentation of the foundation’s financial status.  They specifically alleged that donations were not being used for the purpose specified by the donors.  The legal fees were more than $56,000 and the case was settled with repayment of $160,000 to donors and dismissal of several key board members.

Failure to Manage Appropriately

At a holiday fundraiser and entertainer threw a gift into the crowd injuring an attendee.  The general liability policy covered the injuries to the attendee. However, the injured party also sued the board of directors for financial damages claiming lack of planning for adequate safety protocols and training.  The claim settled for $200,000, and the defense costs were $25,000.

Breach of Contract:

A nonprofit was sued by an independent contractor for breach of a project contract, claiming unpaid obligations. Not all D&O policies provide coverage for breach of contract, but often there is a sub-limit for defense costs  only, so the nonprofit was provided with an experienced defense attorney to assist them. While the defense costs reached $25, the nonprofit was able to obtain a very favorable compromise on the contract damage issues.

 

Employment Practices Liability

Employment practices liability (EPL) insurance covers claims and lawsuits related to harassment, discrimination, wrongful terminations, etc. EPL is not limited to claims just by employees, it usually includes some, if not full, coverage for volunteers and third-party claims as well as.  This coverage is usually included as part of the nonprofit D&O liability.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. You can’t know everything: Employment law is complicated and tricky. However, part of what you get with Employment Practices Liability is help with your employee handbook as well as access to legal help.
  2. People get mad: Even an alleged wrongdoing of discrimination or harassment, etc. can cause a lot of problems within your organization and you want to have a place to turn for immediate help to deal with these situations.
  3. Sexual harassment Claims on the rise: Even a mere suggestion of sexual harassment can ruin the reputation of your organization and if this happens you want to be able to respond quickly and with the best legal advice available.

 

This Could Happen to Your Nonprofit

Failure to Accommodate:

An employee with ongoing performance problems was eventually terminated but alleged he was not given an accommodation due to stress in his personal life. Unfortunately, the employee’s file was not well documented on the performance issues, and the nonprofit had not addressed the accommodation request. The employee was highly paid, and the matter was heavily litigated over a four-year period. Because of the potential for an unfavorable jury verdict, the claim was eventually mediated to a settlement of $350,000 after $230,000 in defense expense fees were incurred.

Volunteer Discrimination:

A volunteer center asked a volunteer to resign.  She filed a discrimination suit claiming they asked her to leave due to her sex, race, and the fact that she was pregnant.  The case went to court and the volunteer was awarded $65,000 however, the defense costs were in excess of $150,000.

Retaliation:

An employee of a youth organization filed a retaliation suit after being fired.  He alleged that he was fired for making a workers comp claim for a serious injury.  The matter was mediated and the former employee received $33,000 in wages and the defense costs were $21,000.

 

Professional Liability

Nonprofit professional liability insurance provides coverage for claims and lawsuits associated with your miscellaneous non-profit professional activities. This would include activities such as teaching, counseling, consulting, and related activities. It is typically not meant to replace errors and omissions coverage for professionals like accountants and lawyers and it does not provide any medical malpractice coverage.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Professional Services are not black and white: While you might think you are providing the correct professional services in the most professional manner, others may not and this conflict can cause a claim or lawsuit.
  2. People don’t share everything: Counseling or consulting with others on what to do or how to behave can backfire if you are not given all the facts of a particular situation upfront.
  3. Teaching is subjective: What and how you teach information can be misinterpreted, especially by sensitive parents or special needs groups.

 

This Could Happen to Your Nonprofit

Faulty Advice:

A nonprofit provided advice to the elderly regarding government subsidies for home improvements.  A senior made repairs to his home based on certain advice that turned out to be inaccurate and made a claim against the nonprofit for the cost of these repairs.  The claim was settled for $41,000 and the defense costs were minimal

Battery by Teacher:

One of the students in a nonprofit school for disabled and difficult students began acting out and needed to be physically restrained. It was subsequently learned that the teacher had not correctly followed take-down procedures, but injuries were minor. The parents retained an attorney and we were able to resolve the claim for a very modest $12,000 to be placed into a college trust fund. No litigation expenses were necessary.

Lack of Disclaimer:

A support group for Alzheimer’s patients provided a page on their website describing a recommended exercise plan but there was no disclaimer to consult a physician before trying the exercises.  A member of the support group was injured while doing the exercises and requested the nonprofit pay her medical bills.   The bills, as well as a small settlement of $10,000, was paid.  The website page was taken down.  Legal fees were $25,000.

 

Owned Auto Coverage

Nonprofit auto insurance provides coverage for the vehicles you own.  This includes coverage for liability associated with at-fault accidents:  bodily injury to other people or damage to other’s vehicles or other’s property.  It can also include coverage for damage to your vehicles.  You can also include coverage for accidents involving uninsured or underinsured drivers.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. You own a vehicle: State laws and lenders mandate coverage on vehicles that you own.
  2. There will be a claim: Vehicles account for the majority of insurance claims in the United States so your organization needs to be well protected.
  3. Other Services: Your organization might want to take advantage of other services such as driver training and vehicle monitoring programs often provided as part of your nonprofit insurance program.

 

This Could Happen to Your Nonprofit

Unsafe Lane Change:

A vehicle owned by food bank made an unsafe lane change into a passing vehicle, which then went off the highway and crashed. The driver and passenger in the other vehicle both made injury claims and retained an attorney. Over a three-year period, each claimant incurred more than $60,000 of suspect medical treatment. By the time a court-ordered mediation was held, the claimants had fired two attorneys and hired a third. Demands at mediation were for more than $500,000, and the claims eventually settled for a total of $80,000, but not before incurred $170,000 in defense costs were incurred.

Uninsured Motorist:

A nonprofit’s employee was traveling on agency business in a car owned by the nonprofit and was rear-ended by an uninsured motorist. The crash was severe, pushing the nonprofit vehicle into the vehicle ahead. The employee’s neck and back injuries were serious and required two surgeries over an eight-year period. While workers’ compensation paid more than $200,000 in medical and disability benefits, the employee was also entitled to additional economic and non-economic damages under the vehicle’s uninsured motorist coverage.

Those claims were settled for $350,000 without the need for litigation.

Right of Way:

A nonprofit vehicle entered a highway after stopping for a stop sign. The driver failed to notice a motorcycle traveling down the highway, which had no stop sign and the right of way. The motorcycle crashed and the rider was injured. The claim was eventually litigated. The injuries were serious and damages included a loss of income claim. The claim settled for $160,000. Defense expense costs, however, were more than $75,000.

 

Hired & Non-Owned Auto Coverage

Nonprofit Hired & Non-owned Auto coverage provides liability coverage above and beyond your employee’s or volunteer’s personal auto coverage.  When you have employees or volunteers who drive their own vehicle on organizational business you can be held accountable for claims and lawsuits associated with at-fault accidents.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Simple Errands: You may not have employees or volunteers driving regularly but they do probably run errands to the bank or post office sometimes.  If employees or volunteer drive anytime for any reason on behalf of the organization you are at risk.
  2. Excluded from Volunteer Protection Laws: The state and federal volunteer protection laws exclude any claims that deal with vehicles.
  3. You need these drivers and their cars: If your organization relies on employees and volunteers using their own vehicles to deliver your services or transport clients then this is the only way to be fully protected.

 

This Could Happen to Your Nonprofit

Employee Driving His/Her Own Car

An insured’s employee driving his own vehicle to the bank to make a deposit and was involved in an at-fault, catastrophic collision. Unbeknownst to the nonprofit, the employee’s personal auto coverage had lapsed. The non-owned coverage become the primary coverage,. The full $1,000,000 in available limits were paid in a settlement which involved a structured annuity to take care of the injured claimant over his lifetime.

Executive Director Goes to Meetings

The executive director of a sheltered workshop was driving to a meeting with a major funder.  She was in a hurry and accidentally ran a red light striking a pedestrian.  The pedestrian’s medical bills exceeded $750,000 and she sued for lost wages and permanent disability.  The executive director only had a $300,000 liability limit on her personal auto policy, so the organization’s nonowned auto policy paid the remaining damages.

Can’t See Behind You

A volunteer of a senior services organization dropped a senior off at a medical clinic.  When backing up to leave he hit a pole on the portico of the building causing damage to the pole and the roof support.  His own auto policy only covered $5,000 of the damages so, the organization’s nonowned auto liability paid the remaining $15,000 in property damages.

 

Umbrella / Excess Liability

Umbrella insurance provides increased coverage limits over other types of nonprofit liability insurance. It is primarily meant to increase the limit of your general liability coverage but can also go over your auto liability, directors and officers liability, professional liability, improper sexual conduct liability, and/or workers’ compensation.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Required by Funders or Municipalities: Many times third parties will require limits of liability that are more than your basic limits.
  2. High New Worth Board Members: If you have wealth board members they may require that you have high liability limits so that they can be adequately protected for their service to your organization.
  3. Significant Organizational Assets: If your organization has assets more than $1,000,000 (the basic general liability limit) then you need to consider umbrella coverage to protect 100% of your assets.

 

This Could Happen to Your Nonprofit

Bad Injury

A volunteer at a boys and girls club fell off of a ladder while helping to paint the club’s gymnasium.  She broke both her legs, was permanently disabled and could not return to her job.  The medical bills and settlement reached $1,850,000.

Another Bad Injury

An environmental organization took a group of school children on a tour of one of their properties.  The children began throwing pine cones at each other and one child was injured and lost his eye.  The parents sued for medical bill payments as well as the cost of the permanent lifetime disability.  Actual responsibility for the injury was disputed.  Eventually the claim totaled $2,500,000 and the defense costs were over $75,000.

Bad Actions

An employee of a sheltered workshop sued for sexual harassment claiming that the executive director would not promote her unless she had a sexual relationship with him.  She also claimed that the board had mismanaged the organization because they knew about the behavior of the executive director but would not fire him.  The lawsuit went before a jury who awarded the claimant $1,500,000.

 

Property Coverage

Property insurance provides coverage for the loss of or damage to the property you own. This property can include your building and your organization’s personal property (furniture, equipment, electronics, inventory, etc.) among other things.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. You own stuff: If your organization owns any property such as office furniture, computers, tools and equipment, etc you want property insurance to replace it in case of theft or fire.
  2. Other people own stuff: If your employees regularly use their own property, such as computers, to do business on your behalf you will want to protect their belongings as well and most property policies provide a sub-limit of coverage for property or others.
  3. You own a building: If you own a building it’s a big asset and needs to be insured properly in case of fire or water damage or other covered loss.

 

This Could Happen to Your Nonprofit

Fire Loss:

Fire broke out in a break room an investigation determined that the faulty wiring in a coffee maker was the cause of the fire. The total cost of the damages to the nonprofit’s business personal property, relocation expenses and business income loss was more than $100,000.

Embezzlement:

A payment clerk manufactured phony invoices to a pre-approved vendor with whom the clerk had an arrangement for sharing the profits. An annual financial audit uncovered the crime, and the guilty parties were convicted, but not before the employee embezzled $281,000 which was partially covered under the employee theft coverage in the insured’s property policy.

Laptop Computer Thefts:

A researcher used his own computer to do work for a nonprofit.  The laptop was stolen from his truck.  A claims was made on the property policy and it paid to replace the laptop for $2,600 plus the cost of duplicating the data.

 

Volunteer Accident

Nonprofit volunteer accident insurance provides coverage to volunteers if they are injured, disabled or die during their service to your organization. It is usually more than their own medical insurance and provides reimbursement of medical costs. It can also include coverage for loss of limbs or loss of life.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Volunteers not covered by Workers Compensation: Since volunteers aren’t paid they are not usually included on the Workers Comp coverage but your still want to provide some help to them if they are hurt (or worse) while working for your nonprofit.
  2. Volunteers are a valuable resource: Providing Volunteers accident coverage shows that you value their contribution to your organization.
  3. Not everyone has medical insurance: Volunteer accident coverage is structuredd to pay out of pocket expenses (e.g. deductibles, etc.) not covered by the volunteer’s medical insurance.  However, if the volunteer does not have medical insurance then the accident coverage will pay the medical bills up to a certain amount.

 

This Could Happen to Your Nonprofit

Volunteer Slip and Fall:

During a fundraising event at a local social hall, a nonprofit’s volunteer slips and falls in some liquid spilled by another guest. The volunteer has her own health insurance with a 20% copay. After the $50 deductible is satisfied, the accident policy will pay the remaining 20% copay, up to 100% of usual and customary charges.

Volunteer Death:

A philanthropic organization sponsored a team building event at a ropes course.  A volunteer fell from the course and died from her injuries.  Above and beyond the liability payments from the course operator the nonprofit paid a death benefit from the volunteer accident coverage to the volunteer’s family.

Loss of Limb

While volunteering at a soup kitchen a man accidentally sliced his finger off with a meat slicer.  He medical insurance paid most of the medical bills while the accident coverage covered the remainder.  The accident coverage also paid him a lump sum under the dismemberment benefit.

 

Workers Compensation

Workers’ compensation insurance provides coverage for employees in the event of injury, illness, or death. The benefits include medical costs, disability income, death benefits, and job retraining. In most states, it is required by law.

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Required by law in most states: Most states have strict workers compensation laws that require any organization with employees to have Workers Comp coverage.
  2. Duty to take care of your employees: If your nonprofit has employees then you will want to make sure they are well take care of if they are injured or become ill while working for you.
  3. Large Claim Amounts: Workers comp claims can be quite large and direct payment of these claims would put an unnecessary burden on your budget.

 

This Could Happen to Your Nonprofit

Repetitive Motion

A thrift store employee complained of pain in her shoulder.  After consulting with her doctor it was determined that it was a repetitive motion injury caused by picking up and moving boxes at the thrift store.  The claim continued over three year with over $130,000 in medical bills before a permanent and stationary determination was made and the employee was paid a settlement of $75,000

Communicable Diseases

A contaminated needle stuck a nurse at a community clinic.  She immediately sought medical attention and the medical bills were minimal.  However, she was required to have ongoing testing over 6 months for communicable diseases.

Car Accident

A worker at a recycling center was driving to a pick up when he lost control of his vehicle and hit a power pole.  He was taken to the emergency room with facial lacerations and a broken clavicle.  The workers comp paid his medical bills as well as lost wages while he was recovering.

 

Cyber Liability

Nonprofit cyber liability insurance provides coverage for instances when your computer security systems are compromised and sensitive data is stolen. It covers the costs to protect the people affected by the breach with resources such as credit monitoring.  Additionally, the policy can respond with crisis aid to help protect your reputation.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Donor Data: If  you keep any type of sensitive donor data such as credit card or other personal information then you need to be protected from a possible hack putting that information in jeopardy.
  2. Privacy Laws: If you maintain any type of confidential records about the services that you provide individual client they can be at risk of theft and dissemination.
  3. Anyone is subject to cyber Extortion: Cyber extortion happens more often then you know and it’s important to have cash ready to pay these demands when needed.

 

This Could Happen to Your Nonprofit

Stolen Laptop:

A social service nonprofit’s Executive Director’s laptop was stolen from her vehicle. It contained personal information, including credit card numbers, of donors. While no identity theft claims were made, all of the donors were notified and provided credit protection services for one year. Total costs were $35,000.

High Profile System Breach:

A nonprofit providing services to battered women discovered its system containing confidential client information had been accessed by an unauthorized source. A local newspaper learned of the breach and gave it front page coverage. The nonprofit engaged a PR firm to manage the publicity, which included an ad in the newspaper providing reassurance that the system weakness had been resolved to the satisfaction of local authorities. The PR firm agreed to provide its services at a reduced cost and total expenses were $8,400.

 

International Coverage

Non-profit international insurance provides coverage for your operations outside of the United States. It is similar to general liability but can also include other coverage such as auto liability, volunteer protection, and repatriation.

 

Three Reasons Why Your Nonprofit Needs this Coverage

  1. You travel overseas to fulfill your mission: Your general liability may have limited coverage for any claims that arise from your travel to meetings or projects in other countries so you need International coverage to provide protection.
  2. You have permanent operations in another country: If you have permanent operations overseas (e.g. animal sanctuary, clean water project, medical services, etc.) then you need to have a policy that will protect those operations.
  3. You have employees stationed in another country: Any American citizens stationed overseas for your nonprofit need to be protected with medical insurance and repatriation options in case they are injured.

 

This Could Happen to Your Nonprofit

Auto Accident

A medical services organization was involved in a car accident in a rental vehicle while on an overseas mission.  The international policy paid the medical bills of the third party and paid for the repair to the rented vehicle for a total of $35,000.

Medical Bills

An employee of an animal rights organization broke her wrist while working in an elephant sanctuary.  He needed to be transported to the closest specialist which happened to be in another country. Then he needed surgery.  The transportation was all arranged by the insurance company and all of the medical bills were paid.

Repatriation

A group of civil rights advocates needed emergency evacuation from a war-torn country.  They contacted the provider of the international coverage who arranged the transportation and got them all out safely.

 

Improper Sexual Conduct / Physical Abuse

Nonprofit Improper Sexual Conduct and Physical Abuse coverage provides protection for actual and alleged claims of abuse by your employees and volunteers to third parties.

Three Reasons Why Your Nonprofit Needs this Coverage

  1. Background checks aren’t foolproof: You do your best to screen your employees and volunteers but the screening isn’t always perfect and sometimes people who aren’t 100% honest slip through the cracks.
  2. You can’t directly supervise everyone at every moment: Employees and volunteers often have unsupervised contact with clients.
  3. People don’t always know they are acting inappropriately: Sometimes people have the best intentions and act in a caring way but it is not perceived that way by the third party.

 

This Could Happen to Your Nonprofit

Day Care Molestation:

An independent daycare contractor was certified by a nonprofit. A child placed in the daycare center was molested by the teenage grandson of the daycare contractor. Litigation ensued and the nonprofit’s records showed all appropriate site visits and background checks had been carefully done. Based on case law that insulates a nonprofit from the unforeseen criminal acts of a third-party and their strict adherence to protocols, a court ordered dismissal that was upheld on appeal. No damages were paid on behalf of the nonprofit, but almost $150,000 in defense legal costs were incurred.

Assault by Employee:

A client of the nonprofit’s safe harbor house was sexually assaulted by one of the nonprofit’s part-time gardeners, who had a mild mental illness. Investigation revealed that the gardeners were supposed to be closely supervised and his absence from the crew could not be explained. Based on medical records that reflected little physical trauma but a psychological reaction, the claim was eventually settled at a mediation for $50,000 with $11,000 in defense costs.

Improper Relationship with a Client:

A food delivery volunteer for a meals on wheels program engaged in a consensual sexual relationship with one of the female clients he delivered to. When this was discovered, he was reprimanded when he should have been terminated, The client filed a lawsuit claiming she was coerced into the relationship in order to obtain food.   Following protracted legal discovery the case settled for just over $100,000. Defense costs were $50,000.