Nonprofits Insurance Alliance

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From the Claims Files: Woeful Website Wording

The chances are that your nonprofit has a website. In the digital era, creating and maintaining a website is almost unavoidable. It explains your nonprofit’s mission and programs to current and potential supporters, solicits donations, and provides additional information on events and fundraisers. The fact of the matter is, your website is the face of the organization.

Given the importance of your nonprofit’s website, it shouldn’t be a surprise that choosing your wording with care and caution is a must – so that visitors are not only engaged and interested in your nonprofit, but also leave with a clear and accurate understanding of what your organization does. Without clear language, individuals in the general public may misconstrue what it is your organization does, and as a result, could end up suing for damages. Unfortunately, that’s exactly what happened to one of our nonprofit members.

The Claim

The nonprofit runs a halfway house for men with dual substance abuse and psychiatric issues. Their clients come into the program after being discharged from hospitals, to make sure they’re stable and can establish both a job and a place to live. One such client, who we’ll call John, entered the program to manage and treat both schizoaffective disorder and an addiction to methamphetamines. During the intake process, John told the organization that he was single and had no spouse – this turned out to be a lie and while John was in treatment, his wife filed for divorce. Despite this, John’s condition was stabilized, he found a job and an apartment, was discharged from the program, and by all accounts was doing well.

After seeing how well things were going for John after he was discharged from the program, his wife tried to re-enter the picture and showed up to his new apartment to reconcile. As the couple was about to become intimate, John’s wife discovered that he had a visible STD. It was subsequently discovered that John had been having an affair with a staff member at the nonprofit, and they were now in love.

The staff member was let go as a result, but John’s wife sued the nonprofit for emotional damages caused by the relationship. Initially, it was deemed that she had no standing in court as she was not a client of the nonprofit, so the judge dismissed the claim. However, she then amended her complaint based on the fact that the nonprofit’s mission, as listed on their website, was to help addicts and their families. The inclusion of families in the nonprofit’s mission meant that the wife could be included under the umbrella of who is being served by the organization.

In the end, it was ruled that the website’s text did not mean that John’s wife was owed anything by the nonprofit, and the suit was ultimately dismissed. However, this claim had the potential to cause of lot of problems for the nonprofit, had the court agreed with the wife that the word “families” meant she was a client of the nonprofit organization.

Lessons Learned

Although this claim did not result in liability for the organization, it highlighted the potential that words used in nonprofit marketing materials, such as websites, have the potential to create legal liability. Words describing services can be alleged to be an implied-in-fact contract or create a legal relationship which can create a legally-enforceable duty to act in a certain manner. So what’s the takeaway from this nonprofit’s story? Your organization’s wording, on its website and elsewhere, is critical. For that reason, carefully examining what you’re communicating and how, is essential – not only to ensure it’s accurate and engaging, but also to ensure that you’re not opening your organization up to unanticipated liability. Legal review of such materials or disclaimers may be appropriate risk mitigation tools for those nonprofits in highly regulated industries, such as health care.

Transporting Vulnerable Populations

Transportation provides a vital lifeline for vulnerable populations to access employment, education, healthcare, and community life. Your organization may transport disabled individuals, developmentally disabled children or medically fragile seniors, or it may transport individuals in wheelchairs or other special mobility devices. Regardless of the individuals being served, there are many factors that come into play when providing safe transportation to these more vulnerable populations. When reviewing your transportation programs, it may help to ask yourself the following questions:

  • What written policies and procedures are in place to ensure client safety and protection against liability? How will they be enforced?
  • What is the level of knowledge and training required for drivers, to ensure that clients are safely transported? Do your drivers know that smooth operation of the vehicle is extremely important in transporting individuals with disabilities?
  • How do I demonstrate through my recordkeeping that my staff are trained to proficiency?
  • Are your vehicles in good working order? Do they have proper securement equipment for mobility devices?
  • What are the established safety standards and restraint systems for securing and transporting wheelchair bound clients?

To keep your clients safe, it’s essential to know the answers to these questions. Why? What could go wrong? Here are two examples from our claims files:

High-Risk Clients

The first example features a community support agency that provides transportation for seniors to medical appointments. One of their clients was known by the member to unbuckle himself when being transported. The driver on this occasion knew of the client’s behavior and had refused to transport him earlier that morning; the afternoon driver, however, was not aware of this client’s behavior. The driver secured the client, who later unbuckled himself and fell. He subsequently injured his knee, which required surgery.

The investigation into this incident also revealed that the van was not equipped with federally-mandated shoulder harnesses or lap belts, making the van illegal to transport wheelchair bound individuals. The agency narrowly avoided an attempt by the client’s attorney to recover enhanced damages which might have been awarded due to the possibility of being charged with a violation of the Americans with Disabilities Act. The claim cost $350,000 as a result of the injuries incurred.

Lack of Training

The second example features another community services center; where drivers transport clients with physical and mental disabilities to do errands, such as going to the laundromat. On the day of the incident, there were three clients on board in the van, one of whom was in a wheelchair. The driver for the nonprofit member had put the client, a 35-year old woman with a congenital brain disorder, on the lift and strapped the chair down with all four straps, as she usually did. In the middle of a left turn, the chair tipped over. She stopped and righted it, not noticing that the tie-down straps were loose. Meanwhile, the woman had hit her head and become unresponsive. The driver traveled back to the center immediately, where an ambulance was called. The client’s head injury resulted in a severe worsening of her condition. During the investigation, the driver stated that she had never received any training in how to properly tie down a wheelchair. The family of the client made a claim through their attorney and it eventually settled for $800,000.

 

Claims You Won’t Believe: Contraception as Contraband

Reproductive freedom and the right to privacy, for minors especially, can be murky territory, with laws differing from state-to-state. In fact, only 26 states and the District of Columbia currently allow minors aged 12 or older to receive contraceptive services without parental approval. But how do these rights work when there’s no parent or guardian involved? What if contraception is legally permissible for minors in a state, but another party steps in and assumes the role of the guardian in making these decisions regarding their right to reproductive health care? One Nonprofits Insurance Alliance Group member in California found out the hard way — read below for their experience.

The Claim

A California nonprofit group home for foster teens was sued by current and former residents asserting a violation of their right to privacy and a denial of their access to reproductive health care. The group home required the teens, as a matter of policy, to be abstinent in order to reside in the group home. While they had no formal policy prohibiting residents from obtaining birth control, the group home admitted taking condoms and other forms of birth control away from the teen residents and penalizing them under their privilege-earning system for possession of what they deemed contraband. The suit also alleged that access to reproductive health care appointments was restricted, and that the teens were not allowed to meet alone with their medical care provider, if requested. The teens were represented by two national, nonprofit public interest law firms that promote youth and reproductive health care rights. The lawsuit sought damages and injunctive relief, which is a court order prohibiting the group home from continuing its practices in this regard, and attorney’s fees under the Private Attorney General Act (PAGA). The suit received extensive publicity.

The lawsuit was based on a violation of the right to privacy guaranteed under Article I, Section 1 of the California Constitution, which applies to public, as well as private entities. It also alleged negligence of the nonprofit for failure to supervise, evaluate and train childcare staff to ensure that they understood the healthcare rights of foster youth as required under California regulations, which includes the right to confidentiality and access to reproductive health care. The suit also alleged failure to follow the Caregiver Resource Handbook issued by the county (which placed the teens in foster care) as it pertained to reproductive healthcare.

While the suit was founded primarily on California law, it did cite the federal case Arneth v. Gross, which determined that the right to access reproductive health care extends to minors in foster care. Under the more narrow federal right to privacy, the Arneth court found that “minors have a constitutional privacy right to practice artificial contraception absent compelling state considerations to the contrary, and this is not diminished because they are in foster care.”

Due to the risks of a large potential damage award, and negative publicity, this case was settled in mediation. While each of the five claimants received a modest settlement of $5,000, the plaintiffs sought an attorney’s fees award available under PAGA. When this issue was submitted to arbitration, the plaintiff’s attorneys were awarded a staggering $400,000.

Lessons Learned

Access to reproductive health care rights for those in residential care is highly regulated by local, state, and federal statutes, as well as the state and federal constitutions. As this claim demonstrates, impairment of those rights can be a huge risk to a nonprofit residential care provider. To avoid such a claim, nonprofits must understand the rules and laws of their jurisdiction concerning the right to reproductive health care for those in their custodial care, and adopt policies and train staff to ensure that those rights are respected and preserved.

 

From the Claims Files: Don’t Let Water Damage Run Your Nonprofit up a Creek!

A little water never hurt anyone, right? Wrong! In fact, our most common uncovered property claim is water damage as a direct result of inadequate maintenance of buildings. Whether your nonprofit owns or rents its property, water damage can be expensive and even catastrophic if not covered by your insurance policy. Because property policies typically exclude water damage unless something else is accidentally or suddenly damaged first, you may get stuck having to repair a roof, deal with damaged ceilings, and replace ruined carpet and electronic equipment, all with money that could’ve been used to support your nonprofit’s mission.

For example, if your roof gutters are plugged and water leaks into our building after a storm, insurance is not going to cover just because there was a storm and you had water damage.  Unless that storm damaged your roof and caused the leak, your insurance is not going to provide coverage. In some cases, organizations are even forced to interrupt their services to deal with repairs, depending on the severity of the damage. And while these situations are preventable with regular maintenance, some nonprofits find this out the hard way. Below are two recent Nonprofits Insurance Alliance Group claims that illustrate just that.

Claim 1: Rooftop Wear and Tear

The first claim involved a roof leak, which resulted in interior water damage to the nonprofit’s building. An investigation showed that the leak was a result of both the type of roof, which was flat with an asphalt finish, as well as a depression in the roof. Additionally, a nearby tree had a branch that extended over the roof, directly above the location of the interior water damage, which allowed for the build-up of leaves. All of these circumstances combined led to a ponding of water, which allowed the water to reach a level where it was able to seep through several cracks in the roofs tar seams and into the interior of the building. Inspection of the roof did not identify any damage to the roof itself from the recent storm, and wear and tear were determined to be the cause of the incident. Because there was no damage caused by a “Covered Cause of Loss,” the nonprofit was left to bear the cost of the internal damage, in addition to the repairs needed to prevent future leaks.

Claim 2: Blocked Drainpipes Cause Surface Water Accumulation

The second claim involved exterior drainage pipes, which overflowed, causing interior water damage.  An investigation showed exterior drain covers had been blocked by debris, resulting in the accumulation of surface water that eventually started seeping into the interior of the building underneath an exterior door. Therefore, the claim was not a result of water being backed up from the drain, but rather water not being able to enter the drain in the first place. As with the previous claim, damage caused by surface water was excluded from coverage, as the damage was caused by lack of maintenance, rather than a “Covered Cause of Loss.” As a result, this nonprofit member was also left to cover the cost of repairs.

How to Prevent This From Happening to Your Nonprofit

Every building is at risk for water damage, whether it’s a result of inadequate maintenance, such as wear and tear on a roof or old plumbing, or gutters and drain pipes that are clogged by the accumulation of leaves. Every building needs to be checked regularly for things such as damaged or blocked roof scuppers, pipes, gutters, and drains.  One question to keep in mind is: “Is there water where there shouldn’t be?”

Small leaks can also turn into huge and expensive headaches, not covered by insurance if they are not addressed promptly. This includes leaks from cracks in doors and windows, improper seals around door and window frames, poorly maintained roofs, and cracks in foundations, exterior walls, and plumbing and HVAC systems.

Proper maintenance includes routine cleaning. Your nonprofit should check all drains, gutters, and downspouts for leaf litter, debris, and other obstructions that can cause water to pool. If you’re in an area experiencing winter snow storms, be sure to clear your snow and keep your gutters and downspouts clear so you don’t develop an ice dam. Also be sure to keep an eye on your organization’s drains and gutters as snow and ice begin to melt – you may identify a smaller, unanticipated leak not detectable in warmer conditions.

Here are some general tips for preventing water damage:

  1. Conduct quarterly inspections of your property for the purpose of preventative maintenance.
  2. Schedule regular seasonal roof inspections, before and after expected rain or snow.
  3. Consider installing a solar roof pump or a sump pump. If you have a pump, make sure it’s operational.
  4. Inspect and maintain fire sprinkler systems.
  5. Identify and repair all leaks and cracks in windows, doors, and exterior walls, as well as with the roof, foundation, and plumbing and HVAC systems.
  6. To protect pipes in winter, consider setting your thermostat a little above freezing if you’re going to be absent from the premises for vacation or a weekend.
  7. Prepare and post a schedule of tasks to ensure that maintenance gets done in a timely manner.

Additionally, if you’re renting your premises, please be sure that your lease includes maintenance to be handled by your landlord, or if it requires you to conduct that maintenance make sure you do so on a regular basis.

We are a nonprofit and we insure only nonprofits, so we know that it is not easy to find the funds to conduct proper maintenance.  But, we know all too well that you either pay the money upfront for routine maintenance or pay a lot more later to clean up the damage. As your insurer, one of the things that bothers us the most is to be presented with claims that we cannot cover.  And we know that you certainly don’t want to be surprised to learn that your insurance doesn’t cover damages that could have been avoided by proper maintenance. Instead, we much prefer that you take this advice to heart so that we never have to tell you your claim isn’t covered. Remember, we’re here to help. Property maintenance is a part of good risk management, and risk management support is part of your insurance policy!

Claims That Could Have Been Avoided: Why Words Matter with Independent Contractors

For many nonprofits, special events and fundraisers are a huge part of what keeps operations moving forward. They raise awareness about critical issues in our communities, while simultaneously raising the funds necessary to cultivate change. Given how important special events are, and how complex they can be to execute, it’s not uncommon for nonprofits to hire independent contractors to provide products or services the day of, or in the days leading up to or following an event. Your nonprofit might choose to hire a clean-up crew or entertainment for the event, or it may need to rent a larger space to house the event itself – no matter the work contracted, it’s typical to bring on extra help. However, did you know that the actions or inactions of an independent contractor could potentially put your nonprofit at risk? In fact, if an incident is in some way caused by an independent contractor and your nonprofit is not listed as an additional insured on their policy, your nonprofit could be left holding the bag for the injury! Unfortunately, this is exactly what happened to one Nonprofits Insurance Alliance Group member, as described below.

The Claim

A nonprofit member-insured held a Bingo Night fundraiser at a local, third-party business. The contract to rent the space for the Bingo Night required the nonprofit to obtain an additional insured status for the business under its insurance policy, as well as execute a contract which included an indemnification provision, a clause used in contracts to shift potential legal liability from one party to the other.

On the night of the event, one of the guests was injured when she tripped and fell in the parking lot of the business where the Bingo Night was being held — an incident caused by an unrepaired pothole in the parking lot, as well as a parking lot light that had burned out so that the claimant could not see the pothole. The nonprofit had no control over the parking lot, nor did it have the opportunity to fix the light that had burned out, as it was not their premises to maintain.

The nonprofit’s insurance policy included an automatic extension of an additional insured status to the business for liability which was “caused by” the nonprofit organization, and because the nonprofit did not control the parking lot or the burned out light, the nonprofit did not cause the incident and it was the business owner’s own coverage which was applicable to the loss. However, the indemnification provision within the contract which was executed by the nonprofit included an obligation to indemnify the business for any liability “arising out of” the operations of the nonprofit. Because the claimant was injured as she left the event, her injury was treated as “arising out of” the operations of the nonprofit.

Lessons Learned

First and foremost, independent contractors should provide evidence of insurance coverage by providing your nonprofit with their own certificate of insurance. If the contractor is one that the nonprofit does business with regularly or is providing an essential service, the nonprofit should request that it be named as an additional insured on the contractor’s insurance policy. Whether a claim or suit has merit or not doesn’t prevent an organization from being sued, and for that reason, additional insured endorsements are vital when it comes to protecting your nonprofit. While these modifications to an existing contract between the insurance company and the insured organization may seem trivial, they have the effect of adding the name of the endorsement holder, your nonprofit, to the list of insureds under the policy, and this could save your nonprofit from a world of hurt.

It’s also essential to perform due diligence to make sure all contractors and subcontractors name your nonprofit as an additional insured, not just assuming as much to be true. Additionally, don’t assume the contractor has appropriate insurance; check that the policy limits of contractors and subcontractors are equal to or greater than your nonprofit’s so you don’t become the deep pocket.

Some nonprofits may think that contracts presented to them, such as the business rental agreement in this case, cannot be negotiated. However, all contract terms are subject to negotiation and must be evaluated to assess responsibilities and risks imposed. With respect to indemnification obligations, nonprofits must evaluate which entity is accepting which risk, whether there is appropriate insurance coverage for the risk, and whether the party with control over the risk, in our example the maintenance of the parking lot, is the one that is legally responsible.

General liability insurance coverage through the Nonprofits Insurance Alliance Group automatically provides an additional insured status to any business, if required by a contract, but only if the acts or omissions of the covered nonprofit have caused the liability. In this example, a change in the language in the indemnification obligation of the nonprofit included in the rental agreement to only accept liability “caused by” the nonprofit or its guests, rather than liability “arising out of” the event would have fixed the problem.  With that language, the business owner’s own liability coverage would have been applicable to a loss caused by the business owner (i.e. poor maintenance in the parking lot), and it would have prevented this nonprofit from contractually accepting this otherwise uninsured loss.  As we all know, especially when in a contract, it’s the words that matter.

If you need additional guidance, clarification, and/or assistance with additional insured endorsements, contact your insurance broker.

 

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