Contrary to popular belief, nonprofit organizations can and do face costly legal claims. Many nonprofits operate on a tight budget, which means just one lawsuit could result in significant financial damage. Liability insurance is available for nonprofit organizations to protect against claims resulting from injuries or damage to people and/or property.
What Is General Liability Insurance for Nonprofits?
General liability insurance (GLI) is an essential component of any comprehensive insurance plan. A GLI plan covers claims against a nonprofit organization that stem from bodily injury or property damage incidents. General liability insurance can help cover attorney fees and medical expenses for which a nonprofit may be held legally responsible. A general liability insurance policy does not generally cover automobile accidents, employee injuries, punitive damages, intentional acts, workmanship or professional mistakes.
Nonprofits often work directly with the public, which means that these businesses are exposed to certain risks. It is important for nonprofit organizations to possess liability policies that are flexible enough to cover independent contractors, volunteers and medical professionals that may work with the organization. This includes organizations in all business sectors, such as mental health facilities, arts and cultural organizations, historical societies, special needs schools, professional organizations, counseling centers, community health clinics, and foundations and fundraising organizations.
It just takes one misunderstanding or oversight to trigger a serious liability lawsuit. Nonprofit organizations that engage in vocational training, counseling or other types of instruction are especially vulnerable to professional liability exposure. The right liability insurance policies can help mitigate risk.
What Types of Coverage Does It Provide?
While no two general liability insurance policies are exactly alike, most cover similar types of claims. A standard GLI policy typically covers claims of:
- Bodily Injury — This includes any personal injuries the nonprofit allegedly caused, such as injuries due to a customer slip and fall accident.
- Property Damage — This includes any property damage the nonprofit allegedly caused, such as a broken window in a customer’s home caused by a volunteer.
- Reputational Harm — This includes words or actions taken by the nonprofit that negatively impacts another business.
- Advertising Injury — This includes the defamation of another business that results in harm to their company.
- Copyright Infringement — The use of work belonging to another person or business, without their permission.
Third-Party Personal Injury
A person who suffers an injury due to another party’s actions has the legal right to sue for compensation. Third-party personal injuries occur when a person or entity is injured due to the negligence of another person or entity such as, if a customer trips and falls at a counseling center or a potential adopter is bitten by a dog at an animal shelter. If the injured person decides to sue, the nonprofit could be held liable for any attorney fees or medical expenses that result from the claim. In these instances, GLI would cover attorney’s fees, medical bills, court-ordered judgments or settlements.
Customer Property Damage
Customer property damage refers to damage to property that belongs to a third party. It is not unusual for a nonprofit organization to encounter the property of a customer or visitor while performing everyday job duties. Unfortunately, on occasion, personal property can become lost or damaged, leaving the nonprofit organization liable.
A general liability insurance policy can help nonprofits pay for the repair of the damaged item or the replacement of the item if it is lost or destroyed, as well as any legal costs resulting from a property damage lawsuit.
Most general liability insurance policies also provide nonprofit organizations with other types of coverage, such as copyright infringement. This type of claim occurs when a copyrighted work is reproduced, publicly displayed, distributed or made into a derivative work without the express permission of the copyright owner.
GLI may also cover defamation of character. A person or entity may choose to sue a nonprofit if they believe that their action damaged their good reputation. Also referred to as “libel” or “slander,” this serious claim can result in damages capable of exact calculation (special damages) and damages not capable of exact calculation.
Some general liability insurance policies also cover breach of privacy. Breach of privacy involves the unauthorized or improper use, collection, retention, disclosure or disposal of personal information. Failure to respect the privacy of a person or entity can result in a lawsuit against a nonprofit.
While general liability insurance does provide a wide range of coverages, there are certain exclusions that most policies include. This includes first party damage, expected or intended injury, contractual liability, recall of products, electronic data or damage to the nonprofits own products or work.
Does Nonprofit Liability Include Volunteers?
Not all nonprofit liability insurance policies cover the actions of people who volunteer for an organization. When purchasing a policy, it is important to make sure that the nonprofit coverage extends to volunteers, in addition to employees.
A comprehensive nonprofit liability policy should cover organizations from both a liability and third-party coverage standpoint. This means that the organization is protected if a volunteer is injured, causes accidental injury or property damage to a third party, acts in a way that causes a third party to sue the organization or sues the nonprofit due to an injury sustained while volunteering.
It is important to remember that while volunteer immunity laws do exist, they often contain a provision that the volunteer’s immunity only applies when the claim exceeds the insurance policy limits that is carried by the nonprofit organization.
Speak with a Business Insurance Broker Today
No two nonprofit organizations are exactly the same, which means that they may not need the same insurance. However, most nonprofit organizations will benefit from acquiring a general liability insurance policy.
When comparing policies, ensure that the insurance extends to volunteers to prevent gaps in coverage. Nonprofit organizations that face higher risks due to the type of work or industry may require more coverage than nonprofits who face fewer risks. To learn more about how liability insurance works for nonprofit organizations, reach out to the experienced business insurance brokers at Business Benefits Group today.