The Nonprofit:
A nonprofit operated an adult day care facility serving clients with significant mental disabilities. The nonprofit employed aides and nurses to provide direct care.
Facility maintenance and groundskeeping services were performed by a third party contractor under a service agreement with the nonprofit.
The Incident:
One afternoon, staff observed a maintenance contractor interacting with a client in a manner that raised immediate concern, and staff intervened to stop the interaction.
Staff reported that they were unable to confirm that the client understood what was occurring or could provide informed consent at that time. Law enforcement was contacted and they took the contractor into custody.
The client’s legal guardian was notified, and witness statements were documented in an incident report.
The Legal Action:
Following the incident, criminal charges were filed against the individual involved. Civil lawsuits were also filed against both the contractor’s employer and the nonprofit.
The client’s family alleged that the nonprofit bore responsibility due to its decision to engage the contractor and allow access to the facility.
The Coverage:
The nonprofit notified its insurance broker and initiated a claim under its Improper Sexual Conduct and Physical Abuse policy with Nonprofits Insurance Alliance (NIA).
NIA reviewed the claim and provided defense counsel to represent the nonprofit. The contractor and the contractor’s employer each retained separate legal representation.
The Result:
An investigation was undertaken to review the incident, the nonprofit’s response, the procedures and practices in place at the time, and the nonprofit’s contract with the maintenance provider.
As part of the review, materials such as vendor screening records, staff training records, incident documentation, and the service agreement were evaluated as part of the claims and legal process.
The civil claims involving the nonprofit proceeded through the legal process and were resolved without an adverse judgment against the nonprofit.
Separately, the matter involving the contractor proceeded through the criminal justice process, and a resolution was reached. The client’s civil claims against the contractor and the maintenance company were also resolved.
Things the Nonprofit Did Well:
The nonprofit documented the incident promptly and cooperated with law enforcement and legal authorities.
The nonprofit maintained service contracts and records that clearly defined the scope of work and responsibilities of third party vendors.
The nonprofit reported the claim promptly and engaged its insurer early, allowing defense counsel to be involved at the outset.
How Can Your Nonprofit Protect Itself?
Nonprofits that serve vulnerable populations sometimes consider how third party vendors are screened, how access to clients and facilities is controlled, and how concerns or incidents are reported and escalated.
Clear contracts, documented oversight practices, staff training, and defined response procedures can help organizations respond appropriately when serious allegations arise and support thorough review in the event that claims are made.
NIA Resources:
Nonprofits insured by NIA have access to My Risk Management Plan, an online set of tools intended to support the development of a risk management plan that reflects an organization’s needs, priorities, and culture.
NIA-insured nonprofits also receive a 40% discount on screening services through IntelliCorp, which may support organizations in evaluating candidates and aligning individuals with appropriate roles.
From the Claims Files stories are for general information only. They are simplified examples and do not guarantee coverage, a defense, or any specific outcome. Some losses described in this series may not be covered.
Coverage depends on the specific facts and on the terms, conditions, and exclusions in your policy. Contact your insurance broker or agent for guidance, and follow your policy’s claims reporting procedures if an incident may involve a claim.
This story is not legal, medical, financial, or professional advice. In an emergency, contact local emergency services first. Any risk management practices mentioned are general suggestions and may not apply to every nonprofit. Follow all applicable laws, licensing rules, and reporting requirements.
