Professional Liability Insurance
for Nonprofit Organizations
Nonprofit startups and social services businesses offer solutions to deep-seated social problems. In the course of carrying out their mission, they may provide solutions or offer advice and counsel that simply falls flat — or worse, causes harm to others. But what happens when an oversight or mistake results in a lawsuit? If you’re found liable for professional negligence, the lawsuit settlement or judgment may be too much for your nonprofit to bear. How do you protect your organization?
To safeguard against these looming risks, nonprofits turn to Errors and Omissions Insurance (aka Professional Liability Insurance), which may offer financial protection. If a client or community member sues your organization for professional negligence or mistakes made while performing your services, your organization’s E&O Insurance may offer funds to cover lawyers’ fees, court costs, and even settlement or judgment fees related to initial charges.
To learn more about E&O Insurance and how this coverage protects your nonprofit or social services business, keep reading.
E&O Insurance: Protecting Nonprofits and Social Service Providers
Errors and Omissions (E&O) Insurance is a necessary safeguard for any organization that offers guidance, counsel, or services to clients. Say, for example, you run a suicide hotline. If one of your operators talks to a teen who later harms him- or herself, the parents could claim your operator was professionally negligent or that your organization failed to perform professional duties. If they sue, your Errors and Omissions Insurance would kick in and may cover the cost of attorney’s fees, settlement or judgment expenses, bond premiums, and other court costs, up to the limits of your policy. Even a meritless claim may be covered by your policy so that you don’t have to pay out of pocket for legal fees and other court costs.
Some of your clients’ contracts will require that your nonprofit business has an E & O policy in place before they work with you. That way, if your organization is truly responsible for a mistake — including shoddy, incomplete, or incorrect work — you can account for the financial losses or tarnished reputation your client may suffer due to your oversights. However, you’ll need to have a Professional Liability Insurance policy in place before an accident happens to receive coverage. Most E & O policies only cover incidents that occur while the policy is in force.
Errors and Omissions Insurance for Nonprofit and Social Service Businesses: Key Details
While shopping for an Errors and Omissions policy to safeguard your nonprofit or social service organization, remember to talk to your insureon agent for advice on the coverage limits that are appropriate for your needs. Our nonprofit insurance agents understand the unique risks your organization faces and can help you determine the kind of policy that fits your mission. Here are a few key details about Professional Liability coverage that you’ll want to keep in mind as you weigh your options.
Most E & O policies today offer what is called "claims-made" coverage, which means your policy must be active when an alleged incident occurs and that your policy must still be in force when a claim is filed. Unless both of these conditions are met, your coverage will not kick in. This is why most nonprofits select an E & O policy and keep it active for the life of their business.
If you have a Professional Liability policy in force and decide to switch to a different policy, know that this gap in coverage leaves your organization exposed. For the interim, look into purchasing a "tail" policy that may cover claims that occur during the transition between E&O policies.
Tails and Prior Acts
Tails and Prior Acts for Coverage Gaps
Your nonprofit could be exposed to coverage gaps if you need to end your current E & O policy in favor of another one. To keep your organization protected at all times, ask your insurance agent about purchasing "tail" coverage or "prior acts" coverage. Tail coverage allows you report claims even after your policy has ended. Prior acts coverage protects your organization retroactively if a past client sues after you’ve terminated your previous policy. This coverage accounts for incidents that took place under a previous policy, but for which claims were filed after the coverage was terminated. For further clarification or to discuss your options, feel free to contact an insureon agent.
Limits and Deductibles
Coverage Limits and Deductibles
E&O policies are typically available in increments of $1 million in order to appropriately protect nonprofits from the cost of exorbitant settlements or judgments. Your per-claim deductible can range from $1,000 to $25,000, but will depend on the amount of coverage your policy offers. As a rule, be sure you don’t accept a deductible your organization can’t comfortably spare out of pocket.
Special Considerations if You Serve Children
If you serve children, the elderly, or vulnerable populations, you may want to consider asking your agent about coverage for abuse lawsuits. While no organization expects a lawsuit like this to occur, E&O may offer protection if your organization or one of its volunteers is accused of abuse. If an incident like this occurs at your organization, Errors and Omissions Insurance may offer financial protection to cover lawsuits, damages you owe the party suing your organization, and other legal expenses.
Get Free Quotes
Find an E&O Policy for Your Nonprofit or Social Service Business
Ready to find an Errors and Omissions policy that fits your nonprofit or social service organization’s needs? The insurance experts at insureon are happy to help. We can tailor your Professional Liability plan based on the number of people you need to cover and the professional responsibilities you need to insure. To get started, complete our easy online application for competitive quotes from top-rated insurance providers.