Virtually every nonprofit recognizes the need to carry officers and directors liability, which is a great start, said longtime account executive William “Bill” Zester, who has focused on the sector for the last 14 years. He said, though, that any nonprofit with employees also needs employment practices liability (EPLI).
Board members usually require a nonprofit to have directors’ and officers’ liability, and they won’t sit on the board without it. “They recognize they have to protect their own personal financial success, but sometimes the very small nonprofits don’t see the value even in purchasing a general liability policy. They don’t have an office, they are volunteer-run, they don’t have workers’ comp, there are not many exposures and they just don’t see the need,” he said.
But there is always a need, he said, especially if they are fundraising or holding outside events. Most venues require a certificate of insurance to protect themselves. “That is when the nonprofit is scrambling for a special event policy when they could have offered a certificate on an existing general liability policy they already purchased,” he said. “And if they have multiple events during the year it is more cost effective to have that annual general liability policy.”
Zester has worked for 5 agencies over 24 years, and for the last 6 years has been with a large independent agency in Ewing, New Jersey.
He said smaller nonprofits often just can’t afford any more insurance than is absolutely required. “You are often on the edge of your seat as to whether they can make the next payment,” he said.
While much of Zester’s business comes from large healthcare related nonprofits, he said he also writes a lot of smaller accounts including advocacy offices, land conservancies and arts councils. “They are easy to write. But since they don’t really have the exposures that some of the more difficult ones have, the premiums are small.”
He said he has been seeing a lot of employment practices liability suits over the last few years. “Someone gets a pink slip and he sues the nonprofit for discrimination or wrongful termination,” he said.
“Nonprofits all have to really concentrate on HR administration and sometimes it gets pushed to the back burner as not being that important, but you have to do due diligence. They are often too small to have a separate HR professional or department so the executive director is wearing multiple hats. If the board or organization wants someone out, they have to follow their procedures and document it. You’ve got to make the case and give them a chance to turn around their behavior before you boot them out the door or you could be sued and/or receive an EEOC complaint.”
He said nonprofits don’t just need employment liability coverage, they also need to do a better job of hiring and firing in order to avoid such problems in the first place. He said that even small nonprofits need to be concerned with writing an updated employee manual and employment application that addresses employment at will, non-harassment & non-discrimination policies and policies & procedures for addressing employee complaints. The nonprofit should enlist a competent attorney who has experience in the field of employment law draft their employee manual, he said.
