We spoke to Riley Binford, President at
Charity First Insurance Service, about the four key dangers for a broker in the non-profit space.
Believing a general liability policy is enough to cover injury to volunteers
“The ideal way to handle injury to volunteers is to have them added as employees to the insured’s workers’ compensation policy,” Binford says. “This is basically a no-fault approach as long as the volunteer is working on behalf of the insured and there is no limit of liability. Unfortunately, most workers’ compensation carriers do not like to provide coverage for volunteers for myriad reasons, which range from exposure and premium determination to audit challenges, etc.”
Most non-profits are reluctant to add volunteers to their workers’ compensation because a claim might impact their experience modifier, and the appropriate payroll and premium may not applied in the ex-mod calculation.
“Since relying on a general liability policy can be risky and convincing the workers’ compensation carrier to cover volunteers on the WC policy could be challenging, the next best thing is to offer a Volunteer Accident policy to the insured,” Binford says. “This requires no negligence and can work in conjunction with the general liability policy.”
Assuming small non-profits don’t need Directors and Officers (D&O) coverage
Due to the general public’s increased awareness of board actions and scandals, D&O should always be considered. In addition to regular D&O claims, in recent years there has been an increase in “donor intent” claims against nonprofits, where a donor is not happy with how his or her donation was used.
“Also, most nonprofit D&O forms include employment practices liability,” Binford says. “If a nonprofit has one or more employee, they should consider EPL, either as part of their D&O or on a standalone basis. The cost of nonprofit D&O/EPL continues to be very reasonable, so much so that the board should consider personally splitting the premium amongst themselves if the nonprofit does not have it in their budget.”
Believing special events policies provide adequate coverage for liquor sales
Although special event policies cover the liability arising from a particular event or events, they do not necessarily provide coverage for the serving of alcohol. If it’s anticipated that alcohol will be at an event, the broker must make sure the event policy is endorsed to provide coverage for the serving (and selling) of alcohol.
“If it cannot be endorsed, then they should purchase a standalone liquor policy,” Binford says. “Often there is confusion about being covered under the “host liquor” wording of the general liability policy. If you are charging for the alcohol, it’s very simple: you’re in the business of selling alcohol and the host liquor wording does not provide coverage; liquor liability must be purchased.”
Covering international organizations with domestic general liability insurance
“Most U.S. domestic policies provide limited worldwide coverage for a nonprofit,” Binford says. “Generally speaking, the policy will not provide coverage for an international claim unless the suit is brought in the policy territory, which in most cases is the United States, Canada and Puerto Rico.”
In addition, the domestic general liability policy will not respond to claims brought as a result of activities of persons whose home is not in the coverage territory. “If an insurance agent has a nonprofit that has regular international activities, they should offer an international policy which takes the question out of where the claim/suit is brought and where their employees and volunteers live,” Binford says.
