Not For Profit: Ensuring you are not at risk

Many of our clients are either members of a Not For Profit (“NFP”) board or their companies have started foundations to benefit the community.

For most NFP organisations, insurance is an essential component of risk management and a key way to manage potential exposures. Every NFP organisation faces risk, whether it’s ensuring the health and safety of its volunteers or protecting its property or premises.  The nature and size of these risks is unique to each organisation and should be evaluated with the assistance of your broker. We outline below, the range of insurance coverages that are available and should be considered by NFPs:

Association Liability

Association Liability Insurance is a combined policy specifically designed for associations and NFP. The policy provides protection to the individual office bearers and the association against wrongful acts in the management of the association, employment practices liability and fidelity. In addition, the policy also provides coverage to the association against claims for financial loss arising from a breach of professional duty by the association. Please see below regarding specific coverage sections:

1. Directors and Officers Liability Insurance

A Directors and Officers Liability Insurance policy (D&O policy) protects the directors and officers in your organisation against claims arising from their actions or decisions made while conducting their roles. For example, a board member who negligently gives wrong advice, asks someone to perform a dangerous task or dismisses staff without proper authority or process exposes themselves to being sued. Where such cases can be proven, the personal assets of negligent board/committee members can be seized to meet any damages. This is where Directors and Officers Liability Insurance comes in.

2. Professional Indemnity Insurance

Professional indemnity insurance is designed to protect you and the NFP organisation against claims for alleged negligence or breach of duty arising from an act, error or omission in the performance of professional services. In simple terms, if you do something or fail to do something and as a result of your professional negligence someone suffers financial loss or is injured in the process, they may decide to take legal action and sue you for compensation. The policy also covers legal costs in defending the claim.

Whilst most NFP organisations might not provide advice in the same manner that an accountant, lawyer, insurance broker or other similar person does, this cover is particularly important for firms providing health and care services or other firms providing advisory services.

3. Public and Product Liability Insurance

A public liability insurance policy is necessary for an organisation to protect itself against claims of negligence made by third parties in relation to injury or property damage arising from the organisation’s operations. The liability cover will extend to functions and events that are being held on behalf of or in conjunction with the NFP.

For example, a person who enters your premises, slips on a wet surface and sustains an injury.

The policy may also cover injuries resulting from products sold or supplied by your organisation. This cover is vital for organisations that sell food or products as part of their day-to-day activities or for fundraising.

4. Fraud (Fidelity) Insurance

Fidelity insurance covers your organisation against misappropriation of funds by employees or committee members. This cover is generally sub-limit to $100,000 and has a limited trigger under the policy. Should this be an area of concern the organisation can also purchase a stand-alone Crime policy.

The Association Liability should be the starting point for all NFP insurances. Other areas of insurance to consider include:

Property Insurance

Property insurance generally covers an organisation’s physical contents against fire, storm damage, accidental damage or theft. This can be either buildings, assets within the office such as desks and computers or portable equipment such as mobile phones and laptops.

Office leases will generally require you to insure fixtures and fittings and glass under the agreement.

Risk Management techniques for protecting your property include deadlocks, an alarm system, security lighting, security signage, etc. The level of security and protection will be reflected in the premium charged by an insurer.

Cyber Liability Insurance

Cyber Incidents of Cyber Security Breaches are a rapidly emerging insurance risk. No matter how robust your information technology controls are, chances are you will not stop a hacker who is determined to infiltrate your systems. While you may not be able to prevent a cyber attack, a cyber insurance policy could assist in minimising the effect on your business.

Cyber policies generally cover direct losses suffered by your organisation, and your liabilities to customers or other third parties arising from system breaches. For further Information on Cyber Liability Insurance, see our article here.

Personal Accident Insurance (Volunteer Insurance)

Personal accident insurance generally covers participants, members and volunteers for any out-of-pocket expenses following accidental injury, disability or death while carrying out their work on behalf of the organisation.

It normally extends to loss of income if the injured person is unable to work as a result of the incident.

Travel Insurance

The travel insurance policy covers the organisation against the risks involved in both domestic and international travel. Loss of baggage, medical expenses, excess in the event of a hire car vehicle accident and cancellation costs may be included in cover. (Recently one of Bellrock’s travel insurers covered cancellation costs for trips cancelled due to COVID-19).

Workers' Compensation

In almost all cases, a workers’ compensation policy is compulsory for organisations that have paid employees. It covers expenses such as wages and medical bills if a person is injured at work.

It is your organisation’s responsibility as an employer not only to have workers’ compensation insurance, but also to maintain a safe workplace.

NFPs are an important part of the community and the work is rewarding and valued by many. It is vital that potential exposures are managed with a programme that is tailored to the unique risk profile of each organisation. It is also important to note that the policy coverage offered by every insurer differs considerably and should be evaluated by an advisor who understands your circumstances.

For personalised advice regarding the insurances required for Not For Profit organisations, and to obtain a quote, please contact us via the form below.

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