The Nonprofit:
A nonprofit operated a museum and living history program at a popular historic site.
The organization employed approximately 25 costumed actors and docents who interacted with visitors, along with 14 non-acting staff members serving in supervisory and support roles.
The Incident:
One of the nonprofit’s actors was involved in a personal relationship with a supervisor. Management and human resources were not aware of the relationship until after it ended contentiously.
After the relationship ended, the employee reported the supervisor for sexual harassment. According to the nonprofit, the employee’s job performance later began to decline.
The organization claimed they attempted to address the issues, but when those efforts did not resolve the performance problems, the employee was terminated.
The Coverage:
When the nonprofit learned about the lawsuit, they immediately notified their insurance broker, who began the process of making a claim on the nonprofit’s Board & Executive policy with Nonprofits Insurance Alliance (NIA), which included Employment Practices Liability (EPLI) coverage.
The Result:
NIA’s claims examiners reviewed the nonprofit’s records, as well as their practices and policies around hiring, addressing performance issues, handling terminations, and workplace relationships.
During their review, they noted that although the nonprofit had documented the reported relationship in the employee’s personnel file and the employee’s report of sexual harassment, the nonprofit had not adequately retained detailed documentation of the alleged performance issues or the steps reportedly taken to address them before moving to termination.
Based on the information available at the time, the parties addressed the dispute through the legal process, and it concluded prior to trial.
Things the Nonprofit Did Well:
The nonprofit maintained performance records and documented efforts to address job related concerns before making a termination decision.
Having records of employment actions and decision making timelines helped establish the sequence of events and provided context for how the organization handled the situation.
How Can Your Nonprofit Protect Itself?
Employment disputes often involve overlapping issues related to performance, supervision, hiring, termination, and workplace relationships.
Some nonprofits consider how employment policies are communicated, how supervisors are trained to document performance concerns, and how complaints are handled independently of disciplinary decisions.
Clear documentation, solid recordkeeping, consistent processes, and thoughtful communication can help organizations navigate difficult employment decisions and respond when questions arise.
NIA Resources:
NIA insured nonprofits with a current Employment Practices Liability (EPLI) policy get no-cost access to:
- Labor and Employment Risk Managers, who can provide guidance on a range of employment related issues, including compliance.
- Harassment prevention training for supervisors, which may support efforts to meet applicable state training requirements.
All NIA insured nonprofits receive discounted access to workplace and business compliance training, including online courses that address topics such as conflict resolution, performance management, and communication strategies.
In addition, NIA insurance includes free access to webinars covering nonprofit specific topics such as risk management, employment risks related to retaliation, documentation practices, and discipline/termination considerations.
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.
