NONPROFIT ORGANIZATIONS

Welcome to the Nonprofit Organzation section of our website. We provide General Liability, Property, Directors & Officers and Workers' Compensation insurance specifically taylored to the needs of Nonprofit Organizations. If you would like to get a quote on these various types of insurance for your Nonprofit Organization, please contact our office to obtain a short questionnaire.

TYPES OF LIABILITY FOR NONPROFITS

Nonprofit organizations typically face a narrower range of liabilities than their for-profit counterparts. Nonetheless, several differences exist which make nonprofit organizations especially vulnerable to liability. For instance, nonprofit organizations are expected to operate with fewer support personnel than for-profit organizations. This fact increases the possibility of less oversight which translates into a greater chance to commit errors. In addition, nonprofit organizations are generally less likely to have defined employment practices and procedures which can lead to lawsuits by employees and/or volunteers. Like for-profit directors and officers, directors and officers of nonprofit corporations can be held personally and individually liable for their actions, or lack of action, in managing the organization. In asserting liability, a director or officer is typically charged with breaching the duty or standard of care owed either to the corporation or to a specific party. Potential liabilities for nonprofit directors and officers generally fall into three categories: (i) liability for breach of duty to the organization, (ii) third-party liability in which persons who suffer some injury from the corporation seek to hold the directors and officers personally responsible, and (iii) government enforcement actions.

D&O LIABILITY vs GENERAL LIABILITY

A source of protection for directors and officers of nonprofit organizations is Directors and Officers Liability Insurance. Such insurance may also provide protection to the nonprofit organization as well. Nonprofit organizations have traditionally carried only basic liability coverage; i.e., commercial general liability (“CGL”) coverage. This type of coverage applies to claims for bodily injury, personal injury, advertising liability and damage to, or destruction of tangible property. Such coverage will often not respond to employment claims, antitrust claims, governmental actions or any other type claim not involving bodily injury, personal injury, advertising liability or property damage. Despite the recent increase in potential liability, many nonprofit entities continue to carry only basic liability coverage. Although more and more nonprofit organizations are obtaining Director and Officers Liability coverage, a significant number of nonprofit organizations only carry basic liability coverage. Primary reasons cited for not carrying any directors and officers coverage is lack of need or cost.

D & O LIABILITY INSURANCE

Directors and Officers Liability Insurance (“D&O”) is designated to provide coverage for losses arising out of the management of the organization. D&O policies typically include at least two parts. The first part, typically referred to as INSURING AGREEMENT A-INDIVIDUALS, provides direct coverage to the individual directors and officers (and any other designated individual(s)) for wrongful acts that give rise to a claim for which they are legally obligated to pay. The second part, commonly known as Organization Reimbursement (or, Indemnification), insures the nonprofit corporation’s obligation to indemnify its directors and officers. Such policies may include a third part, Organization Coverage, which covers amounts the organization is legally obligated to pay for its direct liability. The organization coverage can be especially beneficial to nonprofit organizations considering that the organization itself is usually not covered by the liability-limitations statutes. Up until just recently, coverage exclusions typically applicable to nonprofit D&O included claims for: (i) dishonest or fraudulent conduct; (ii) personal profit or advantage; (iii) libel and slander; (iv) pollution; (v) ERISA; (vi) bodily injury and property damage; and, (vii) claims covered by other insurance. Now, more and more insures are providing coverage for these types of claims under D&O policies. D&O policies are typically written on a “claims made” basis. Claims made policies cover claim asserted during the policy period regardless of when the “wrongful act” occurred. Claims made policies often require the organization to notify the insurer promptly of circumstances known to it that may give rise to a claim. Once the insurer is notified, a claim which subsequently develops in connection with that notice will be deemed made during that policy period, even if the claim is not actually made until after the policy has expired. Organizations can acquire additional protection if the policy expires by exercising “extended reporting period” or “discovery” clauses. These clauses permit an insured organization, for an additional payment, to extend its coverage for claims arising from actual or alleged wrongful acts committed prior to or during the expiring policy period.