Insurance Against Liabilities

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    © Copyright, Carter
    McNamara, MBA, PhD

    Can you insure against your liabilities? That answer is easy.
    Yes — and no. Every organization, particularly if it owns or
    rents a physical space, should have general liability insurance.
    This covers you if, e.g., clients or visitors fall down stairs
    or a bookcase falls on them. It would be appropriate to add employees
    and board members as additional insured under this coverage. The
    organization should also have Non-Owned Auto Coverage, which protects
    the organization when an employee is driving a family car for
    business reasons and also covers rental cars. It is usually contained
    in the general liability policy, and you probably already have
    it if you have the general policy, but you should check. You may
    also be able to add wrongful termination coverage under general
    liability, but there may be a clause preventing it through what
    is known as an “insured vs. insured” exclusion, that
    is, you can’t use insurance to protect against internal strife.

    If you are a tiny organization that does nothing else but,
    e.g., put on a special event, it is sometimes possible to obtain
    temporary insurance for a specific occasion or period, covering
    things that would otherwise be under general liability for another

    Workers’ compensation insurance, though controversial
    because of its costs, is considered a good buy, and one of its
    coverages protect against employee lawsuits — a must.

    Organizations employing professionals who see clients (health
    and social services, for example) should ensure that these professionals
    are covered under professional liability insurance, either
    individually or as provided by the agency, and that the agency
    is named as an additional insured.

    The most difficult area to discuss is directors and officers
    , or D & O, which is also intimately concerned
    to fidelity coverage. Organizations moving large amounts of money
    should have fidelity coverage to cover possible criminal acts,
    which are specifically excluded from D & O. Areas under fidelity
    include theft, robbery, burglary, forgery, and general shenanigans
    involving computers. D & O, on the other hand, may protect
    the board from failure to implement proper controls that would
    have prevented the losses from the exposures covered under fidelity.
    (The writers of this are fully aware that this is ambiguous.)
    BoardSource’s booklet “Nonprofit Board’s Role in Risk Management”
    notes that D&O insurance does not cover: fines and penalties
    imposed by law, libel and slander, personal profit, dishonesty,
    failure to procure or maintain insurance, bodily injury, and property
    damage claims, pollution claims, and suits by one board member
    against another.

    The larger the organization and the wealthier the board members,
    the greater the need for D & O. However, D & O is formidably
    expensive for small organizations and many plans provide limited
    for what you are realistically risking. All insurance
    policies are not created equal, and some in the D & O area
    tend to be written to cover you for anything except what you might
    really be risking. There is no hard-and-fast rule n the cost-benefit
    problem and you must assess your own exposure. If you are buying
    this insurance, have the proposal reviewed by an insurance professional
    other than the person selling it.

    You may also explore with the agent for your homeowners’ coverage
    whether your policy covers outside activities of this kind or
    whether you can purchase protection under what is called an umbrella
    . This is not a high-percentage shot, particularly
    without an extra premium, but worth the inquiry.

    Finally, unless the organization’s bylaws specify otherwise,
    it is now presumed (at least in Minnesota law) that the organization
    will indemnify you for actions taken, as long as no actual malfeasance
    is involved. Indemnification is not worth much it the organization
    has neither assets nor insurance.

    And, finally, put your energies into doing a conscientious
    job, rather than trying to do it all through insurance.

    Also, consider
    Insurance (Business)
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