Nonprofits Insurance Alliance

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Emergency Preparedness: Weather and Natural Disasters

Chances are you’ve seen the movie Twister at least once before. If so, you probably remember the opening scene, where the father rushes his family into their home’s storm cellar as a tornado approaches, with just enough time to save them, but not himself. Even though it’s just a movie, had this been real life, the entire family may have survived had they been more prepared and had a plan in place.

The fact is, we’ve nearly all experienced some form of severe weather. Some have even faced a full-blown natural disaster, such as an earthquake. Knowing what environmental risks your nonprofit is most likely to encounter is the first step toward being prepared in the event of an emergency. And don’t just consider high impact incidents like hurricanes and tsunamis. Did you know that the National Weather Service states that extreme heat kills more people than hurricanes, floods, tornadoes, and lightning combined?

When extreme weather or a natural disaster is imminent, it’s too late to plan. Every organization should have a comprehensive emergency preparedness plan, including a section for weather and natural disasters. Besides the major benefit of providing guidance during an emergency, developing an emergency preparedness plan has many other advantages, and you may discover unrecognized conditions that could aggravate an emergency situation and can work to eliminate them in advance.

If disaster does strike, are you confident in your ability to quickly secure your nonprofits’ clients, employees, volunteers, and facilities? If not, walking through risk scenarios will help determine your readiness. Start by assessing your risk for various natural-disaster scenarios. If you’re in the Eastern U.S, you may need to prepare for hurricanes and severe winter storms. Nonprofits in the Midwest and the South are at risk for tornadoes, and West Coast nonprofits are subject to and should prepare for disasters such as earthquakes, mudslides, and wildfires.

Good emergency planning takes the cooperation of individuals across your organization. Consider building a cross-functional team, clearly defining the roles and responsibilities of each member, and once your team is in place, develop an action plan to define how your organization will respond to likely disasters. Be sure your plan includes emergency supplies, such as: non-perishable food, bottled water, battery-powered radios, first aid supplies, flashlights, batteries, duct tape, plastic sheeting and plastic garbage bags. Planning is necessary in order to avoid risks and potentially even save lives.

Additionally, be sure to know the difference between a weather watch and a weather warning. A weather watch means there is a possibility of an incident. Conditions are right for the weather, but nothing has happened yet. No response is needed other than keeping informed and being prepared. With a weather warning, severe weather has already been seen or is expected. This is serious, and appropriate actions should be taken. Your plan should take advantage of such warnings with, for example, instructions on sand bagging, removal of equipment to needed locations, providing alternate sources of power, light or water, extra equipment, and relocation of personnel with special skills.

Once your plan is in place, training is important. Your staff and volunteers need to clearly understand what to do in the event of an emergency, and be comfortable in carrying out any assigned responsibilities. Be sure to do some drills or live practice so people are prepared to respond in an emergency situation. While it’s impossible to prevent these incidents, preparation can mean the difference between temporary disruption and sustained disaster for your people and your operations.

Here are some additional resources to assist you in developing and enhancing your organization’s emergency preparedness plan:

Managing Volunteers

Did you know that many 501(c)(3) nonprofit organizations have no paid employees? Volunteers provide a critical link between nonprofits and their communities by bringing needed skills, connections, insights and resources to the organization. In some cases, they also serve as valuable public advocates and ambassadors for the nonprofit. Some organizations only have a few volunteers, while others manage hundreds of volunteers – but the fact remains that volunteers are critical to the relationship between nonprofits and their communities.

It’s important that your volunteers know what they can expect in the way of guidance and supervision, as a lack of clear directions and/or difficulty in contacting a supervisor can cause frustration and lead to mistakes. While there are many ways in which to manage a volunteer workforce, consider checking your strategies against the list below to assure your nonprofit is following the best safety practices possible:

      1. Commit to providing explicit instructions for all volunteers, as they cannot meet expectations that are unclear.
        • Similar to a job description, volunteer position descriptions typically include a list of expected duties and responsibilities.
        • It is a good practice to provide a volunteer handbook, set of policies, and/or a procedures manual. This establishes expectations and provides critical information about the organization. Clear policies and procedures can also minimize liability.
      2. Let volunteers know what they can and cannot (or should not) do. As an example, many programs specifically prohibit volunteers from offering rides to clients, or taking clients home for meals or social activities. Avoid unintended liability by providing explicit direction. Don’t assume that your interpretation of “common sense” will prevail.
      3. All volunteers should sign a volunteer waiver. If your organization allows minors to volunteer, their waiver must be signed by a parent/guardian.
      4. Any volunteers that pose a safety concern or pose a threat to your nonprofit’s clients or staff should not be permitted to continue participating as a volunteer.
      5. Volunteers should be subject to discipline leading up to and including termination of their volunteer service. Executive Directors should not be expected to welcome volunteers just because they happen to be a friend of a board member or a donor. They have to have a role with expectations agreed to in advance.
      6. Volunteer injuries need your immediate attention. If a volunteer is injured when providing volunteer service, it is important to conduct a prompt and thorough investigation. Your action plan should include:
        • Demonstrating compassion and concern for the volunteer’s well-being; determining the cause of injury;
        • Notifying your insurance broker to determine if there is any coverage available;
        • Evaluating whether future incidents can be prevented with training, equipment or other measures;
        • Evaluating the adequacy of the immediate response following the incident.
          (Were medical personnel contacted in a timely fashion?); and
        • Identifying how the organization’s response to a similar incident could be improved.

When using youth volunteers (anyone under the age of 18), you will want to think about their duties and responsibilities and whether those activities are suitable. There are several things to consider when engaging youth volunteers:

      • In opportunities where children get involved alongside their parents, you should ensure the activity is suitable and that parents are briefed about any risks. In this type of activity, parents remain responsible for their children.
      • For opportunities in conjunction with other groups (e.g., schools, clubs), we recommend working with the group leader to ensure they have appropriate supervision and insurance in place. You should still assess the risk of the activity and ensure it is suitable for the group. Your organization is responsible for ensuring the activity is safe, but the supervision is the responsibility of the group leader.
      • For individual opportunities for youth, ensure that there will be proper oversight in place as they will not be as closely supervised as they may be in one of the two options noted above. At no time should a minor volunteer be alone with an adult.
      • Any projects for which you are providing equipment, such as gloves or gardening equipment, have appropriate sizes for the youth. It’s your responsibility as the nonprofit to ensure youth volunteers have a safe, healthy and positive experience.

In addition to ensuring that volunteers are safe, don’t forget to show your appreciation on a regular basis! The importance of a simple verbal “thank you” cannot be overstated.

Remember that a volunteer is an individual who performs hours of service for you without promise or expectation of compensation. Any compensation provided to a volunteer, such as a stipend, may inadvertently convert your volunteer into an employee. It can also jeopardize the legal protection for the volunteer under the Volunteer Protection Act.

While the law provides some relief for the negligent acts of volunteers, these laws vary widely from state to state and are often misunderstood. And, don’t make the mistake of assuming that your nonprofit will be exempt from liability because its purposes are charitable, or because the person responsible for the harm is a volunteer.

Managing volunteers is similar to managing paid staff. As with your staff, volunteers expect to be provided with rewarding experiences, treated with respect, trained as needed, properly supervised, and provided with feedback. Millions of volunteers across the country support our communities through all kinds of valuable service.  And, they provide this service with an admirable record of safety.  Since inadequate or improper training and oversight is frequently the cause of an incident and/or injury involving a volunteer, we hope these suggestions will help make that record of safety even better!  Wouldn’t we all prefer to avoid incidents and injury to people and property and spend money on direct services rather than on expensive claims against the organization and volunteer?

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.

Handling Terminations of Employment

No termination should ever come as a surprise. This is a common mantra by labor, employment and human resource specialists alike, because it summarizes the topic of employment terminations so well.

Preparing to terminate an employee is no simple matter because the way an employer handles the employment relationship from the start all the way through this final event, can either set the stage for lengthy and costly litigation, or more preferably, end a relationship in an uneventful farewell.

Typically a termination follows conduct that is either so egregious, the employee is foolish not to expect a termination (e.g., theft of company property, assault on a coworker, engaging in sexual harassment), or results from a series of disciplinary measures where the employee was put on notice that continued poor performance or behavioral issues would result in further discipline or termination.

Certain misconduct may result in more immediate and severe consequences. For instance, in the event of workplace violence, sexual harassment, theft/dishonesty, or being under the influence of drugs or alcohol, it may be more appropriate to issue an immediate termination rather than use progressive discipline. Contrast this to intentional reduction in output, insubordination, or consistently late/incomplete work. These types of issues may not warrant immediate termination, but should still be documented as soon as a pattern of poor performance is noticed. Importantly, inaccurately stellar performance evaluations will do more harm than good when it comes time to defend a decision to terminate for “poor performance.”

While it may be true that the doctrine of employment-at-will is the fundamental employment relationship in the United States, meaning that without notice, an employee may quit at any time and for any reason, or an employer may end employment at any time and for any reason not prohibited by law, caution must still be taken when terminating an employee, and employers would be prudent to carefully evaluate their decision for any termination.

Managers and supervisors are often hard-pressed for time, but taking the time to clearly document misconduct or concerns will help demonstrate objectively, the reasons for discipline and/or termination.  Also consider whether policies and procedures have been explained to staff and consistently applied. Did the employer review similar incidents and apply consequences as they would for any other employee who engaged in similar misconduct? Was this employee properly trained and made aware of expectations? Were all employees, without regard to their protected class, treated the same?  If applicable, were they given the proper warnings prior to termination?

Some best practices in preparing for and conducting a termination include:

  • Ensuring credible documentation is in the employee file regarding negative performance/behavior
  • Discussing termination with direct supervisor(s) and HR
  • Being honest with the employee about reasons for termination but keeping the explanation to a minimum
  • Expecting the unexpected. Employees will react in all different ways, be prepared ahead of time for all possible scenarios.
  • Supervising the removal of personal effects
  • Scheduling a termination to minimize disruption in the workplace
  • Communicating the termination privately, but considering a witness, especially in terminations you think will be contentious on any level
  • Allowing the employee the opportunity to respond to any investigative findings or decisions for termination
  • Arranging for timely termination of access (e.g., email, computer logins, key access) to prevent sabotage
  • Communicating other housekeeping items to employees such as the continuation of benefits, when they can collect their belongings, and how you will logistically exit the room once the termination meeting ends
  • Acting swiftly and without hesitation once a decision has been made

Lastly, even those terminations that are well-documented and warranted may not be a welcomed action by employees, and the employer may want to consider severance pay in exchange for a release of claims. If an employee is litigious, a member of a protected class, has recently requested or taken a medical leave of absence (whether for physical or mental illness), filed a complaint regarding the workplace, or has disclosed a disability or need for some accommodation, employers should consider risk of a lawsuit for discrimination or retaliation. Inconsistencies applying rules to any employee will lend to a risky situation for the employer.

The EEOC prohibits consideration of race, religion, sex, national origin, age, disability or genetic information when making decisions to terminate employment.  Other laws also require employers to provide certain notices to employees following termination (e.g., COBRA) and may require that final pay and all reimbursements are made to an employee at the time of termination.

No matter the reason for a termination, employers should remember that the loss of a job could be detrimental to the employee, so it is always best to practice courtesy, compassion, respect and professionalism during the process.

Changes to Independent Contractor Classification in California

While businesses have traditionally subcontracted certain tasks to independent contractors, the on-demand or “gig” economy has seen this practice skyrocket with the business models used by Uber, Lyft, GrubHub, TaskRabbit and many other tech companies. To a limited extent, nonprofits also depend on independent contractors to perform functions where regular staff do not have the expertise, or for temporary or limited projects.

There is little risk when subcontracting is done through a business, such as hiring a temporary worker through a staffing agency where the worker is the employee of that agency. But when a nonprofit is hiring an individual worker to perform tasks that falls within the scope of the nonprofit’s mission, the classification of independent contractor just became much more risky due to the recent California Supreme Court decision in Dynamex Operations West, Inc. v. Superior Court of Los Angeles.

In its lengthy decision, the Supreme Court analyzed the basic public policy objective of the California Wage Orders, which were adopted to establish minimum wage, overtime, and meal and rest breaks for non-exempt employees. The court noted that these laws ensure responsible employers are not hurt by competitors realizing the potentially substantial economic benefits of substandard employment practices (such as non-compliance with minimum wage, overtime, meal and rest breaks, insurance benefits, etc.), that could result in a “race to the bottom.”

After analyzing the definition of “employee” under the Wage Orders, as well as the existing multi-pronged independent contractor test and legal tests used by other jurisdictions, the Court determined that a simplified “ABC” test should be used to evaluate whether a worker is classified as an independent contractor for purposes of California Wage Orders.

So how does this simplified test work? The ABC test presumptively considers all workers to be employees, and permits workers to be classified as independent contractors ONLY IF the hiring business demonstrates that the worker in question satisfies all three of the following conditions:

  • A. – That the worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • B. – That the worker performs work that is outside the usual course of the hiring entity’s business; and
  • C. – That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

So if the worker meets conditions A and C, but not B, because they are not working outside the usual course of the hiring employer’s business, then the worker must be classified as an employee.

The most difficult prongs of the test to meet for most workers will be prongs B and C, so nonprofits analyzing worker classification should likely start with their mission statement and purpose. If an employee is working to further that mission, then under condition B, that worker is likely an employee and no further analysis is necessary.

Going on to condition C, by way of example, while a plumber or an IT technician are not likely to fall within the mission of a social services nonprofit, whether they are in an independently established trade, occupation or business will need further examination. A licensed plumber in a separate business clearly is, but an IT technician may or may not be. Condition A, who directs and controls the worker in the performance of their work, will always require a case-by-case evaluation.

Finally, remember that this Supreme Court case involved the definition of “employee” for purposes of the California Wage Orders. Different employment laws have different definitions of “employee,” so it is possible that a worker may properly be classified as an employee with reference to one law but not another. Nevertheless, once a worker is classified as an employee for Wage Order purposes, they likely should be similarly classified for all other compliance purposes.

Nonprofits that have workers classified as independent contractors now or over the past three years (the applicable statute of limitations on wage claims) should re-evaluate that classification under this narrowed definition to assess whether there is potential liability for wages or penalties for the work performed.

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