Why Your Nonprofit Can’t Have General Liability without Professional Liability Insurance

“I want general liability only. That’s all my contract requires. I don’t need professional liability.”

And so begins the dance around why nonprofit organizations should have professional liability insurance.

The professional liability question comes up all the time. Occasionally, there is some frustration because the nonprofit doesn’t have licensed professionals or there’s no contractual requirement from a funder.

Here are some of the reasons why your nonprofit can’t have general liability without purchasing professional liability (and a few why you really, really should have the coverage):

  1. The Insurance Company Won’t Allow It: I was just visiting with one of our carrier partners, and the underwriter flat out said, “We will NEVER offer general liability without professional liability. There is too much of a fine line between professional and general liability, that we can’t do one without the other. The risks are too great” (paraphrased).
  2. The Insurance Agent Won’t Allow It: Insurance agents have their own professional liability insurance because one of the biggest claims against them goes kind of like this: “Why didn’t you offer me _______________ coverage?” We know that while additional premium looks expensive before a claim, that same premium looks awfully tiny after a claim hits if you didn’t purchase the insurance. We’d prefer to save you from yourself and make sure you have what you need.
  3. You Simply Need It: If you offer any form of counseling, referral services, mentoring, guidance, case management, peer leadership, etc., you could, potentially, have a ‘professional service incident.’  If you do those things, you need the coverage because…
  4. General Liability Excludes Professional Liability: If you distrust insurance companies, then purchasing professional liability will help you cover your bases and give you the best chance for a claim that might straddle the professional/general liability fence.  Professional services exclusions on general liability might cause a decline for a claim that is professional in nature.
  5. General Liability Limits Types of Losses to Bodily Injury, Property Damage, and Personal/Advertising Injury: If the claim doesn’t include one of these things, then general liability probably won’t address it.
  6. Professional Liability Fills in the Potential Gaps and Addresses Monetary Driven Claims: Those strange claims levied because you didn’t due your duty as a professional services firm (regardless how professional you feel you are) can only be addressed by a professional liability policy.

The main reason, to be frank, is that insurance companies are scared to be forced to pay claims under the general liability policy that truly should be addressed by a professional policy. Someday, they’ll have a policy that simply includes social services professional right in the general liability insurance form, but that won’t happen anytime soon.

Further, often the rating methods for general liability aren’t sufficient to grab reasonable premium for the risks of an organization that works with at-risk populations.

What Are Your Thoughts?

Do you have professional liability for your nonprofit? Why or why not?

 

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