Any organization that provides services to youth, developmentally disabled individuals of any age, or senior citizens should consider this type of insurance. The intent of this coverage is to respond to allegations of sexual abuse. This should not be confused with sexual harassment, which is more appropriately insured under a directors and officers policy.
Some insurers claim that this coverage is included in their general liability insurance because the policy does not specifically exclude improper sexual conduct, but relying on a general liability policy is a risk that may provide no coverage for employees and volunteers who may be unfairly accused. Unless this coverage is purchased as a separate policy, specifically providing coverage for improper sexual conduct, you will likely not have any coverage for your innocent employees or volunteers.
Enhanced Coverage of Nonprofits OWN Improper Sexual Conduct
Summaries of key features only. Actual policy language will differ.
- Separate limits from the General Liability Coverage Form
- Various limits available: aggregate limit to $3 million
- Umbrella limits to $10 million available
- Prior Acts Coverage available for an additional charge
- Broad definition of insured includes nonprofit organization as well as executive officers and directors, employees, volunteers, interns, and students-in-training
From the CLAIMS FILES
Day Care Molestation:
An independent daycare contractor was certified by a nonprofit. A child placed in the daycare center was molested by the teenage grandson of the daycare contractor. Litigation ensued and the nonprofit’s records showed all appropriate site visits and background checks had been carefully done. Based on case law that insulates a nonprofit from the unforeseen criminal acts of a third-party and their strict adherence to protocols, we were able to obtain a court ordered dismissal that was upheld on appeal. No damages were paid on behalf of the nonprofit, but we incurred almost $150,000 in defense legal expenses.
Assault by Employee:
A client of the nonprofit’s safe harbor house was sexually assaulted by one of the nonprofit’s part-time gardeners, who had a mild mental illness. Investigation revealed that the gardeners were supposed to be closely supervised and his absence from the crew could not be explained. Based on medical records that reflected little physical trauma but a psychological reaction, the claim was eventually settled at a mediation for $50,000. We incurred $11,000 in legal expenses.
Battery by Teacher:
One of the students in a nonprofit’s school for disabled and difficult students began acting out and needed to be physically restrained. It was subsequently learned that the teacher had not correctly followed take-down procedures, but injuries as a result of the alleged physical abuse were minor. The parents retained an attorney and we were able to resolve the claim for a very modest $12,000 to be placed into a college trust fund. No litigation expenses were necessary.