Is your D&O coverage good…or great?

As with many professional lines coverage, Nonprofit Directors and Officers (D&O) coverage is complex and policies vary widely from insurer to insurer. How can you make sure that your insured has adequate coverage for their nonprofit? See if your insured’s coverage is good… or great! 

Retroactive Date versus Full Prior Acts

Most D&O policies are triggered by a when a claim is filed against an insured (claims made trigger). Some policies  what is called a retroactive date. A retroactive date puts a restraint on how far back coverage will go for an event. Full Prior Acts does not set a date limit, and will extend coverage all the way back until the organizations inception.

Here is an example showing both types of coverage. A nonprofit opens its doors in April 2013 and painted all of its walls with a paint that contained lead. Policy A is effective April 2015 - April 2016 and has a Retroactive Date as of April 2015 and Policy B is effective April 2015 - April 2016 and has Full Prior Acts coverage. In May 2015, Lucy develops a disease that is attributed to her playing with and eating the paint chips that contained lead from the nonprofit. Policy A would not cover this claim because the event happened before the Retroactive Date. Policy B would cover this claim, because it has Full Prior Acts that extends back to the nonprofit’s inception.

Defense Inside the Limits versus Defense Outside the Limits

Defense costs can often prove to be the most expensive part of litigation. Even if a claim is groundless, lawyer fees, arbitration, unearned salary from missing work and more need to be paid to handle a claim. It is important to know whether your insured’s policy pays defense inside the limits or defense outside the limits. If a claim’s defense costs reach the per-claim limit for coverage, the insurer will no longer pay for defense costs. Defense outside the limits is the opposite, in which the insurer will continue to pay defense costs indefinitely.  This is especially important for a nonprofit whose operating budget is minimal. If the defense is only paid within the limits, it will not take long for a claim to force the nonprofit to close its doors, even if the claim is groundless.

Shared Limits versus Separate Limits

Nonprofit Directors and Officers coverage is often paired with Employment Practices Liability coverage. Though some nonprofits believe they do not need Employment Practices Liability Insurance (EPLI), they do not know that it often covers volunteers as well as employees, and that EPLI claims occur 90% more often than a GL claim. An important feature to look for in your D&O policy is whether the per claim and aggregate limits are shared or separated between the D&O and EPLI. This is important because if there was a claim against your EPLI coverage, you may not want that claim to erode the limits that you have for D&O.

For example, if a volunteer was sued for discriminating against the public during the course of working for the nonprofit, this would potentially trigger an EPLI claim. It could also trigger a D&O claim in which a manager is sued for not properly screening this volunteer. If you have Separate limits, each of these claims will have their own limit to defend and pay the claim.

Reimbursement versus “Pay on behalf of”

This is one of the most important portions of a policy for a nonprofit. If the policy states that the insurer will reimburse the insured, that means the insured has to front the money for the defense of a claim. The insurer will then reimburse them for qualifying defense expenses afterwards. This can be detrimental for a small-budget nonprofit, especially when they believed that they purchased insurance so they would not have to pay for defense costs at all. It is imperative to get a D&O policy that will “pay on behalf of” an insured during the defense of a claim. These simple words can save a Nonprofit from closing its doors.

Get an instant quote for your nonprofit D&O by sending the answers to the below questions to submissions@gatewayspecialty.com

-          Name of Nonprofit? -          Physical Address? -          Description of Operations? -          Total Annual Revenues? -          Number of full time and part time employees and volunteers?

Who sues a nonprofit board of directors?

Understanding what the need is for Directors and Officers (D&O) coverage is the first step, but do you know who could bring a claim against the board of directors? Below is a list of potential plaintiffs and the claims they could file that could be covered under a D&O policy.

DONORS – Claims resulting from those who make donations to the organization

Ø  The Board of Directors of a church was sued by a number of their donors, alleging misrepresentation of the financial status of the organization. Three members brought separate suits for repayment of the money lent to the church. The first case settled for $240,000 of which $117,000 accounted for expense. The second case settled for $75,000 and incurred $86,000 in defense costs. The last case paid nothing to the claimant, but incurred $13,000 in defense costs. The total loss including defense costs exceeded $530,000.

THIRD PARTIES – Third Party Lawsuits can be filed for various reasons

Ø  An organization filed a suit against a foundation and its Board of Directors for improperly infringing upon the claimants intellectual property rights. The claimant filed suit seeking injunctive and monetary relief for the Foundation’s alleged improper use of trademarked property while promoting their fundraiser. The claim settled and the total loss including defense was over $400,000.

EMPLOYEES – The most common claims made by employees involve Discrimination, Harassment, Wrongful Termination, Retaliation and Hostile Work Environment

DISCRIMINATION

·         After 10 years of employment, an employee was fired for poor work performance. This employee brought a discrimination suit against their employer under the Americans with Disabilities Act (ADA). The individual alleged lack of work place accommodation and constructive discharge. The claim was closed for a total loss of over $80,000, including more than $20,000 in defense costs.

SEXUAL HARASSMENT

·         An employee alleged one of the directors sexually harassed her by unwanted physical contact, which occurred multiple times. After mediation, the case settled for $30,000. The defense costs exceeded $20,000.

RETALIATION

·         A former employee discovered illegal transactions involving retirement funds. Shortly after reporting the violations, she was terminated by her employer. She filed suit alleging retaliation and wrongful termination. The total loss exceeded $100,000 with the settlement figure over $80,000.

GOVERNMENTAL AGENCIES – Claims due to the violations of law

Ø  The United States Department of Justice brought suit, alleging misappropriation of funds and failure to revert unused money back to the government. The insured received federal grant money and allegedly used leftover grant money to renovate office space instead of return it to the government. The case closed for a total loss of over $60,000, including $21,000 for defense costs.

VOLUNTEERS – Volunteers are able to bring suits similar to those made by employees

Ø  A volunteer claimed the denial of a full time position was due to her sex, race and pregnant condition. She filed a lawsuit claiming discrimination. The claim is pending further litigation and defense costs paid to date total over $10,000 with an outstanding loss reserve of $65,000.

MEMBERS – A claim against the Directors to protect their members’ interests

Ø  A law enforcement fraternity began proceedings to have a member removed from the organization. This member then sued the organization in order to have the proceedings halted. While there was no monetary settlement, the defense costs were $15,000.

BENEFICIARIES – A claim made by the recipient of the organizations’ services

Ø  A discrimination suit was filed against the Board of Directors when the claimant requested a transfer within the housing complex and was denied. The claimant alleged discrimination based on national origin, religion and sex. The claimant was a resident at a drug and alcohol rehabilitation center. The court dismissed the case due to a lack of evidence. More then $10,000 was paid in defense costs.

Get an instant quote for your upcoming nonprofit D&O account by providing the below information or give us a call at 877-977-4474.

• Name of the Applicant
• Physical Address
•  Description of Operations
• Total Annual Revenues
• Number of Full Time and Part Time employees and Volunteers

What is the Need for Nonprofit Directors and Officers?

When serving on a nonprofit board of directors, the question often arises of whether they should obtain Directors and Officers (D&O) coverage. It may seem like a trivial coverage at first sight, but there is a lot of benefit that can potentially save each board member from losing their personal assets. Below are a few reasons why it is extremely important in today’s litigious society to purchase D&O coverage for your Nonprofit Board of Directors:

•  Lawsuits can come from donors, employees, the public, clients and governmental agencies
•  Board members assets (their homes and investments) can be at risk
•  Bylaws of the organization may indemnify the board but not board members
•  Lawsuits can put a nonprofit out of business in defense costs alone
•  Corporate scandals like Sarbanes Oxley Act has heighted accounting awareness        
• Over 400 nonprofits have been audited by the IRS in the last year

Get an instant quote for your upcoming nonprofit D&O account by providing the below information or give us a call at 877-977-4474.

• Name of the Applicant
• Physical Address
• Description of Operations
• Total Annual Revenues
• Number of Full Time, Part Time Employees and Volunteers

Do You Smell That?

Not the peppermint and cinnamon! We are talking about the Holiday season. It’s that time of year again; the time for us to reflect upon the year, be with our loved ones and, most importantly, eat delicious food!

With the Holiday season comes dinners, parties and gatherings. Never show up empty handed with this easy-to-make recipe courtesy of www.delish.com! 

Reindeer Bait

INGREDIENTS

•      3 c. corn chex
•      2 c. wheat chex
•      2 c. mini pretzels
•      2 c. mini marshmallows
•      1 c. red and green M&Ms
•     20 oz. white chocolate
•    Red and green sprinkles, for garnish

DIRECTIONS

1.    In a large bowl, mix together Corn Chex, Wheat Chex, pretzels, mini marshmallows, and M&Ms.

2.    Melt white chocolate and pour over mixture. Stir until fully coated.

3.    Transfer mixture to a parchment-lined baking sheet or dish and top with sprinkles, then refrigerate until firm, 1 hour.

4.    Break up into bite-size pieces and serve.

We hope this recipe is a hit at your next holiday party and we hope your holidays are filled with life, love and happiness.

Needing coverage for your upcoming Special Events? Let Gateway Specialty be your solution! Call 877-977-4474 to get a quick quote!

"I Have A Confession To Make"

"I Have A Confession To Make"...

Religious leaders throughout the country hear this phrase on a daily basis. Every day priests, pastors, rabbis, ministers and other clergy are trusted to provide a broad range of counseling services for their congregations and communities, often times, when they’re at their most vulnerable. Marital counseling, parent/child relationship building, bereavement counseling, insights on faith-based virtues, and guidance through life transitions are common services provided.

Professional religious counseling programs draw on modern methods of therapy and behaviorism, while also integrating spiritual values and fundamental theological ideals. While congregation members put their faith and trust into their clergy, clergypersons are legally held to the same standard of care as other professional counselors. 

Common lawsuits against clergy include the following allegations:

• Failure to protect the counselee (counselee attempts suicide or attempts to harm another person)
• Failure to report child abuse when required to do so by law

• Allegations of sexual misconduct between the clergyperson and counselee

• Quality of counseling services is unsatisfactory or has inflicted mental distress

• Breach of confidence/failing to keep private counseling information confidential

The defense costs alone for these types of allegations can financially devastate a house of worship, forcing them to close their doors permanently, regardless of whether or not any merit to the allegations exist. In addition, with over 4,000 start-up places of worship opening each year , there are many clergy entering the field for the first time without having any prior counseling experience. This can compound the liability exposure for clergy and their houses of worship.

Houses of worship can help to protect themselves by having established guidelines on sexual misconduct and controls in place for maintaining counselee confidentiality, making sure their clergy members are qualified and obtaining pastoral professional insurance.

We provide a broad and comprehensive insurance solution for houses of worship of all faiths and denominations. Our pastoral professional coverage is available in conjunction with general liability and provides errors and omissions coverage for the counseling services provided. We provide limits up to $1,000,000 for a competitive premium charge of $250.

Additional coverages and benefits for our Nonprofit Package Houses of Worship product include:

• Abuse and molestation limit options available up to $1,000,000

• Automatic coverage for outreach activities, fundraisers, missions, retreats, and other special events

• Optional certain criminal or civil proceeding defense cost reimbursement coverage available

• Automatic additional insured status for church members

• Optional hired and non-owned auto coverage

• Limit options for directors and officers and employment practices liability, including third party coverage, available up to $5,000,000

Please contact us today for more information on our Houses of Worship product!

Article Courtesy of USLI >> www.newsletter.usli.com

Why D&O Is Important for Nonprofit, Social and Human Services

What is Directors and Officers Insurance?

Directors and Officers (D&O) is a liability coverage that is tailored to protect the directors, officers and board members of an organization. Directors and officers can be found personally liable and having proper coverage allows board members to make decisions clearly without the worry of being sued. D&O coverage protects individuals and organizations from claims including negligence, misappropriation of funds and breach of fiduciary duty. These lawsuits are very expensive, can halt your organizations services and put your board members' personal assets at risk.

What are the benefits of D&O?

Most Nonprofit organizations do not realize how often these claims arise. Every decision a board member makes lends itself to potential litigation risks. Understanding, things like Hammer Clauses, Defense Outside the Limits, Cyber Coverage and a Lifetime Occurrence Reporting Provision (LORP) can go a long way in protecting an organization from closing its doors.

• A hammer clause is a consent to settle provision stating that an insurance carrier will pay up to a particular amount for a claim that could have been settled for a lesser amount and that the insured has chosen to continue and litigate.
• Defense Outside the Limits covers defense costs without eroding the liability limit of the policy
• Cyber Coverage can provide for defense and indemnity costs incurred when sensitive information (personal information, credit card numbers, financial statements, etc.) is compromised
• Lifetime Occurrence Reporting Provision provides former board members peace of mind for their decisions and actions in the event that their successors fail to maintain their Claims-Made coverage

A recent claim example illustrates the need for Directors and Officers coverage for Nonprofits Organization.

D&O Claim Example

The trustees of a charitable organization decided to expand their activities into areas that were not explicitly envisioned by the founders. Soon after, their state's attorney general brought an action against them alleging misuse of funds and property for operating outside their charter, even though no third party raised a complaint. The organization's insurer defended the claim and incurred $75,000 in defense costs.  Through reading this claim, it is apparent that D&O claims can be unexpected and could put your company in a daunting financial position. Luckily for this organization, they were carrying proper D&O coverage.

Obtain a D&O quote for your nonprofit, social or human services today!

Umbrella Coverage Explained for your Nonprofit, Social and Human Services

What is Umbrella Coverage?

Nonprofit organizations have a variety of unique exposures that can make their appropriate liability limits, and insurance coverages, difficult to gauge. As time passes, our society is growing to be more litigious in nature, which makes nonprofit losses even harder to predict. It is especially important for nonprofits to have comprehensive coverage in place, so that they're always in the best position to be protected. An important part of securing comprehensive insurance coverage includes an Umbrella policy. Umbrella insurance policies offer extra liability insurance in the event of a large loss, which enables nonprofit organizations to continue to focus on what matters - their mission.

Why is Umbrella Coverage Needed?

Umbrella coverage is a strong asset to have, especially working with a nonprofit. The funds to run a nonprofit operation are slim as it is, it would be detrimental if the nonprofit organization was forced to pay an insurance claim out of pocket because they did not have the proper coverage limits.

The following are claims examples that illustrate the severity and regularity that nonprofit claims can occur:

• A fraternal club was having a cookout while celebrating Independence Day. The propane tank on the grill exploded, severely burning eight veterans and two children. The case settle for $3,900,000, well over their $1,000,000 general liability limit. 
• A young church volunteer was helping paint the outside of the church. While on the ladder, the volunteer slipped and fell on the ground, suffering major head and neck injuries. $2,500,000 was paid to the volunteer's family.
• A youth community center took a group of teenage members to a local swimming hold for the day. A 14 year old boy drowned during the outing. The case settled for $2,800,000.

Get a package quote with Umbrella coverage or add monoline Umbrella coverage to any existing policy for your nonprofit, social or human services today!