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March 31, 2010 / Brett Cohrs

Liability Coverages Most Nonprofits and Social Services Need

In my work with nonprofits, I get a lot of questions about what coverages are really needed. Budgets are tight, but it’s important to have adequate protection.  I recommend a package policy that includes general liability, professional liability, sexual abuse and molestation liability, and management liability (Directors & Officers and Employment Practices Liability).*

Here’s why:

General Liability (GL)

Practically speaking, some insurance companies require purchase of GL in order to  access the professional and sexual abuse coverages. More importantly, nonprofits are businesses and have basic operations. GL provides coverage for property damage or bodily injury to a third party due to negligence.  GL policies include coverage for personal and advertising injury as well: libel, slander, copyright infringement, etc.

Professional Liability (PL)

Professional Liability addresses the services your nonprofit provides. Do you provide formal counseling or case work? Do you provide educational services or life skills training, including budgeting, home management, job training, and the like? These are professional services–even if they are provided informally by volunteers or employees who are not licensed counselors or social workers.

Sexual Abuse and Molestation Liability

This coverage is self-explanatory: It addresses civil suit losses due to improper sexual conduct  (defined differently by different carriers).  If a volunteer or employee is accused of improper conduct, then this policy defends the organization and usually the individual unless that individual is actually found guilty of a crime.

Management Liability (D&O & EPLI)

Some small nonprofits believe Directors and Officers liability is all that is needed for their organization. Unfortunately, D&O policies will not protect the directors or officers if the loss is due to bodily injury or property damage, poor or negligent professional services, or sexual abuse or molestation (Ds and Os are protected under those specific policies).  A nonprofit D&O policy deals with claims arising from discrimination, harassment, misappropriation of funds, and poor management.

It’s important to note that each of these policies protect employees, volunteers, directors and officers. The only difference is the type of loss that they are protected from.

As always when discussing insurance, it’s important to review your policies. They look a lot more complicated than they are! Or discuss with your agent. If she doesn’t know the answer, she should have the resources to find it for you. 

What I tell my clients: review the policies, note the exclusions and if any of the exclusions jump out at you, make a note to ask where that coverage can be picked up elsewhere.  If you have questions, please leave them in the comments or email me at brett@hains.com

What coverages do you have in place for your nonprofit?

*Auto liability, employee dishnoesty, and workers comp are usually necessary, too, but we won’t go into those here. Depending on the type of risk, any number of other coverages are needed. Consult your local professional

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