Nonprofit Insurance Checklist: General Liability

This is the first installment of an occasional series based off of our nonprofit insurance team’s coverage checklist. The coverages are not necessarily in order of importance or likelihood of claim. Please consult your insurance professional (or reach out to me) to discuss your particular situation.

General liability (GL) is a basic business insurance coverage. Since a 501c3 (or 4 or 6) is a form of business, general liability insurance must be a consideration, perhaps even a necessity.

Nonprofit Checklist - General Liability

Nonprofit Checklist – General Liability

Why is General Liability Important?

A Planned Expense for Unplanned Claims

General liability is important because it defends the organization, board, employees, and volunteers when there is a claim or lawsuit or accusation of negligence. It also will pay the plaintiff if the claim is covered and the court or other body deems the claim is warranted.

Claims Can Be Very, Very Big

You’ve seen huge liability claims – those claims that reach into the high six figures or even the low 7 figures (and beyond). General liability is one of the key coverages that help provides funds for you when your organization is either negligent or accused of negligence.  Without the coverage, you run the risk of major financial damage to your nonprofit.

The Odds of a Claim or the Consequences?

It’s not about the likelihood of a claim. It’s about the mess if and when a claim hits. Clients often focus on the odds vs. the consequences. Nobody can predict if something will happen. We can gauge our ability to pay for defense or damages should a claim happen.  Could you or would you want to shell out $100,000 in defense and damages? $1,000,000?

Let’s look at the general categories of coverage under your Commercial General Liability policy.

Coverage A: Bodily Injury & Property Damage

The two most often referenced types of claims for general liability are these:

  1. Bodily Injury
  2. Property Damage

Bodily Injury

If your organization causes bodily injury to someone (who is not an employee), then general liability is often the policy that will come to your aid.

Property Damage

If your organization causes damage to someone’s personal property, then general liability is the most likely coverage to defend you or pay a claim. Please note, this is not damage to your property, but to a third party’s property.

An Example of Bodily Injury and Property Damage

Assuming your policy has no restrictions on it, consider this scenario:

Your nonprofit rents a room at a local library for a six-week high school group mentoring class. On one occasion, a couple of the students in your mentoring group are way too hopped up on Mountain Dew and decide to throw a football around in the main library area.

One of the students decides he must score a touchdown and starts weaving in and out of the stacks until he turns a corner, runs into a sweet elderly lady, knocking her down and breaking her hip. At the same time, your student loses his footing and crashes into a bank of computers, knocking them all down and effectively destroying them.

The injury to the sweet elderly lady? Bodily injury claim under your general liability policy. You were negligent in your supervision and as a result, your organization was the cause of her injury.

The damage to the computers? Property damage claim against your organization. Again, your GL policy should defend you and pay the claim.

Coverage B: Personal & Advertising Injury Coverage

This coverage addresses less ‘physical’ types of damages. Here is summarized list of what Personal & Advertising Injury includes:

  1. False arrest, detention or imprisonment
  2. Malicious prosecution
  3. Wrongful eviction, entry, or invasion of right of private occupancy
  4. Libel and slander
  5. Invasion of privacy
  6. The use of another’s advertising idea in your advertisement
  7. Infringement of copyright, title, or slogan in your advertisement

These types of claims might seem unlikely, but consider something like invasion of privacy by oral or written publication. Those event pictures you post on your website or that picture of one of your mentoring groups… did you get permission from those faces in those pictures? Likely claim? Probably not. Possible? Of course.

Coverage C: Medical Payments

Medical payments is a ‘no fault’ bodily injury coverage that makes a few thousand dollars available to a claimant who is accidentally injured on your premises or during your operations. You weren’t at fault. They aren’t suing you, but you, in good faith, make first aid, ambulance, diagnostic, or other medical services available. This coverage can sometimes help steer claimant away from levying a general liability claim for bodily injury.

Final Thoughts: General Liability for Nonprofits

It’s nearly impossible to sum up a general liability policy in a short blog post, but the three coverages listed above offer a picture of the intentions of the GL policy.

Your nonprofit really should consider this one of the pillars of its insurance program. Like with your personal auto or home insurance, you hope you never have to use it, and there’s a good chance you will never have to, but you’re sure glad you have them when something does happen.

If you can plan for the expense of the liability coverage, you can have some peace of mind when an unplanned for claim falls onto your desk.

Action Items:

  • If you are an existing, established nonprofit, review your policy’s endorsements and policy language. See if there’s an exclusion or a provision that causes you some concern or, conversely, offers a coverage you didn’t realize you had.
  • If you’re a new, startup nonprofit, do not bypass general liability because you’ve heard that directors and officers liability is most important. Consider both coverages carefully.
Always note…

Scenarios vary wildly and policies will always have various expanding or restricting endorsements attached (another topic for another day), so as much as you can stomach it, read your policy. At the very least, I suggest reading the exclusion sections. If anything makes you nervous, ask your insurance professional about it. Remember that insurance policies aren’t created to cover everything, so make sure to walk through a process that will help you  uncover your risk exposures so you can address each one as appropriately as possible. 

Questions?

If you have a question about general liability insurance, please leave it below or reach out through our contact form.

 

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