501(c) & Non Profit Organizations | GB&A

Non Profits & Charities

501(c) & Non Profit Organizations

Non Profits operate in a unique risk environment. It’s one of the few types of organizations that, from inception, begin with considerable directorship exposure. While taking a seat in the c-suite can be a rewarding experience, the prospect of having your personal assets exposed as a director or officer, is a frightening proposition. With the department of labor's new overtime rules (qualifying previously exempt employees) and many non profits expanding into newly charted areas such as crowdfunding, that exposure has been magnified. Recent sector trends including a greater emphasis on PR to increase donor loyalty also increase risk due to greater “saturation” from donors. Executive claims can include:

  • Misrepresentations made during fundraising
  • “False claims act” related claims for improper accounting practices and other falsified claims made to the government
  • Claims asserting fraud through the mismanagement of funds
  • Violations for fund solicitations
  • Governmental investigations
  • Employment related claims including 3rd party harassment and discrimination

Most non-profits are intimately aware of their executive liability but few understand the true level of complexity and diversity of D&O insurance itself. Unlike other insurance products, D&O is not standardized. While many non profits will place a heavy emphasis on premium when making purchase decisions - basing that decision on premium alone is often ill-advised, particularly for larger small and mid sized non profits . Terms that should be addressed and carefully reviewed include: 

  • Duty To Defend Vs Duty To Indemnify
  • Carve outs such as anti-trust, false advertising, etc.
  • Broad definitions of loss, insured, claim, etc
  • Defense costs outside vs inside the limits
  • Acceptable severability clauses
  • Wage and Hour Coverage for EPLI

It is also important that non profits understand the entire scope of their risk environment and the carve-outs of each policy. In addition to executive liability needs, many organizations also have a level of professional liability exposure such as educators professional or publishers’ professional liability. Additional exposures that require coverage coordination include coverage for: events, sexual abuse, cyber liability, worker’s compensation, crime, property and more. 

Risk Profile

The Risk Profile below outlines your company's core exposures. Click to learn more and select your coverages of interest to begin building your insurance portfolio or click "contact us" to be connected with a broker.

  • Commercial Liability & Property

    Commercial liability packages (sometimes referred to as CPP's or BOP's) provide balance sheet protection in the form of financial reimbursement and liability protection in the form of coverage for defense costs and damages resulting from:

    • Claims asserting bodily injury and/or property damage
    • Product liability claims (unless excluded)
    • Advertising Injury such as libel, slander and infringement related claims 
    • Theft and property damage losses for inventory, business property, machinery, etc
    • Loss of business income
    • Equipment breakdown
    • Key Broadening endorsements (Transit coverage, basic cyber, employee dishonesty, ERISA, basic EPLI, and more)

    Due to the fact that endorsements can either broaden and extend coverage or limit/exclude coverage, policies should be carefully reviewed. Seemingly small endorsements such as “selling price” endorsements and business income coverage for dependent properties (such as suppliers, retailers and leaders) can provide substantial coverage enhancements. Due to the advertising risks faced by this sector, it is also often wise to seek coverage through a carrier that has a strong reputation for advertising coverage.

    mmercial package policy) which include coverage for commercial property, inventory, computers, equipment and loss of business income. 

  • Directors & Officers (including EPLI)

    Directors & Officers Insurance provides

    • Direct Protection for Individual directors and officers against non indemnifiable claims such as bankruptcies
    • Balance sheet protection in the form of reimbursement to the entity for indemnifiable claims
    • Protection for claims against the entity itself

    Claims are often asserted by donors, investors/shareholders, creditors, competitors, regulatory agencies and can include:

    • Claims asserting mis-use of funds and claims revolving around fundraising
    • Breaches of fiduciary duties
    • Anti-Trust and False Advertising Claims
    • Accusations Of Fraud
    • Deceptive trade practices and fraudulent inducement
    • Creditor & Bankruptcy Claims
    • Direct & Derivitive Shareholder Claims
    • EPLI & Employee Claims asserting harassment, discrimination, wrongful termination, etc.
  • Non Profit Professional Liability (E&O)

    Professional Liability Insurance (also known as errors & omissions), provides protection for claims made by clients or individuals asserting financial damages. These claims can arise from errors, oversights, negligence, breach of duties, breach of contract and more. E&O insurance provides coverage for defense costs, settlements and awards. For non profits providing services, consulting, advising, teaching, publishing or education/instruction (among other services), E&O is an important component of a holistic program. With clients depending on the delivery of your services, failure to deliver can result in your client sustaining financial damages, quickly resulting in an E&O claim. With most D&O policies containing broad "professional services" exclusions, coverage can be afforded through the incorporating products such as educator's liability, publishers' professional liability and misc professional liability.

  • Employer's Liability & Workers Compensation

    Workers Compensation insurance is a requirement for companies with employees. It provides coverage for employees’ medical payments resulting from injuries sustained while on the job and is often purchased in conjunction with short term disability (which is also required by the state). This is an important coverage for non profits, as most states require companies to provide workers compensation for volunteer employees.  Additional Coverages and endorsements that should be considered include broad form all states coverage and foreign workers compensation coverage (especially important for employees traveling abroad for fundraising purposes).

  • Cyber Liability

    Cyber Liability Insurance provides: 

    • 1st party coverage to the entity for: lost income and restoration costs, notification and credit monitoring costs, costs to pay an extortion or ransom, and more. 
    • Liability protection against 3rd party claims arising from: failure to protect from (or prevent) an intrusion or transmission of virus, regulatory actions, media liability claims asserting breaches of intellectual property and more. 

    Claims can include:

    • Data Breaches
    • Processing Errors and Lost Or Stolen Laptops
    • Stolen Paper Records
    • Transmission Of Viruses 
    • Ransomware And Cyber Extortion Attacks
    • Media Liability resulting from content published online
  • Crime/Fidelity (including 3rd Party)

    Crime & Fidelity Insurance is particularly important for non profits in order to protect their funds. It provides financial protection for the entity against theft, crime and dishonest acts of employees, executives and independent contractors. These claims can include theft of money/securities, forgery, alteration, computer fraud, fraudulent invoicing, and funds transfer fraud among others. Third party crime coverage provides protection for claims of theft asserted by clients or customers. These claims can arise when employees are working on site or have access to computer networks. Modern crime policies also provide extended coverage enhancements for newer schemes such as social engineering fraud (also known as business email compromise).

Get (Risk) Managed.

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