Nonprofit organizations may consider various types of insurance to minimize risk to the organization, its officers, and its board members. As you operate your nonprofit organization, insurance coverage that you may need may include general liability insurance, directors and officers insurance, volunteer accident liability, workers’ compensation insurance, property insurance, and automobile insurance. The type and extent of insurance policies you may need can differ according to your organization’s size, purpose, and operations.
General Liability Insurance
General liability insurance covers bodily injuries and damages to property belonging to third parties. These policies also cover injuries that do not result in bodily harm but are still personal injuries to third parties, such as libel or slander. General liability policies cover the organization and typically also cover board members, officers, directors, employees, and volunteers against these types of legal claims.
General liability policies provide funds for an attorney to defend the organization if sued. The policies also pay out in the event of a successful lawsuit against the organization or a settlement that requires the organization to pay a third party money.
Directors and Officers (D&O) Insurance
D&O insurance policies cover certain “wrongful acts” committed by a nonprofit organization or its directors or officers. Nonprofits often provide this coverage to protect board members from personal liability as they perform their board participation or management-related duties.
Common claims that fall under a D&O policy include any breaches in fiduciary duty. In some cases, these policies also cover employment discrimination claims by employees.
Volunteer Accident Liability
Although general liability insurance may cover volunteers who injure themselves, many nonprofits choose to insure their volunteers separately. These policies generally are no-fault policies that provide coverage for injured volunteers.
Workers’ Compensation Insurance
If your nonprofit has even one employee, you must maintain workers’ compensation insurance under California law. This insurance covers any injuries or illnesses that employees develop while on the job. Workers’ compensation insurance covers only employees, not independent contractors or volunteers. Generally, having this coverage is beneficial to the nonprofit organization, as it limits your liability if an employee is injured at work. The employee’s exclusive remedy is through the no-fault workers’ compensation system; in most cases, they cannot sue you for any negligence that led to their workplace injury.
Property insurance is necessary for nonprofit organizations to own real estate, such as an office building, or business equipment, such as computers or furniture. These policies generally protect the nonprofit from theft, loss, or damages to the property. However, there are some standard exclusions to property insurance policies, similar to homeowner’s insurance policies. These exclusions might include damage caused by mold, floods, and earthquakes. In addition, property insurance does not cover automobiles.
If the nonprofit owns at least one motor vehicle, it must maintain automobile insurance for that vehicle. California law requires that all vehicles driven on roadways be insured with a minimum amount of liability insurance. A nonprofit also should take care to maintain a commercial vehicle policy, rather than a personal vehicle policy, which often will not cover damages incurred in using a vehicle for business. Commercial vehicle policies also may have different requirements, such as requiring the organization to maintain documentation of all authorized drivers and their driver’s licenses.
Allow Us to Meet Your Legal Needs Church Law Center dedicates its efforts to the legal matters that nonprofit organizations, religious organizations, and churches face daily. Call us today at (949) 245-3177 and set up a time to talk to us about your case. Get your questions answered and learn more about how we can help.