There are many types of insurance options available to nonprofit organizations to help protect the nonprofit from claims and lawsuits that can destroy the good work offered to their community. Often times, general insurance agents do not understand or take the time to educate nonprofit directors on the exposures and risks they face on a daily basis. Below are the types of insurance coverages you should look for in your insurance protection plan:
Business Auto Liability
This coverage is necessary for company-owned or leased vehicles. Business auto coverage may include liability only or may also cover physical damage. The liability portion covers damage to other vehicles or property and injury to others for accidents for which you are at fault. Auto physical damage covers repairs of vehicles you own. Uninsured/underinsured motorist coverage may be purchased with a business auto policy and it provides specified coverage for accidents involving uninsured or underinsured motorists.
Commercial General Liability
This is typically the “core” coverage for a nonprofit. Most commercial general liability insurance provides coverage for a wide range of acts or offenses which result in bodily injury, personal injury, advertising injury or property damage to a third party. The most common type of incident covered by this policy is a “slip and fall”. Commercial general liability (often referred to as CGL or GL) insurance is generally available as an “occurrence” policy, which provides significant advantages over a “claims-made” policy.
A general liability policy may also extend to special events. If your organization conducts any type of special events, you should make sure that your general liability policy includes special events and that you follow any requirements about providing notice of special events.
Directors and Officers Liability
Directors and officers liability coverage is intended to cover damages resulting from the wrongful acts of the directors and officers of your nonprofit. Directors and officers liability coverage extends to types of claims that are not covered under the commercial general liability policy. Among the items a good directors and officers policy should include is broad coverage for all types of employment-related actions, including allegations of wrongful termination, harassment, discrimination and failure to hire. It should also pay for defense costs as they are incurred, not on a reimbursement basis.
Employee Benefits Liability
This coverage is usually purchased as an endorsement to the commercial general liability policy. It is intended to cover specified damages from your organization’s negligent handling of the administration of your employee benefits program. For example, a new staff person starts on July 1st and ends up needing emergency surgery on August 15th but because of an oversight they were not added to your health plan. This coverage would typically apply.
Employee dishonesty coverage is intended to provide a source for recovery of funds, securities or property embezzled by employees or volunteers. This coverage may sometimes be purchased with property coverage or may be purchased separately as a fidelity bond.
Improper Sexual Conduct Liability
As its name suggests, Improper Sexual Conduct (ISC) Liability coverage insures against claims of improper sexual conduct. General liability policies typically do not include this type of claim because ISC is based on an intentional malicious act. Some insurers claim this coverage is included in their general liability insurance because the policy does not specifically exclude improper sexual conduct, but relying on a general liability policy is a risk that may provide no coverage for employees and volunteers who may be unfairly accused. Unless this coverage is purchased as a separate policy specifically providing coverage for improper sexual conduct, you likely will not have any coverage for your employees or volunteers.
Non-owned/Hired Auto Liability
If your employees or volunteers use their own vehicles on company business, this coverage is very important. The purpose of this policy is to provide “excess” coverage over an employee’s or volunteer’s personal auto insurance. If an employee or volunteer is involved in an accident while driving on behalf of your organization, and the limits of his or her personal insurance policy are exhausted, this coverage protects the organization.
Property coverage is purchased to protect the physical assets you own or lease such as buildings, office equipment, furniture, fixtures, etc. There may be special types of coverage which need to be purchased for property in transit, mobile equipment, fine arts, etc. When considering this coverage, it is important to have a thorough inventory of all physical assets, then make sure that the property is accurately valued and that adequate coverage limits are purchased.
Social Service Professional Liability
This coverage is often provided as an endorsement to the commercial general liability policy. It typically provides coverage for errors and omissions as a result of social services activities. While it may, depending on the policy, cover counseling, nurse practitioners and the dispensing of medications, it is not true malpractice liability coverage. This policy is typically not sufficient for organizations with medical malpractice or other professional liability exposure.
Participant/Volunteer Accident Insurance
Accident insurance provides a limited amount of coverage for injury to a student/volunteer/participant (depending on the specific coverage) on a no-fault basis. Under commercial general liability, it is typically necessary to establish fault before a payment is made.
Accident insurance typically pays regardless of fault, and may pay out prior to an individual’s health insurance or in excess of it, depending on the particular policy.
True to its name, umbrella coverage typically provides higher liability limits for a variety of coverages as well as potentially providing coverage for damages which may not be covered by the primary coverages. For example, a single umbrella policy may increase the limits of coverage on a commercial general liability policy, a business auto policy, and a directors and officers policy simultaneously. This policy engages when the limits of another policy have been exhausted.