This story is about a class-action lawsuit against an apartment complex, so I understand if my nonprofit readers do not understand the relevance to their operations.
Many of you should never be affected by bed bug issues. Actually none of you should be so affected, but if you run residential facilities: shelters, group homes, treatment centers, or transitional housing facilities, there’s an outside chance.
As a matter of fact, one of my underwriters expressed concern over insuring residential facilities for that very reason: bed bugs. That was the first time an underwriter gave pause because of the little mattress dwelling vermin. Usually insurance companies have underwriting guidelines for residential facilities due to the large property exposures or some other reason inherent with the population, i.e. some companies prefer to deal with youth facilities, some prefer elder care.
Bed bug claims can be difficult. I’ve seen carriers pay the claims on behalf of hotels, but any claim involving infestations can present some policy interpretation issues for adjusters.
The recommendation? Never take bed bug issues lightly. Take quick action to eradicate the little buggers. It could save you a world of hurt down the road.
What are some claim examples from your world that you have questions about?
Disclaimer: Note that this and other posts are offered for informational purposes only. Always consult your professional regarding your specific concerns.
A few days ago I wrote this post as a response to one of the most common questions asked of property and casualty insurance agents: Which coverages do I need?
I’d like to follow that with a corollary question: How much coverage do I need?
After you select the coverages to address your organization’s exposures, your next decision is how much limit you will purchase.
My suggestions: Enough to put your organization’s stuff back in place and enough to protect the stuff your organization owns (and the stuff your board members and key employees and volunteers own).
Let’s look at two of the base policies for any commercial insurance package to illustrate my suggestions on this question.
Property Insurance for your Building
The wrong question to ask: “How much is my building worth?” These days, as we’re all painfully aware, property values are way low. Buildings are typically worth much less than it would cost to rebuild them.
Your limit should be enough to rebuild your building in the event of a loss. More importantly, it should be enough to repair a partial lost without any penalties.
I could really take you down a rabbit hole of insurance-ese here, but I’ll refrain. Suffice it to say this: YOU DO NOT WANT TO UNDERINSURE YOUR MOST IMPORTANT OPERATIONAL ASSET IN ORDER TO SAVE A FEW DOLLARS.
If you are underinsured from a replacement cost perspective, you will get penalized on a partial loss. That’s the only way you won’t be completely angry with your insurance company or your agent for something you failed to do in the event of a loss.
If your whole builiding burns down, perhaps a lower limit would give you enough to build back a lighter version. On the other hand, if you just have a 25% loss due to a windstorm and are underinsured, you’ll only get partial payment for your loss. That will not make you happy.
Ask your agent or track down a replacement cost estimate on your structure. Chances are if you’re only insured $50 a square foot, you’re not insured high enough.
The main objective when selecting property limits is to have the funds available to put all your stuff back in place as quickly as possible.
General Liability Insurance for your Operations
These comments apply to ANY liability policy you have in place (auto, professional, directors and officers, etc.).
The primary basis for your limit is not the likelihood of the size of your claim. If you read my previous post, you cannot predict that type of thing.
What you do know is the value of your assets. Therefore, select a limit that will protect as much of your assets as possible. To put it another way, if someone sues you, how much do you have at stake?
Even if your organization doesn’t have much more than a laptop, a desk, and $1,200 in the bank, you need to consider future earnings and the personal assets of your board members and employees. A lawsuit probably will not only name the organization, but any key people involved. Heck, it might name the whole board.
Most general liability policies come with a standard $1,000,000 limit. I’d suggest considering an umbrella to give you additional limit. Check your assets and your potential earnings.
Factor in the nature of your organization, also. That variable is important, too. If you work with youth in the juvenile justice system, you might need have higher limits than if you provide rent assistance and food pantry items on a referral basis.
The same principle applies across the board to your other liability policies: Check the assets at stake, then your operational exposures, and decide.
Disclaimer: Please make sure to discuss these items with your insurance professional as each situation has its own circumstances.
I get asked this question often. As an insurance agent who started higher education as an English Major and finished with a Master of Divinity (that would from a seminary, not a degree on how to use a Ouija board), I’m super sensitive to being perceived as a salesman.
So when I hear the question ‘What coverages do I need?’ red flags go up: How can I tell them the truth without them thinking I’m trying to super-size their value meal? (in case that metaphor is too vague: I never want a client to think I’m selling them something they don’t need.
Here, then (and the next couple posts), is where I will answer the question in a generalized fashion. Your situation is unique–talk to a pro.
‘What Coverages Do I Need’: Code for ‘What Kind of Claim Am I Going to Have?’
The question truly hinges on the word ‘need’. If by ‘need’ you mean, ‘What kind of claim am I going to have?’, then I can’t help you. Insurance agents aren’t prophets. I’m not, despite my education, a diviner: I cannot predict from whence a claim might come; nor can I predict whether you’ll ever have a claim.
All we can do is propose policies that protect the stuff you own and protect your liability exposures because of the stuff you do.
Instead of looking at likelihood of a claim, we lay your stuff out on a table (figuratively speaking) and try to play a matching game: which coverages match up with which exposures. For instance, how likely is it your house is going to burn down? Not very. Still, you want to protect that ‘stuff’, so you purchase a homeowner’s policy.
Likewise, if you work with youth, how likely is it that you or one of your volunteers or employees will sexually molest one of the youth you serve? Not very. Still, the exposure and possibility for a a valid or drummed up lawsuit is always there. Consequently, we suggest you purchase a policy that addresses this possibility.
Need isn’t about likelihood of a bad event; it’s about focusing on the things you will still need after a bad thing happens (i.e. your building, money to pay employees, funds to pay damages, etc).
If you provide any advice, counseling, or miscellaneous social services, you should find the appropriate professional liability policy.
If you own or only drive ANY vehicles–ever, you should match up your autos with an auto policy (at least a hired/nonowned auto policy).
If you have volunteers who do labor for you, you should match that exposure with a volunteer accident policy (in lieu of workers’ compensation which only applies to employees–normally).
If you do overseas work, you should investigate repatriation coverage.
If you are a foundation and are entrusted with funds, then you should make sure you have an employee dishonesty policy and directors and officers policy.
If you do a lot of work on the internet or have confidential information on hand, you might want to look into a cyber liability to address those risks.
Get the picture? An insurance agent’s job is not to predict, but to put little umbrellas of coverage over as many exposures as possible. The predicting and riverboat gambling piece is up to you.
I look forward to answering this question more fully in coming posts.
As always, I’d love to know what your insurance questions and concerns are, if only to assist in what questions YOU need to ask of your insurance professional.
Most nonprofits don’t provide chiropractic services, but if you’re billing any entity for services, don’t do what this guy did.
I admit that I am not intimately familiar with how my nonprofit service providers report to medicaid for payment. I don’t know if the process makes for an easy scam or not.
My understanding, though, is that health insurance companies and governmental entities pay fees to nonprofits for their professional services. Therefore, the temptations are the same, regardless of nonprofit or for-profit status.
You have to maintain accurate records and report your services honestly and conscientiously.
In addition to potentially falling into fraudulent or negligent billing practices, poor documentation can lead to more serious medical or counseling negligence.
It’s extremely difficult to defend against a claim of medical or counseling error if you don’t have good documentation. Any professional knows that the devil is in the details and the details are the billing, the documenting, the privacy, and so forth.
So… dot your I’s and cross your T’s.
Question: What kinds of seemingly innocent admin or documentation mistakes have you seen to have huge consequences? (please–put in terms of hypotheticals. We don’t need names to be named here).
Web 2.0 or 3.0 or 4.0 and Social Media and Blogging and Chatrooms and Bulletin Boards and Online Communities. There are so many ways a nonprofit can engage and grow their supporter and client base through online engagement.
But you know how people participate, right? They’re having work, eating a sandwic, multi-tasking, stewing over a bad morning, reading some opinion that they disagree with, and then shoot off their own fiery retort. The Snark War then begins. What if the sniping becomes libelous or slanderous?
Or what if someone from your organization posts false data in a chatroom or on a bulletin board that could potentially damage another individual or organization?
As an insurance man, I must tell you that you might not have coverage.
From the standard ISO CG 0011207 Commercial General Liability insurance policy:
This insurance does not apply to:
k. Electronic Chatrooms Or Bulletin Boards
“Personal and advertising injury” arising out of an electronic chatroom or bulletin board the insured hosts, owns, or over which the insured exercises control.
If you only have a General Liability, Professional Liability, and Sexual Abuse Liability policy, you are probably uncovered should some online libel, slander, or other personal injury lawsuit arises from the bulletin board or chatroom.
The beautiful thing (yes, beautiful) about insurance is that there is often another policy that will provide a pot of money. You just have to find it. Three possibilities in this case:
- Directors and Officers Liability: If you have a Nonprofit D&O policy, review it. Check to see if they include personal and advertising injury or extend coverage to online activities.
- Cyberliability: This a relatively new insurance product (or one of those gaining traction). It can address anything from these personal and advertising liability issues to data breach (how many of our nonprofits carry medical or other confidential client information?) to inadvertent introduction of computer virus.
- Specialized Endorsement Packages: Companies increasingly add back coverages to their base policies by endorsement (a fancy insurance term for ‘changing’). An insurance company might include a long list of additional coverages that are either included for no cost or added for a nominal fee. Check the list (they are ever-changing). You might find some coverage there.
Regardless: ALWAYS CONSULT YOUR PROFESSIONAL AGENT.
Question: Do you have questions about any off-beat claim scenarios that we can include in a future post? Any particular covered/not covered curiosity?
Special events go hand-in-hand with nonprofit operations. Unless an organization subsists solely on grants, donations, government or private contracts, or fees for services, it probably has a special event fundraiser or two.
Even if it doesn’t need the event to serve as a fundraiser, an organization might have a special party or event to celebrate successes, holidays, or its members or clients. It’s one of the ways a nonprofit can pass out a big ‘Thank You’ to those who donate their time or finances.
From an insurance perspective, though, most special events include activities that aren’t part of the normal operations of the organization.
It’s vital to know how your nonprofit’s general liability policy extends to the special event.
When planning an event that hasn’t been disclosed to your insurance agent or carrier, your first job is to go disclose it. Call your agent and give him or her a description of the event.
If you have an insurance package tailored for nonprofits, there’s a good chance the activities are covered and a certain level of event is already addressed in your policy. If you don’t have a tailored package, you might have to take out a separate policy or endorse your current policy to include the activity.
Some specific items that I see come across my desk often that you might want to be aware of:
- Bounce Houses: You almost can’t have a fall or spring festival without a few of these opportunities for collar bone breakage. Many companies will want to exclude this exposure. However, there are a few that will include it. Regardless, they will want to know that you are using a reputable, insured resource for the inflatables. Always get proof of coverage from the company that provides the inflatables.
- Beer, Wine, Liquor: Some companies offer primary liquor liability for nonprofits’ events. Others aren’t so excited about the exposure to a liquor liability claim. Their policies are somewhat vague regarding liquor exposure at an event. Make sure to disclose that there will be alcohol. Even if you have to take out a small separate policy, it beats having to pay for a claim when a person ended up w/ 10 instead of their allotted 2 beer tickets and caused a wreck on the way home.
- Athletic Events: Is this a 3-on-3 basketball tournament? A 5K run? A paddle race on a local river? Are your participants or spectators covered if they are injured? Ask your agent. She should be able to find out or find the coverage you need for this type of exposure.
Some coverages to consider:
Volunteer or Participant Accident Insurance: If your liability policy excludes coverage for participants of an athletics based event, then take out accident insurance. There will be a small cost per participant.
Single Event Policy with Liquor Liability: If you are responsible for getting a liquor license or are just selling the liquor and want to be sure, just take out a policy.
Special events are wonderful ways to build community and raise funds. A special evening or picnic or festival can do wonders to bring supporters together around a common cause.
Just make sure that an event that is supposed to bring your organization together, doesn’t tear it apart because of a fluke accident.
Discussion: What are some unique special events you’ve experienced? Have you experienced a claim that was covered or not due to a unique special event situation?
After a quick review of my first few entries, it is apparent I need a more focused and consistent approach. If you are an insurance or nonprofit professional, please weigh in.
My goal with this space is to educate nonprofit professionals on risk management and insurance ideas and methods–without being tedious and boring. I hope to be a resource to you regarding questions about insurance basics (some insurance policies are pretty similar to those held by for profit companies) and risk management issues that are more specific to your industry.
To achieve that goal, I’ll have weekly features on nonprofit claim examples and coverage specifics. I’ll sprinkle in some other posts of interest: executive director interviews, guest features, and other items related to managing the risk of nonprofits.
To durther break it down…
Nonprofit Specific Coverages: Every couple weeks, I will feature a different element of a policy that is especially helpful for nonprofits. For example, I might discuss why a professional liability policy is important even if the nonprofit doesn’t employ degreed professionals. Or perhaps how an abuse policy addresses client to client abuse situations.
Types of Social Services: These will review risk management and insurance specific to certain types of nonprofits or social services. It’s no secret that the nonprofit world mirrors the for profit world. Therefore, there is a vast array of organizations that are have tax exempt status, from schools and churches to museums and foundations from insurance companies and technology service providers to community development corporations and child welfare organizations.
General Insurance 101: These posts will address insurance basics–commercial property, auto, workers’ compensation, etc. Is mold covered? What in the world is hired/nonowned auto liability?
Claim Examples: What are some real life applications of when insurance solved a problem for a nonprofit? What happened and which coverage came to bear? If you have some from your experience, please feel free to share.
Risk Management: Whenever I come across some interesting risk management perspectives or suggestions, I’ll pass them along.
Question: If you’re a nonprofit professional, are there any other items that you might find helpful out of an insurance/risk management blog?