In my last blog post, I discussed the need for churches and nonprofits to utilize waivers and parental consent forms as a means to protect a church or nonprofit from liability and judgments. As I stated then, however, these forms are not a panacea and churches and nonprofits should be careful to carry adequate insurance to more fully mitigate against risks. There are many different types of insurance policies an organization should consider. Below is a list of the most common ones with a short description of each type.
- Commercial General Liability Insurance- The purpose of liability insurance is to ensure that those who are injured receive compensation. Injury lawsuits tend to be quite expensive so purchasing this type of insurance is a means by which a church or nonprofit can reduce such risk. A typical liability policy not only covers judgments but also provides for paying of legal defense
- Malpractice Insurance- Liability insurance generally does not provide coverage for professional services. A church or nonprofit that provides professional services should consider malpractice insurance. A typical example of this is counseling services. Many ministries offer marriage or financial counseling but fail to realize that without malpractice insurance, liability stemming from those services may not be covered by other existing policies.
- Directors and Officers’ Insurance- D&O insurance policies cover personal liability incurred by members of the board of directors resulting from their board actions. Although a general liability insurance policy may cover board members where the church or nonprofit is accused of negligence by an employee or volunteer, a liability policy will typically not cover matters such as unlawful employment practices, breaches of fiduciary duties, or bad management practices.
- Workers’ Compensation Insurance- Unless a church or nonprofit is exempted by law, workers’ compensation insurance must be obtained. Most churches and nonprofits are subject to Workers’ Compensation laws. Even if an exemption does exist, an organization should still consider voluntarily purchasing this insurance. This is especially true if the coverage in the general liability policy is inadequate to cover a serious employee injury.
- Property Insurance- Any church or nonprofit which owns property should consider property insurance. In many cases, an organization’s greatest assets are its property, whether real or personal. An organization should make a detailed inventory of all its property and ensure that adequate insurance exists to protect its property.
- Equipment insurance- An organization should also evaluate its need for equipment insurance. This type of insurance covers accidental and sudden breakdowns in equipment resulting in physical damage which requires repair or replacement.
- Automobile Insurance- Any organization that owns and operates automobiles should, and most likely are required, to carry automobile insurance. A church or nonprofit should make an inventory of all automobiles and ensure that each automobile is adequately insured.
- Volunteer Insurance- Churches or nonprofits that rely heavily on volunteers should also consider the need for insuring them. Volunteers are generally not covered by workers’ compensation policies, auto policies, or even liability policies. Organizations with lots of exposure here may consider various ways of insuring volunteers. For workers’ compensation policies, volunteers may be added to the policy. Likewise, liability policies may allow an endorsement for additional insureds which would cover volunteers. Some insurance companies may provide separate volunteer liability policies.
- Cyber Liability Insurance- A type of insurance that is growing in demand is cyber liability insurance. This insurance covers an organization’s liability for a data breach involving sensitive information. As more and more sensitive data is being stored electronically, a church or nonprofit should consider the need to mitigate risk in this area as well.
Insurance law can be complex. Moreover, the insurance needs of one organization might vary widely as compared to another organization. If your church or nonprofit has questions regarding insurance coverage, contact the attorneys at Dalton & Tomich, PLC.