NonProfit 101. Notes: Session 1B: Insurance, What you do not know can hurt you! From Survivability to Sustainability. June 10, 2015 Session 1B page 1

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1 Session 1B: Insurance, What you do not know can hurt you! Notes: June 10, 2015 Session 1B page 1

2 Session 1B: Insurance, What you do not know can hurt you! Notes: June 10, 2015 Session 1B page 2

3 June 10, 2015 Session 1B page 3

4 Minimum Insurance Checklist Items You Need to Know Non Profits have the same, if not more, liability exposures as For Profits Don t let your budget determine the coverage purchased Discuss leases, grants and contracts with your agent Items You Need to Explain Detail of operations and services. Resume on key employees (Executive Director) noting experience in field. IRS determination noting NFP status. Financials Employee duties and associated payrolls Revenues and sources Insurance Agency / Agent Expertise in Non-Profits Accessibility, visits your location Insurance carriers available How do I file a claim? Insurance Carrier A rated carrier by AM Best Expertise in Non-Profit coverage Where is claims office? Property Replacement Cost Coverage Adequate Limits to rebuild or replace o Building o Contents o Computer / Electronic type systems Business Income & Extra Expense coverage for at least 12 months of operation Crime / Employee Dishonesty June 10, 2015 Session 1B page 4

5 Liability Occurrence Form General Liability limits $1,000,000 per occurrence / $3,000,000 aggregate No product liability or designated location/operation exclusion Professional Liability - $1,000,000 per occurrence / $3,000,000 aggregate Sexual /Physical Abuse coverage - $1,000,000 per occurrence Punitive Damages included Volunteers are insured Fund raising events planned Liquor Liability Host or Dram Shop? Automobile $1,000,000 Combined Single Limit CSL Any auto coverage Symbol 1 or Hired & Non-owned Symbol 8 & 9 Hired & Non-Owned Liability coverage Physical Damage (if you desire on owned / leased / rented vehicles can t on non-owned) Workers Compensation Statutory Coverage $1,000,000 Employer s Liability Other states coverage if needed Required if 5 or more employees In AL other states may differ. Makes no difference if full-time or part-time. Management Liability Director s & Officer s Liability $1,000,000 limit Entity Coverage Full prior acts coverage Spousal coverage for D s & O s Employment Practices Liability Fiduciary Liability June 10, 2015 Session 1B page 5

6 Umbrella $1,000,000 limit Coverage excess of o General Liability o Automobile Liability o Employer s Liability (portion of Work Comp) o Professional Liability. Volunteer Accident Medical Protection for volunteer injury Cyber Liability Protection for liability of personal data client, employee, volunteer Protection for your own data June 10, 2015 Session 1B page 6

7 Common Insurance Terms Liability Insurance General Liability protection from claims arising due to negligence caused to a third party. Covered persons should include the entity, its employees and volunteers. Protection from: bodily injury and property damage product liability personal injury including libel, slander, defamation, or malicious prosecution advertising injury including libel, slander, or copyright infringement due to advertising activities medical payments with no-fault requirements for small medical injuries host liquor liability for fund raising/social events Coverage that is not typically found in the basic General Liability policy will require special attention. If you re dealing directly with people, especially children, consider: sexual misconduct physical abuse Professional Liability protects from negligent acts, errors / omissions or allegations from your work product that may not cause bodily injury. All liability policies should provide a duty by the insurance company to secure legal protection (defense council) for insured Party(s) even if a claim is false or fraudulent. You should require persons that supply services to you or on your behalf, whether volunteer or contracted, to provide proof of coverage for their activities. June 10, 2015 Session 1B page 7

8 Property Insurance Property provide for the repair or replacement of owned building(s), contents and betterments / improvements to a leased / rented facility. There are many different ways to insure the property value including actual cash value, agreed amount and replacement cost against varying degrees of perils known as basic form, broad form and special form. Typically the most advantageous is to insure for replacement cost with a special form policy. Take significant consideration into the value that it would cost to replace your building and contents with today s construction costs and contents of similar function. Another consideration is that a property policy provides the coverage at a specific location. Property that you take away from this premise needs to be protected by a separate policy known as inland marine. Business Income and Extra Expense in the event that your property is damaged, there could be a significant amount of time that passes before the building or contents are repaired or replaced. This event could cause a loss of revenue, terminations or lay-offs of employment due to lack of a facility to conduct operations, ongoing administrative obligations and necessitate the relocation to temporary facility incurring extra expenses to maintain your operation. Business income and extra expense coverage can assist in mitigating these financial losses. Workers Compensation Workers Compensation provides medical and indemnity (wage and future earning capacity) benefits to an employee that is injured in the course of their employment. Employer s Liability part of the workers compensation policy providing protection from the employer s negligence contributing to the employee(s) accident or illness. Volunteer Accident Medical Provides medical expense coverage that are in excess of benefits paid by another health care plan for injuries suffered by volunteers injured while performing supervised and sponsored volunteer activities on your behalf. June 10, 2015 Session 1B page 8

9 Automobile Automobile provides coverage for the liability associated with the use of an owned or leased vehicle. liability protection against injury and property damage to a third party physical damage protection for the damage caused to your vehicle uninsured / underinsured motorist protection for injury sustained by occupants of your vehicle against others that may not have any or enough liability coverage medical payments - no-fault requirements for small medical injuries non-owned liability protection for your organization from imposed liability of allowing a person, typically an employee or volunteer, to use their personal vehicle for the conduct of your non-profit, i.e. running an errand Rental Cars hired liability protection against injury and property damage to a third party while operating a rented vehicle hired car physical damage - protection for the damage caused specifically to the rented vehicle Safe Operators - care should be taken to only allow proven and mature (age 21 and older) drivers to use Vehicles, even their personal vehicle. The review of an individual s motor vehicle record (MVR) should be done before granting permission to use the non-profit owned or their personal vehicle. Require any person using their personal vehicle should maintain their own liability coverage with proof on file with your non-profit. Umbrella Liability Umbrella provides additional liability coverage in excess of certain underlying or primary liability policies. The primary liability policies have maximum limits in each claim and/or aggregate (sum of all claims). An umbrella policy should provide excess coverage for: general liability automobile liability employer s liability professional (maybe) June 10, 2015 Session 1B page 9

10 Directors & Officers Liability Director s & Officer s (D&O) - protection of the organization, its directors, officers, employees and volunteers for their decisions or non-decisions made in governing, managing and performance of duties as directed. Wrongful acts can include allegations of breach of duty, management errors and omissions, and other acts that cause harm to the organization. Also, most organizational bylaws make a promise to indemnify its board member(s) from an action (claim or allegation) which results in a personal financial loss. It s rare that an organization has the financial capacity to repay the defense costs and potential judgment against its board member(s) without the protection of a D&O policy. Employment Practices Liability (EPL) protection against employment related issues such as wrongful termination, discrimination, harassment, civil rights violations, ADA, etc. Often, the EPL policy is combined with the D&O policy. Cyber Liability Allegations or failure of your computer security resulting in liability to a third party, including defense costs, compensatory damages, punitive damages or injunctive relief. Common claims will cite invasion of privacy due to the unauthorized disclosure, theft or loss of private and confidential financial or health-related data; identity theft and the transmission or receipt of a piece of cyber toxin (aka virus, worm, etc). June 10, 2015 Session 1B page 10