Nonprofits Insurance Alliance

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4 Tips for a More Rewarding Nonprofit/Broker Relationship

In an earlier blog, we explained the difference between an insurance broker and an insurance company.  As discussed in that article, the broker is someone who specializes in insurance and risk management, whose role is to help the nonprofit put together an insurance program of one or more policies to mitigate the potential for financial loss from a variety of risks. Essentially, they act as a consultant to the nonprofit to understand the risks associated with the nonprofit’s mission and the types of insurance needed to cover those risks. Part of that discussion would include if there are risks that cannot be insured against.

As you begin (or continue) a relationship with your broker, here are some key considerations to ensure you are getting the best coverage for your nonprofit at the best price.

  1. Ask your broker to walk you through your policies

Part of your broker’s job is to help you understand the insurance coverages you are purchasing.  That includes understanding not only what is covered, but also what may not be covered.  The last thing you want is to have a loss and find out it is not covered or that the limits available are not adequate.  Here are a few sections included in most insurance policies to which you want to pay close attention:

Limits Section (aka Declarations or “Dec” Page) – This part of the policy shows what limits you have available to you for each accident (occurrence limit), and also for the whole policy year (aggregate).  You and your agent should review this section to make sure you have adequate limits, especially if any of your contracts require you to carry specific insurance limits.

Insuring Agreement (aka Coverage Agreement) – These paragraphs will summarize when your policy will be triggered, and who is covered.   It may also discuss when the insurance company starts and stops defending a claim.

Exclusions – This is a very important section as it details what things are specifically excluded from coverage in your policy.  You and your broker should look through this section and confirm that there are no exclusions for activities critical to your nonprofits mission or activities.

Definitions – This section defines all the key terms used in the rest of your policy.  As an example, your policy may say that it pays “Damages” for claims which occur in the “Coverage Territory.”  You need to understand how the insurer is defining Damage and exactly what the Coverage Territory is, to ensure it meets your needs. For the most part, any term in quotes or capitalized will be in the Definitions section.

Lastly, review the schedule of properties and vehicles listed in the policy to make sure everything is there that should be and nothing is missing.  More about that in the next tip.

  1. Tell your broker ASAP about any changes to your operation

This can’t be emphasized enough.  In order to ensure you have the necessary coverages in place you should, as soon as possible, tell your broker about any changes to your operations.  This includes buying or selling properties, buying or selling (or leasing) vehicles, changes in location, change to employees and adding or changing programs or operations.

Some polices give a grace period for reporting new vehicles and buildings, but not all.  You don’t want to have a claim only to realize it won’t be covered because the vehicle or property was not listed on your policy.  On the flip side, if you sell a vehicle or a property, you don’t want to pay insurance for something you no longer own.

Also, if you change operations (i.e. add a new program) you want to make sure these new operations are covered.  As an example, maybe just a general liability (GL) and a directors and officers (D&O) policy were adequate for your operations when you first started. Subsequently you added a program with children, and now you want to consider adding an improper sexual contact and physical abuse (ISC) policy in addition to the other policies you have.

  1. Don’t sign a contract without first reviewing it with your broker

Part of the broker’s job is to assist the nonprofit with risk management.  This includes helping the nonprofit review those parts of any contract they sign (as part of work they perform) that may affect their exposure to loss.

Recently, the indemnification and insurance requirements in contracts that nonprofits are required to sign have become draconian.  Specifically, municipalities all over the country have begun to push as much liability as possible off to the nonprofits performing services and work.  Quite often, the liability that the nonprofits are being asked to accept are outside of the control of the nonprofits.

As an example, many contracts have wording which require the nonprofits to accept liability for all claims “arising out of this contract from any cause whatsoever, including the acts, errors, or omissions of any person.” The argument can be made that every claim “arises out of” the contract.  This means the nonprofit may be forced to defend and possibly indemnify another party for claims caused through the negligence of that other party.  In other words, the nonprofit may be forced to pay for a loss that was not their fault and out of their control.

Your broker can help you review the insurance sections of your contract to make sure the liability flows in the correct direction.

  1. What to ask when comparing quotes from different insurance companies

Comparing quotes from different insurance companies can be a very daunting task, even for those familiar with insurance.  You must look at limits, price, exclusions, sublimits, endorsements, etc.  For those who don’t do this on a regular basis, it can make your head spin!

The first thing your broker should explain is variance in price between different quotes.  As Warren Buffett once said, “Price is what you pay.  Value is what you get.” One quote for insurance may look more attractive than another quote because it is less expensive but quite often, it is less expensive because it provides less coverage or there are hidden costs. As an example, sometimes insurance companies use deductibles and self-insured retentions (SIR) as a way to lower their own costs and shift risk to the nonprofit.

When the nonprofit accepts a deductible or SIR, they are responsible for that portion of a claim.  For example, if there is a $10,000 loss and the policy has a $1,000 deductible (or SIR), the nonprofit is responsible for that deductible and will only receive a net claims payment of $9,000. When comparing two policies, make sure any deductibles or SIRs are the same.  A policy with a higher deductible may have a lower up front cost, but may be a bigger overall “insurance spend” on the back-end.  Also make sure your broker explains the difference between a deductible and a SIR.  The latter is an “upfront” out-of-pocket cost. The former is billed back to the nonprofit once the claim is settled.

Another question to ask the broker about is claims settling philosophies between companies.  Some companies have the reputation of denying claims often and with wild abandon.  They can afford to charge less premium because they are more likely to deny claims. Their polices are craftily worded to exclude certain coverages and losses, or are silent on certain issues.  Other carriers, like the carriers in the Nonprofits Insurance Alliance Group, try to find coverage for their nonprofit members.

Lastly, you should ask your broker about the difference in commission they will receive from the different insurance companies.  Your broker is compensated by the insurance company via a commission which is part of the premium you pay.  Most brokers will advise their clients based on what is best for the nonprofit.  They want to make sure the nonprofit understands the differences discussed above and makes an informed decision.  There are a few brokers, however, who may be tempted to recommend an insurance policy from the company that will give them the biggest commission, regardless of what is in the best interest of the nonprofit.  Asking for transparency of the commission arrangements will help you understand the decision making process.

Preventing Sexual Harassment in the Workplace (Hint: It Starts at the Top)

As recently stated by the Equal Employment Opportunity Commission (EEOC): “harassment in the workplace will not stop on its own – it’s on all of us to be part of the fight to stop workplace harassment. We cannot be complacent bystanders and expect our workplace cultures to change themselves.”

The truth of this statement cannot be overstated.  While it has long been believed that training and an effective complaint process is the way to stop the problem, the EEOC has pointed out that more is likely needed.

“With legal liability long ago established, with reputational harm from harassment well known, with an entire cottage industry of workplace compliance and training adopted and encouraged for 30 years, why does so much harassment persist and take place in so many of our workplaces? And, most important of all, what can be done to prevent it? After 30 years – is there something we’ve been missing?”

It could be said that the missing element is leadership. Too often, yet for good reason, dealing with sexual harassment in the workplace is something that management, executive directors, and chief executive officers often defer to others to handle and manage.

Perhaps the time has come to see the wisdom and efficacy of having the leaders of the mission of the enterprise become more personally involved in the necessary task of eliminating and preventing sexual harassment in the workplace.

Granted, the reality is that many of these individuals are very busy, taxed and overworked. However, a demonstration by senior management and supervisors that they acknowledge, understand, and will take an active role in prevention can only have a positive effect upon the consciousness in the workplace that “zero tolerance” means just that.

In general, there are many ways this leadership can be demonstrated. Here are just a few suggestions:

1. Management Should Take an Active Role in Training

While senior managers are in attendance in training sessions, as some states require, they are often left off the list of presenters. Indeed, the presence of these agency leaders provides a strong and important signal to staff that this subject is important and that management is committed to the elimination of sexual harassment in the workplace. It’s also important to consider an active role in the presentation by the manager, as their level of engagement is likely to have a significant impact on the staff’s engagement.

2. Train Supervisors to Monitor the Workplace for Policy Breaches

Supervisors should be trained to proactively monitor the workplace for any breaches of the organization’s sexual harassment policies. Supervisors and management are uniquely positioned to monitor the interactions of staff with one another and to make inquiries if there is a hint that any form of harassment is occurring, or if one demonstrates the effects of being victimized.

3. Demonstrate Proactive and Effective Support of Enforcement

Given the need to effectively deal with an occurrence of sexual harassment in the workplace, it’s important to remember that the best way to fix a problem is to remove the offender. This often presents management with a conflict of loyalties if the offender is a long-time employee, colleague, or friend. Moreover, it can be the case that the offender is a very productive or important contributor to the overall operation of the agency, including members of senior management. These loyalties or practical concerns must be set aside in making decisions and imposing consequences for violation of sexual harassment policies. No one is too important, indispensable, or essential to an employer’s business to be disciplined for violations of a zero tolerance policy, and managers should demonstrate the courage to handle these situations properly.

4. Monitor and Track Complaints and Investigations

While the complaint and investigation processes are properly delegated to staff with the experience and expertise to handle these critical functions, it’s also vitally important that management know how these actions are handled. Keeping track of the status of complaints and investigations allows management to know the character of their workplace and the agency’s progress in ensuring the workplace is free from harassment.

5. Maintain an Open-Door Policy

Nothing will encourage employees to come forward and report their experiences more than a senior manager who welcomes, supports, and empathizes with them. That support not only enhances morale within the workplace affected by harassment, but also demonstrates an appreciation of the problem and commitment to prevent it from occurring again.

The law has placed no greater importance on any single aspect of employment than the prevention and elimination of sexual harassment. While training and effective complaint and investigation policies have provided methods to achieve this goal, dedicated understanding, support, and encouragement by the leaders of an organization are essential to ensure that mission will succeed.

Background Checks and Ban the Box in California

Historically, it has not been uncommon for risk-adverse employers to adopt policies prohibiting the hiring of applicants with a criminal history. Given that one in seven Americans has some sort of criminal history, numerous states and local jurisdictions are passing legislation that makes it more likely employers will consider these applicants. Increased employment opportunities have been shown to reduce the likelihood of recurring offenses for workers with a criminal record, and help these individuals re-integrate into our communities.

Key to these legislative efforts are “Ban the Box” laws, which generally prohibit employers from inquiring about criminal history on the employment application. Nine states and more than 15 cities have adopted Ban the Box laws that apply to private sector employers, with many more jurisdictions applying these laws to government contractors.

California jumped on the ‘Ban the Box’ bandwagon with Assembly Bill 1008, effective January 1, 2018. Modeled after the City of Los Angeles’ Fair Chance Ordinance, this new California law prohibits employers with five or more employees from inquiring about criminal history until a conditional offer has been made. Ban the Box laws don’t prohibit employers from considering criminal history, but rather create a process establishing the timing of when the criminal history can be considered. There are limited exclusions under California’s Ban the Box law, including for positions where an existing law requires criminal background clearance.

Under the California Ban the Box law, an employer must make an individualized assessment of whether an applicant’s criminal history is acceptable or not. It also outlines a process by which the applicant can dispute the accuracy of the criminal history, and provide evidence of rehabilitation or mitigating circumstances for the employer to consider. Employers are required to provide notice of their decision, and grant an opportunity for the applicant to respond, before making the decision final.

While the Ban the Box law is a recent addition in some states, the requirement that employers conduct an individualized assessment of applicants with criminal histories is not. In 2012, the federal Equal Employment Opportunity Commission (EEOC) adopted Enforcement Guidance for employers considering denying employment based on criminal records. These guidelines were founded on studies which demonstrate that criminal record databases are inaccurate or incomplete, and that using criminal history as a basis to deny employment creates the potential for disparate impact of individuals based on factors such as race, which is unlawful under Title VII of the Civil Rights Act.

The EEOC guidance lays out a process for employers to conduct an individualized assessment of whether, based on the job, there is a business necessity to exclude an applicant with a particular criminal conviction, which includes a review of the nature and gravity of the offence, the time that has passed since the conviction or completion of the sentence, and the nature of the job sought.

Many states, including California, have similar regulations or guidance on this issue, including laws that limit an employer’s ability to use certain types of criminal records, such as arrest records, juvenile records, or certain low-level marijuana convictions. Additionally, the Fair Credit Report Act (FCRA) and similar state laws, require employers to obtain written permission to search the criminal records history of employees and applicants, and to follow additional notice procedures if a criminal record is being used to deny employment.

When it comes to criminal background checks and Ban the Box laws, the key take away for employers is to review all laws applicable to their workers’ in the jurisdiction in which they work, and to create checklists and standardized forms to ensure compliance.

Liquor Liability 101: How to Serve Alcohol at Your Nonprofit Events

When most Americans think of this time of year, they imagine hot cocoa, candy canes, and reindeer. However, when most nonprofit leaders think of this time of year, their minds go to holiday events and fundraisers, the spirit of giving, and, more likely than not, how to safely provide alcohol at said events. Whether your nonprofit is serving alcohol to employees and guests, or selling it in order to raise money, here are some questions to consider so that your nonprofit doesn’t find itself faced with an alcohol-related lawsuit.

Are You Familiar with Your State’s Social Host Liability and Dram Shop Laws?

Social host liquor liability laws cover situations where liquor is provided at no cost. Most states have these laws, which hold your organization responsible for providing liquor to minors in any situation that results in injuries to the minor, or injuries that the minor causes to others due to alcohol intoxication. Some states have stricter social host liability laws which go beyond underage drinking. These laws can hold you responsible for accidents caused by anyone allowed to drink to excess then injures themselves or a third party.

Dram shop laws determine how the liability flows from injuries caused by intoxicated people or minors when alcohol is being sold to customers. If a nonprofit has a fundraiser and sells liquor to attendees, in some states they could be held responsible if an attendee has an alcohol-related accident and injures themselves or others. In fact, depending on the state, an establishment selling alcohol could be held 100% liable for alcohol-related accidents if it’s proven a person got intoxicated, or further intoxicated, at their establishment.

Understanding these laws will help your nonprofit put the proper controls in place to better protect against an alcohol-related accident. This is especially true in states that allow nonprofits to easily obtain an event specific liquor license, such as Colorado. While these days liquor licenses make it easy for a nonprofit to organize a fundraiser where they sell alcohol, that doesn’t mean that liability doesn’t exist.

Do You Have Controls in Place for Service?

The key to any event involving liquor sales or host liquor is making sure you control who can attain an alcoholic beverage, and how much they are able to access. There should be controls in place to ensure that minors are not served alcohol. This can be done in many different ways including:

  • requiring a picture ID anytime someone asks for a drink
  • giving out bracelets or wristbands to potential alcohol drinkers after showing ID, and having the bartender check for the bracelets
  • giving out drink tickets to adults (with proper ID)

In addition to making sure people are old enough to drink, you should also have controls in place to make sure visibly drunk people are cut off from being served additional alcohol.  Depending on the state, there are laws which stipulate when a bartender should stop serving someone who is considered to be intoxicated. In certain insurance claims, it’s the bar’s adherence or neglect of these rules which make them more or less liable in cases of an alcohol related death.

The best way to control the flow of alcohol is to make sure your servers understand the laws and serving guidelines, and to limit consumption when appropriate.

Who is Going to Serve the Alcohol?

In most states, there are companies that specialize in bartending for events. These companies have trained and certified their bartenders to know specific state laws and serving guidelines, and as such, many nonprofits choose to hire one of these companies for their events. In addition to bringing in trained bartenders, these companies also carry liability insurance, which should cover any negligence on the part of the bartender, such as serving a minor or a visibly intoxicated patron.

Some nonprofits will elect to serve the alcohol themselves, especially in host liquor situations where the alcohol is being provided at no cost. If this is the case, having controls in place and an understanding of state liquor laws is essential.  Any designated servers should be trained to proficiency on the signs of alcohol impairment, and have protocol for handling visibly intoxicated individuals.

Do you Have the Correct Insurance?

A standard general liability policy provides host liquor liability, which covers events where alcohol is provided free to guests, but not situations where alcohol is sold. Examples of what is covered include an open bar at a Christmas party, a wine tasting event for staff or donors, or providing beer at a picnic. For many nonprofits, this is adequate liquor coverage.

However, in some cases, nonprofits sell liquor at fundraising events. For example, a nonprofit may hold an event at a local bar, who donates their space and allows the nonprofit to keep 50% of the bar sales. In this example, the nonprofit could be held liable under dram shop laws, which may be more severe than host liquor laws. The nonprofit should request a full liquor policy to cover these events as they may not be covered under the host liquor liability included on their policy.

Although there are potential risks involved with serving alcohol to employees and guests at holiday parties and fundraising events, learning about state laws, putting proper controls in place, and having a comprehensive insurance policy can help limit those risks so that your nonprofit can stay calm and party-on this holiday season.

When #MeToo Comes to the Nonprofit Workplace

It’s hard to ignore the plethora of revelations of sexual harassment incidents involving well-known public figures being revealed in the news recently.

It’s also difficult to ignore the grassroots social movement that resulted – the #MeToo campaign, originally started by consultant, blogger and advocate Tarana Burke over 10 years ago, and recently popularized with a tweet by actress Alyssa Milano that garnered more than 35,000 direct responses on its first day. From there, the hashtag quickly spread across multiple social media platforms and grew immensely in participation, with individuals all over the world chiming in to share their stories of harassment and assault, or simply posting #MeToo. To say the trend is viral is an understatement – people are speaking up, and they’re doing so publicly.

What you may not know is that the number of harassment complaints nonprofits have been receiving has increased as well. These complaints run the gamut from anonymous emails reporting decades old alleged transgressions to the reporting of current serious ongoing harassment of current employees by their supervisors. Sexual harassment is a serious issue and it is incumbent upon every nonprofit to do what it can to minimize the risk of these types of incidents from occurring.

At the Nonprofit Insurance Alliance Group, we have many free tools to assist our members in addressing these risks. The following resources are available to our nonprofit members when faced either with a current complaint of sexual harassment in the workplace, or to educate your workforce in mitigating the potential risk of sexual harassment becoming an issue.

  • Free recorded webinar on Preventing Sexual Harassment and Abuse Conduct in the Workplace, which can be accessed
  • Free recorded webinar on Conducting Internal Investigations, which can be accessed
  • Members with a current Directors and Officers policy (which includes Employment Practices Liability) can take advantage of free unlimited Employment Consultations. Labor & Employment Risk Managers (LERMS) can assist members in understanding best practices for establishing a harassment free workplace, including sample policies and recommended training; the processing of a complaint of harassment, including internal or external investigation and assessing risk; and possible steps to remedy the situation. Information on how to request a consultation can be found here.
  • Free Sexual Harassment Prevention Training for Supervisors, available for nonprofit members in Connecticut and California where such training is legally mandated. Additional information can be found here.
  • Training brochures for nonprofit staff working with youth, entitled “Supervision of Children and Teens Never Includes Sex,” which is available

In addition to these resources, you should confirm with your nonprofit’s insurance broker that you have sufficient Employment Practices Liability (EPLI) insurance coverage under a Directors & Officers (D&O) insurance policy, and/or Improper Sexual Conduct (ISC) coverage, if you are exposed to risk in this area.

Making these tools available should help create a healthy and respective environment at your nonprofit, minimize the likelihood of a #MeToo incident from occurring, and assist you in responding if such an incident does occur.

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