One very interesting coverage that is important to most service-based nonprofits is professional liability. Professional liability is errors and omissions liability regarding any services provided by the nonprofit to its clients, consumers, students, or patients.
I understand that ‘interesting’ is a relative term. As an insurance fellow, I reserve the right to call coverages interesting. To you, it might simply be helpful and very, very important.
Here are three facts regarding professional liability as it pertains to nonprofit insurance programs:
- Some insurance companies will not sell you general liability without including professional liability.
- You do not have to employ or have a volunteer with a professional designation to merit having this coverage. ‘Professional’ isn’t defined by the person’s title or letters after her name. It’s defined by the type of activity involved.
- General liability policies often have ‘professional services exclusions’ that will attempt to exclude coverage for services deemed to be ‘professional services’.
Why would you need professional liability?
You need professional liability, primarily, to protect your organization if a lawsuit comes up charging negligence in your performance of professional services.
- This could mean that you failed to provide appropriate advice.
- You could have failed to meet the standards required by an organization in your position.
- Perhaps you provided counsel that resulted in unintended injury.
- You might have failed to provide adequate training, employment screening, or some other reasonable risk management initiative that resulted in a failure to provide safe and competent services.
- You might have generally failed to provide a level of service that is reasonable to expect for an organization in your industry or position.
It’s a tough distinction, but the intention of general liability is to cover bodily injury and property damage due to your physical operations:
- Someone trips and falls at your offices.
- You have a special event and someone gets food poisoning due to your attempt at chefery with your Big Green Egg.
- The children in your after school program graffiti the walls of the museum you’re visiting while you were playing Candy Crush Saga on your iPhone.
None of these have to do with your case management, counseling, and referral services.
On the other hand, when your operations veer toward teaching, counseling, mentoring, case management, medical services, or referral services (in addition to many others), you start entering into the professional services arena.
Test yourself. Do you offer any of the following services?
- Case management
- Referral services
- Life skills training
- After school programs
- Addiction treatment and rehabilitation
- Services for the developmentally disabled
- Services for the elderly
- CNA home health services
- Group mental health therapy
- Foster placement and adoption services
- Group home or residential oversight or care
- Parental training
- Anything like any of these things above…
If you do, then you should at least discuss professional liability with your insurance agent.
Social Service Professional Liability vs. Legal, Medical, Architectural and other Malpractice
Most nonprofit insurance programs will offer the social service, educational, minor health care, and counseling professional liability.
These very same policies will exclude certain types of professions. Make sure to review the policy that is being offered and confirm that your type of professionals are covered.
If you offer legal, accounting, financial planning, architectural, medical, or even computer design services, you will want to review your insurance company’s professional liability exclusions. It might make sense to procure a traditional errors and omissions possible for these specialized professions.
The Estimated Cost
Professional liability is viewed differently by different insurance companies. Specialized insurance carriers will have a greater ability and appetite to offer this coverage at competitive premiums.
As with all insurance coverages, your pricing will vary depending on the following:
- Numbers of professionals or individual service providers (employees, volunteers, and (sometimes) independent contractors)
- Numbers of client visits, placements, school attendees, etc.
- The relative risk of the professional services: light life skills training might carry a lower rate than foster placement and adoption services
- Claims history: If you have some professional liability claims, you can always expect higher rates.
You see that I’m unwilling to plant any cost seeds in your mind. The estimates vary wildly.
So… Do You Need It?
As you read through this, if you saw your organization described, then you should, at the very least, have the coverage quoted. You might be surprised how inexpensive it is. You also will always want to insure yourself according to your operations, whether or not you feel a claim is likely.
Insurance claims in general are never particularly likely, that’s why we insure according to what we do know. In this case: If you provide services that hint that you are providing services that are advisory, educational, or anyway medical, you will need to seriously consider this coverage.
Your situation is unique. Make sure to discuss specifics with a licensed insurance professional. This post is purely to help raise the questions regarding insurance you should consider.
- What are your nonprofit’s services?
- Do you have designated professionals?
- Do you have volunteers who provide mentoring or counseling?
- What has your experience been with professional liability or errors and omissions liability?