Nonprofits offer many valuable services to communities all across the country, and due to the vast number of people they serve liability insurance coverage is a must for these organizations. As one article from My New Markets notes, though, “Nearly 85 percent of nonprofits have an annual budget that is less than the average cost to defend and settle litigation against its board.” But as insurance expert Peter Bern shared with Smart Business, many still fall for the misconception that:
“… nonprofits do not have much exposure. The reality is that there are many lawsuits that are brought by shareholders, employees, regulatory agencies, competitors and customers that are not covered by general liability insurance. Only a directors and officers’ policy can provide coverage for an actual or alleged wrongful act, breach of duty or mismanagement.”
Recently, some updates and enhancements for nonprofit insurance have been introduced into the overall market. Here is a glimpse at some of the newer features My New Markets outlines:
Definition of Loss – Policies are expanding the definition of loss to include points such as pre and post judgment, front and back pay, enhanced breach of contract, and the final adjudication of wording on personal liability exclusions. This is due in part to the increased frequency and severity on directors and officers policies and employment practices liability litigations.
Definition of Insured – The definition of insured is also becoming more specific to include items such as debtor in possession, volunteers, and interns. While volunteers have access to protection through state statutes and the federal Volunteer Protection Act, it varies by state and is limited, and even with that protection, there was no way to prevent from lawsuits filed against volunteers.
Network Security – As we’ve shared before, cyber liability insurance is a smart consideration for nonprofits, as most nonprofit directors and officers policies do not provide comprehensive network security coverage. With more and more nonprofits using more advanced forms of technology to store information, nonprofit leaders should look for extra coverage to protect them from the adverse effects of a cyber attack.
As My New Market’s recent question and answer session on directors and officers coverage notes, recent years have brought about more and more instances of nonprofits being named in various litigations for various reasons. As nonprofits continue to be the focus of such scrutiny, it’s important to have up-date insurance coverages in place.