The Shield of Protection
Watershed groups are innovators, passionate about their mission, and take the inherent risks needed to protect and enhance local waterbodies. Many activities undertaken by watershed groups have a high potential for risk. For example, youth groups assisting in a streambank restoration project are using equipment (hammers, shovels, stakes) that may result in injury. The injured participant may claim negligence by the sponsoring organization(s) or staff (employee or volunteers) even if the organization and responsible staff ensured all safety measures were followed and volunteer waiver forms signed. Insurance coverage is critical to protect organizations from unforeseen events, but this protection does come at a substantial cost.

Organizations should not assume that being incorporated or obtaining nonprofit status shields them from being sued. Is your organization required to purchase insurance? The answer is no; New Jersey statutes (New Jersey’s Charitable Immunity Law, N.J.S.A. 2A:53A-7 et. seq.) do provide some limited immunity to nonprofit corporations. Can you still be sued? The answer is yes, and your organization will still have to cover the legal expenses even if the case does not reach court. The incurred expenses can devastate a group’s capability to continue its programs and mission. Insurance coverage is critical to protect an organization from unforeseen disastrous and catastrophic events. But this protection does come at a substantial cost. Regardless of your budget, it is important to assess your operations and plan for insurance coverage.

Getting Started

The types of insurance policies and associated nuances can be overwhelming when determining the coverage your organization needs. The number of coverage options seems almost proportional to the number of insurance companies. To complicate matters, insurance policies change from year to year.

There are strategies to reduce your risks (risk management), but these activities, such as developing policies and purchasing safety materials, can also be seen as additional costs to the organization. These additional costs, however, should be seen as valuable assets and investments in your organization. Risk management is a means to reduce the liability in your organization. When your organization invests in the safety of its operations, there is a rippling effect felt both internally and externally. These new policies and materials improve the quality of your programs by informing your members and volunteers that their safety is as equally important as their new experiences with nature and your organization. They also provide staff and volunteers with the peace of mind that they are trained and have the means to handle most circumstances. Once you have taken steps to reduce your organization’s risk, it is time to look into the insurance options to insure the rest.

The most basic insurance coverage for an organization is a commercial general liability or CGL policy. This type of policy provides coverage for claims alleging bodily injury, personal injury (slander/libel) and property damage. General liability insurance covers many, but not all liability exposures facing an organization. The second most common insurance coverage is Directors and Officers (D&O) insurance.

D&O insurance protects an organization against claims alleging “wrongful acts” by those covered in the policy. D&O insurance covers the legal expenses and settlements associated with claims. Consider the following scenarios: a granter determines that your organization inappropriately used restricted funds to pay rent. Or the Board of Trustees fires the director because of old age. In these cases, the funding organization and the director may have grounds for lawsuits, but these circumstances are not covered by general liability insurance.

helpful_hint Helpful Hints Below are a few examples on how to modify your activities to reduce risk.

  • Provide appropriate trainings for staff and volunteers such as safety training or financial management.
  • Develop standard operating procedures for administrative and program activities, particularly internal controls to protect against fraud and theft.
  • Develop a waiver for the organization’s activities that explains the potential risks involved in an organization’s activities.

Discuss coverage options with other groups to learn ways to obtain improved or more suitable coverage.

Keep in mind that once you finally obtain a policy your work is not entirely over. The addition or removal of activities may also affect your policy. In general, it is wise to keep a line of communication open to your insurance company to ensure all your activities are covered. Continually investigate your options to improve the organization’s coverage. Obtain legal assistance and have thorough discussions with insurance professionals to determine the most appropriate choice of protection for your organization.

 Further Resourcesresources

  • Center for Non-Profits  The Center is a charitable umbrella organization serving New Jersey’s nonprofit community. They offer group-buying programs on various insurance coverages.
  • Nonprofit Risk Management Center The Center provides numerous resources and publications on insurance issues and provides free technical assistance on risk management and insurance via telephone and email.
  • River Network River Network offers D&O Coverage for its Partners through U.S. Liabilities.

Coverage, Claims & Consequences: An Insurance Handbook for Nonprofits, from Nonprofit Risk Management Center.

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