Non-Profit Liability Exposures

A non-profit organization faces many liability exposures. These liability exposures can be broken down into different categories. These categories are defined really by the insurance coverage that responds to them. The main liability exposures to non-profit organizations are as follows:

General Liability Exposures	Slip & Fall.
Workers Compensation	Do you really need worker's compensation insurance?
Professional Liability	Some professional liability exposures may not be covered by Directors and Officers Insurance.
Employee Benefits Liability	Leave it to the Professionals
Fiduciary Liability	Be careful with that financial advice!
Auto Liability	Don't own a vehicle? You still have the exposure.
Directors & Officers Liability	The great unknown.

Known as premises liability or office liability coverage. These are the most commonly insured types of liability exposures. This coverage comes as part of a " package" providing building and contents coverage. The Insured Perils under General Liability are as follows:

Bodily Injury	Means Bodily Injury, Sickness, or Disease sustained by any person which occurs during the policy period, including death at any time resulting there from.
Property Damage	(1) physical injury to or destruction of tangible property which occurs during the policy period , including loss of use thereof at any time resulting there from. (2) loss of use tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period.
Personal Injury	Other than Bodily Injury arising out of one or more of the following offenses: False arrest, detention or imprisonment. Malicious prosecution. Wrongful entry or eviction. Oral or written libel and slander. Oral or written violation of privacy.

Worker’s Compensation provides coverage in two parts. Part one is the statutory benefits for the injured employee. Part two is the "Employer’s Liability" coverage.

You are required by law to pay certain benefits to employees injured on the job. In exchange for these guaranteed benefits, the employee gives up direct legal action against you for bodily injury liability. The employee, however, can take action against a third party, and that third party can then take legal action against you. This is where employer’s liability coverage comes into play. Employer’s Liability coverage is part of the worker’s compensation policy and will respond to these "third party over" type claims. An example of this type of claim is as follows:

Employee is working at their desk, and the desk fails, falling on the employee and causing a compound fracture in the employee’s leg. The employee collects his worker’s compensation benefit. The injured employee then hires an attorney to sue the manufacturer of the desk. The desk manufacturer then sues the YOU since you used the desk for something other than its intended purpose. The employer’s liability coverage will respond to this type of claim.

Please remember that you have NO defense in the event an employee is injured and you do not carry worker’s compensation coverage. You WILL pay the statutory benefit to the injured employee. Bankruptcy is not an option. The personal assets of the directors and officers WILL be attached if there are no other assets. Directors and Officers coverage WILL NOT defend the D&O’s and the organization if you fail to maintain workers compensation coverage.

Directors and Officers Insurance does indeed provide coverage for Professional Liability. However, there are two very important reasons why you should look at a separate policy for professional liability

Certain organizations, such as clinics or counseling centers, may be sued due to bodily injury caused by the act or decisions by a professional at that non-profit organization. Directors and Officers coverage excludes coverage for claims of bodily injury. The general liability policy provides coverage for bodily injury claims, but excludes professional liability exposures altogether.

For example. Most directors and officer policies that our office has available provides coverage for Y2K. However, if your business is helping other non-profit organizations become Y2K compliant, than the directors and officers policy will specifically exclude that exposure.

Employee Benefits Liability applies to errors made by the human resources individual in your organization responsible for administering the employees benefits. Liability arising from providing erroneous information concerning group health, COBRA, worker’s compensation, and other employee benefits can be insured by purchasing an employee benefits liability policy. This coverage can be extended from your general liability coverage with some insurance companies. This coverage is NOT provided by directors and officers insurance.

Fiduciary Liability arises when promised results are not met, or when you are accused of giving bad financial advice. Directors and officers coverage does pick up this exposure to a degree. You will NOT have any coverage if you recommend Pension investments to your employees. Pension fiduciary liability can be avoided by offering a range of financial choices and having your pension plan administered by a third party.

Liability arising out of the ownership or use of an automobile. If you own vehicles, purchase the insurance. If you do not own vehicles, add hired and non-owned auto liability to your General Liability coverage. If you frequently rent vehicles, add hired physical damage coverage to your auto policy and avoid paying the rental car waiver fees.