501(c) non-profit organizations need numerous forms of insurance, just like a for-profit corporation does.
Leadership at most agencies typically have a general liability insurance policy in place but may not know that there are multiple other types of policies they need. General liability insurance does not protect you from errors, mistakes, or malpractice.
Lawsuits and other claims arising from those actions can be devastating for a non-profit, potentially costing your agency tens or even hundreds of thousands of dollars. Thankfully, errors and omissions insurance for nonprofits can protect your organization.
Errors and omissions insurance, or E&O, is a specific type of insurance, sometimes called professional liability. It serves to protect the organization in the event claims are made or lawsuits are filed for negligence, malpractice, mistakes, errors, or inadequate work. Depending on the policy, the plan may cover court costs as well as any settlements up to a certain amount.
While each professional liability policy is slightly different and may contain a few unique aspects, they do all generally cover similar claims, including:
Keep in mind that no other type of insurance other than errors and omissions insurance for nonprofits is applicable in these situations. If a mistake is made or someone from, near, or representing your agency commits even a minor mistake, you stand to lose thousands in legal fees alone.
E&O insurance is often carried and discussed under the umbrella of professional liability insurance. Do not let the name fool you – the types of occupations covered by the term “professional” have expanded over the past years. Where it was once only used to refer to doctors and lawyers, the term now applies to everyone involved in health care, human services, counseling, vocational training, and other types of education or instruction. Basically, anyone who is involved with the public should contact an insurance agent to discuss adding an errors and omissions insurance for nonprofits option to their existing plan.
Close to 90 percent of all non-profit insurance claims relate to accidents or injuries that happen at the non-profit location or events run by them – whicj is typically covered under general liability. The remaining 10 percent are the result of allegations of impropriety, professional mistakes, errors and omissions, and poor employment practices. With an E&O insurance plan in place, you can easily cover the legal fees and costs associated with those claims.
Nonprofit agencies are particularly vulnerable to claims for a few different reasons. The first is the type of community served by those types of organizations. Typically, these agencies work with people who have mobility or other issues. Additionally, nonprofit agencies hit by lawsuits without adequate insurance coverage often find themselves unable to carry on with their mandate.
Obtaining additional insurance may seem like an unnecessary monthly expense, but it is an important part of doing business. You need to be sure that regardless of the outcome of any claim, you and your agency can continue fulfilling your purpose. As a result, it is better to invest in a comprehensive professional liability insurance package including errors and omissions insurance for nonprofits coverage.
Most non-profit organizations should invest in directors and officers insurance for nonprofits, or D&O liability, immediately. These policies protect the decision makers in the organization from claims made about the performance of their duties. D&O insurance also covers wrongful or negligent acts regarding employment practices and finances.
This type of insurance is important to have, as it protects your directors and officers from being personally liable should anything happen. D&O insurance covers the cost of defending the agency as well as the directors and officers in claims or lawsuits. However, D&O insurance does not cover the same types of claims as E&O, which is why nonprofit organizations should always consider investing in both policies.
We hope this article on errors and omissions insurance for nonprofits was informative. The world is becoming increasingly litigious, making it necessary to have all the coverage you need to continue operating. Professional liability insurance offers non-profit organization coverage in the event of a claim or lawsuit, giving you the tools and funds you need to meet your mandate while also fighting legal battles.
