I. Believing that a general liability policy is enough to cover volunteer risk

Most nonprofits and the people they serve depend heavily on volunteers. However, volunteer activity presents a number of risks. General liability (GL) policies cover bodily injury and property damage to third parties. They also cover other damages such as libel, slander, defamation of character, and invasion of privacy.

A nonprofit can be found liable for a volunteer’s actions if they harm someone. Nonprofits should make sure their GL policies will protect both the organization and the volunteer in the event a of a third-party claim.

Last, but not least, nonprofits face substantial risk from injury to volunteers while working on behalf of their organization. Injury to volunteers may be covered under a general liability policy if there is negligence on the part of the nonprofit organization, but coverage relies on proving negligence which is often not the case. Volunteer accident policies, which don’t require that proof, will also cover employee injuries—and provide a more comprehensive form of coverage.

II. Not considering the need for sexual abuse and molestation liability coverage

If your organizations serves children, the infirm, and the elderly, sexual abuse and molestation coverage is a must-have. It is common for both the organization in addition to the employee or volunteer accused of perpetrating the abuse to be included in a lawsuit. General and professional liability policies usually do not cover cases of sexual abuse and molestation; it typically needs to be purchased separately.

These policies can cover the defense of employees or volunteers unless they admit to the abuse or are found guilty. If that is the case, they would be responsible for their own court costs, but the nonprofit would still have coverage for defense and settlement expenses.

If your organization works with the vulnerable population, we will spend some time going over ways to mitigate your exposure and protect the population you serve. One rule of thumb is that if your organization cannot prove that it prioritizes the safety of children and other vulnerable individuals, you not only put them at risk but also make your organization an easier target for an unfounded lawsuit.

Two questions to ask yourself are:

1. Do we have well-written guidelines for all employees and volunteers that explains how they shall work with others?
2. How well are we at inspecting what we are expecting from them?

III. Assuming small nonprofits don’t need Directors and Officers (D&O) coverage

This coverage insures the directors, officers, and trustees of nonprofits against suits brought against them for decisions they make on behalf of the nonprofit. These decisions can run the scope from regulatory compliance to financial and operational issues, as well as wrongful actions against employees and volunteers.

As insurance agents, we often encounter the objection from smaller nonprofits that they don’t need D&O coverage due to their size or the fact that they don’t have employees. However, no matter the size of the nonprofit, its board members may be forced to pay significant damages out of their own pockets (both income and assets) if they are held liable for damages. Nonprofits without D&O liability insurance may find it difficult to attract directors and officers for this reason. If you have been asked to serve on the board of a nonprofit, we strongly recommend that you insist on seeing a copy of the D&O policy.

It is important to keep in mind that employees are not the only people who can sue members of a nonprofit’s board. Potential plaintiffs can include funders, vendors, other nonprofits, other board members, donors, members, and the state Attorney General, among others.

However, the majority of D&O claims are related to employment issues. These may include discrimination, sexual harassment, wrongful termination, and failure to accommodate employees with disabilities. As a result, most nonprofit D&O policies now include coverage for Employment Practices Liability, which covers the organization and its board in the event of damages pertaining to wrongful termination, harassment and discrimination.

While most D&O policies cover employment-related issues, every policy is different—and some may only include certain employment practices unless more broad coverage is specified. As most D&O insurance claims are employment-related, this is usually advisable.

IV. Believing special events policies provide adequate coverage for liquor sales

Many nonprofits hold social gatherings and fundraising events where alcohol is served. In most states, “social host” legislation dictates that organizations which serve alcohol are legally responsible for damages if, for example, a guest drinks too much at an event and later gets into a car accident. When that happens, a nonprofit may be forced to pay out of pocket even if it has a general liability (GL) policy that theoretically includes events.

Most general liability policies provide coverage for “host” liquor liability—meaning if the nonprofit is serving alcoholic beverages for free, coverage applies. However, if alcoholic beverages are being sold rather than served free, the situation becomes more complicated. Most general liability policies exclude coverage for liability arising from the serving of alcoholic beverages for nonprofits that are “in the business” of selling those beverages.

Carriers may deem the nonprofit “in the business” of selling alcohol if tickets are being sold that include an alcoholic drink, or if the event requires a liquor license, for example. Because of this gray area, nonprofits with only GL coverage in these situations are often at the mercy of how carriers look at the said event and how a court might interpret the policy language. Things get even more complicated when the venue owner provides the alcohol on behalf of the nonprofit.

Therefore, liquor liability insurance is essential for nonprofits that hold events where alcohol is sold, even if the alcohol is provided as part of the cost of a ticket which includes food. If you are in charge of the insurance program for a nonprofit, talk to your agent and broker to be sure on the types of forms your carrier is using—as liquor liability isn’t always automatically included in special events policies. Some carriers use a standard ISO policy form that includes both special event and host liquor liability coverage, while other specialty carriers exclude all liquor.

V. Leaving volunteer-owned vehicles uninsured

Many nonprofits don’t have the financial resources or need to buy and maintain their own fleet of vehicles. Therefore, they rely on volunteers and employees to use their own when doing work on the nonprofit’s behalf. Any nonprofits whose employees or volunteers use their own cars on the job need to be sure that non-owned auto coverage is in place. This type of coverage is usually added to a nonprofit’s auto insurance policy, but it can also be added to general liability.

Some nonprofits depend on their employees’ or volunteers’ personal auto policy. However, even though most personal auto policies include coverage while performing volunteer work, being on the clock and paid for driving to run errands or transporting goods or people is a different story. Furthermore, if an employee or volunteer causes and accident and doesn’t have high enough liability limits (or let their insurance lapse), the nonprofit will be first in line to be sued.

VI. Ignoring the need for cyber liability insurance

All it takes is one wrong email attachment to be opened, one typo when entering a web address or simply becoming a victim of a hacker breaking into their IT system. In 2015, hackers exposed non-profit IRS reports at the National Center for Charitable Statistics. Cybersecurity is a serious risk for non-profits large and small—and their coverage needs to keep up with the rising risks. This is particularly true for any organization that takes donations through a website, stores and manages sensitive data through an internal software system, or does seasonal fundraising online—as a data breach during a fundraising campaign can wreak havoc for any non-profit’s income. The risks are significant, but cyber liability insurance is not being offered to non-profit and religious organizations as frequently as it should be.