Nonprofits today are navigating an increasingly precarious landscape when it comes to managing risks associated with abuse and molestation claims. For many organizations, maintaining adequate insurance has become a pressing challenge as carriers pull back capacity or cap limits on coverage.
At least one broker has flagged an uptick in not only the frequency of nonprofit claims related to abuse and molestation but also in the staggering size of payouts.
"Nonprofits are particularly vulnerable to these types of claims," said Matt Engle (pictured), commercial lines producer at the Insurance Office of America. "It’s a sensitive topic and a tough situation for any organization, especially if an alleged incident hits the public airwaves."
Reinsurers, who back insurance carriers, are now reluctant to offer capacity due to the sheer size of these claims, often amounting to millions of dollars. As a result, they’ve reduced coverage availability and increased costs, even for lower limits.
Where once nonprofits could secure $10 million to $15 million in coverage limits, it’s now challenging to get more than $5 million, Engle said. Even securing these reduced limits requires organizations to demonstrate strict protocols for hiring, training, and monitoring employees and volunteers.
The impact of abuse and molestation allegations extends far beyond financial strain. According to Engle, the reputational damage caused by allegations or claims can devastate a nonprofit, particularly those serving vulnerable populations.
“If such claims become public, they can severely damage the nonprofit’s reputation. Adding to the difficulty, lawsuits are now revisiting incidents from years past, further straining both the organizations and their insurers,” Engle said. “Defending these claims has become increasingly costly, especially as almost every claim now involves legal representation, often escalating to class-action lawsuits.”
In such a climate, organizations are left with no choice but to double down on their efforts to mitigate risks. One key area of focus is hiring practices.
“Over the years, I’ve seen how critical it is to establish comprehensive hiring and training protocols,” Engle told Insurance Business. “At IOA, we use a risk score approach covering pre-hire, post-hire, pre-claim, and post-claim processes. Before extending an offer, we guide clients on conducting in-depth background checks and using tailored interview questions to identify potential red flags.”
Engle shared several best practices for conducting thorough background checks and screening processes for nonprofit employees and volunteers:
“It’s about creating a culture – one where safety and accountability are ingrained at every level of the organization,” Engle said. “That culture, backed by rigorous processes and continuous oversight, is the best defense against potential claims.”
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