General Information
Types of Insurance
This section includes an alphabetical listing of the common types of commercial insurance that voluntary sector organizations often have.
COMMON TYPES OF COMMERCIAL INSURANCE FOR
NONPROFITS AND CHARITIES
- Automobile (Owned and Non-Owned Coverage)
- Business Interruption
- Commercial or Comprehensive General Liability
- Crime
- Directors and Officers (D&O) Liability
- Errors and Omissions
- Liquor Liability
- Machinery Breakdown
- Professional Liability (including Malpractice Liability)
- Property
- Special Events Liability
- Tenant’s Legal Liability
Automobile Coverage
Owned Automobile
Under Alberta law, if your organization owns vehicles, you require owned automobile coverage.
Non-owned Automobile
While you can’t insure a vehicle your organization does not own, non-owned automobile coverage protects your organization against liabilities connected to any individual or company using a vehicle to undertake work for your organization, including employees, volunteers, couriers, or other types of drivers. This coverage can usually be added for a small cost.
Rental Car Liability
Rental car liability is covered by the rental agency. If for some reason in the event of claim the rental
agency’s cover was inadequate or void, your organization’s non-owned auto coverage would defend your
organization. Another option is to add an endorsement to your non-owned automobile policy to cover any
physical damage to the rental vehicle. Under the law, the owner of the
vehicle, such as an employee,
still needs their own personal
automobile insurance.
Employee and Volunteer Use of Personal Vehicles
Employees should advise their insurance companies if they use their personal vehicle for business purposes. Volunteers do not have to advise their insurance company if they use their personal vehicle as part of their volunteer work, as the work for the organization is not considered “business use.” However, volunteers should talk to their broker if the use of their vehicle for volunteering is more than occasional.
Business Interruption Coverage
Business interruption coverage can provide compensation if your organization has to shut down temporarily because of a type of insured loss or incident that is covered under your insurance policy, for example, a fire on your property. Depending on your policy, the coverage may cover extra expenses related to the incident, income that was lost as a result of the incident, or additional costs to continue operating, among other costs. Organizations may also want to consider how business interruption coverage can help ensure they are able to meet any contractual obligations to funders.
For example, if the government funds your organization to run a
program, what happens if there is a fire on your property and you can’t offer the programs for a period of time?
Commercial or Comprehensive General Liability
(also called general
liability, or CGL)
General liability coverage protects your organization against third party legal liability related to property
damage or bodily harm, such as damage to property that you don’t own or rent, or injuries sustained during
your programs.
General liability automatically covers Directors and employees while they are acting in the scope of their
duties; however, you may need to request an extension to cover volunteers.
Abuse Coverage (including physical, sexual and other types of abuse)
Most general liability policies specifically exclude abuse coverage. Organizations working with vulnerable
populations such as children, the elderly, or the disabled, should consider obtaining abuse coverage.
Depending on your insurance company, this may be added as an endorsement to your general liability policy,
or it may be issued as a separate policy. However, only a small number of insurance companies in Canada
offer abuse coverage, so talk to your broker or agent.
Employer’s Liability
This coverage can be added to your general liability policy to protect your
organization if an employee is injured and seeks compensation. This only
applies if your organization is exempt from having Workers’ Compensation
coverage for your employees. It is not the same as having Workers’
Compensation as it only responds if it is established that the employer
was deemed to have been negligent.
V isit the Workers Compensation
Board of Alberta online at
www.wcb.ab.ca to see a list of
industries that are exempt from
WCB coverage.
Personal Injury and Advertising Injury Liability
Personal injury and advertising injury liability can be included in a separate insurance agreement under a
commercial general liability policy to cover claims arising out of wrongful eviction, libel, and slander, violation
of privacy, and infringement of copyright. This coverage is subject to limitations and restrictions.
“Claims-made” versus “Occurrence” Liability Policies
| Claims-made | Occurrence |
| Claims-made policies provide coverage for claims submitted during the policy term, even if the incident
leading to the claim was before the policy was in
place. However, insurance companies often add
a “retroactive” clause so the policy will only cover
claims stemming from incidents that happen while
the policy is active, not claims based on incidents
that took place before the policy was in place. Your 1992 claims-made policy will not respond to the claim as it was before the policy was active and the policy includes a retroactive clause. As there was no policy active in 1991 when the alleged incident happened, you do not have coverage. |
Occurrence based policies provide coverage for
incidents occurring during the time the policy is in
effect, even if the claim is years later and the policy Under an occurrence-based policy, the claim would be covered by the ABC Insurance policy that was active in 1991, not your current policy. |
Depending on your insurance company, liability policies such as Directors and Officers (D&O), abuse coverage,
and professional liability may be issued on a “claims-made” or “occurrence” basis.
Crime Coverage (types of coverage may include dishonesty bonds and robbery)
Each year in the news, we hear about employees who steal, embezzle or commit other crimes against
their organizations. Although no employer wants to contemplate this type of situation, crime coverage will
provide protection for these types of financial losses. As well, if your organization has custody of other
people’s property, for example if you provide in-home care for clients, you can get a dishonesty bond to
cover theft of clients’ property.
Directors and Officers (D&O) Liability Insurance
All nonprofit organizations have a governing body such as a volunteer Board of Directors. As the leaders of the organization, it is common for volunteer Board members to express concerns about their own personal liability for the organization’s operations.
D&O covers against risks that are not included under your organization’s general liability policy, such as:
- claims arising out of Board decisions or omissions
- actions or activities performed directly under the auspices of the Board of Directors. D&O policies are usually issued on a claims-made basis.
D&O does not cover
- bodily injury or property damage as this is covered by your organization’s commercialgeneral liability coverage.
For example, if someone slips in the lobby of a building you own, your general
liability, not D&O policy, would respond to any claims.
Protecting Board Members in Your Bylaws
By “indemnifying” your Board members in your organization’s bylaws, your organization agrees to pay the
costs associated with a claim related to a Director’s service on the Board.
While indemnification helps protect Board members, many nonprofits and charities do not have the
money in reserve to pay the costs associated with a claim. D&O insurance covers the financial
requirements of indemnification.
Do All Organizations Need D&O Insurance?
Your organization’s decision to buy D&O insurance should be based on your level of risk. Most nonprofit D&O claims are employment-related, so the level of exposure is usually low for organizations with few or no employees. Talk to your broker or agent, and your Board about D&O insurance requirements.
Liquor Liability
When you serve alcohol at an event or function, your organization is exposed to a number of liquor-related liabilities including:
• Liability as a server – serving people past the point of intoxication.
• Liability as an occupier – whether you own the event venue, or are renting, you have a responsibility
to protect people on the premises from harm.
• Liability as an employer – when employees are consuming alcohol at events such as staff parties.
Buying a liquor liability policy for an event or function can help protect your organization, however, you should
also consider implementing policies and procedures that can address the risks connected to serving alcohol.
For example, internal policies and procedures may limit the amount of alcohol served to guests, not allow bartenders to serve intoxicated guests, and encourage guests to use a taxi service.
Visit the Insurance Bureau of Canada online at www.ibc.ca for detailed information about how you can reduce
your liquor liability.
Machinery Breakdown
Machinery breakdown usually covers the cost of repairing or replacing damaged equipment or machinery,
and any other property that was damaged by the failed machinery.
This type of coverage is valuable for organizations that own machinery or equipment such as boilers,
air conditioners, refrigerators, or phone systems as it may be difficult to cover unanticipated repair or
replacement costs.
Malpractice Liability
There is no single definition of who is a “professional,” so ask your broker how your insurance company defines professionals to determine if any of your employees or volunteers fall into this category. This will determine if you need professional liability coverage.
Employees or volunteers who are professionals and acting as a professional in their duties for your organization should have their own professional liability coverage to ensure their own interests are protected.
Professional Liability
This coverage responds to claims arising from acts of professional
negligence. Depending on your insurance company, this type of insurance
coverage may also be called “errors and omissions” or “malpractice”
insurance (note that malpractice always refers professional negligence
leading to bodily harm).
The following examples show the difference between the two categories
of professional negligence: financial loss and bodily harm.
Financial Loss
Your organization offers a program that provides financial advice to lowincome
earners. Advice from one of your employees who is trained as a
professional financial advisor leads a participant to lose their life savings.
The participant seeks compensation from your organization.
Bodily Injury
As part of your organization’s teen suicide hotline service, an employee
who is a trained psychologist speaks to a teen caller. Subsequently,
the teen commits suicide and the victim’s family sues your organization
alleging negligence.
Depending on the programs and services you offer, funders may require certain types of professional liability insurance be in place. Carefully review all contracts from funders and talk to your broker to determine what coverage you need to meet the funder’s requirements and to protect your organization.
Property Insurance
Property insurance is valuable for all organization, whether you rent or own property. In additional to buildings and other structures, property insurance also covers the physical assets your organization owns such as furniture, equipment, etc.
| If you own | If you lease |
| If you own your office or other roperty, property insurance protects against losses to buildings or other property, and the contents of buildings, such as your organization’s furniture, computer equipment, and other assets. | If you lease your office or property, property
insurance will provide coverage for the items your
organization owns, for example, computers, furniture
and other items. When leasing, review your lease to |
Covering the Value of Your Property
Property insurance policies usually include a co-insurance clause that sets
out the percentage of your property’s value you have to insure (such as
buildings, contents, or other physical assets). A standard requirement is
that you insure 90% of the value of your property. If you insure below the
co-insurance rate you will not get full coverage for a claim.
For example if you insure only 45% of the value of all your property
(including all assets) instead of the required 90%, you’ll get precisely half
your claim. On the other hand, if you insure to 90% of your property value
and everything is destroyed, you’ll get just the 90% you insured.
Moving?
Many organizations move property items they own from one location to
another, for example, a laptop and projector that are used for presentations, or lighting and staging
used for a community theater program. Depending on your insurance company you may have the
following options for covering these “moveable” items:
Floaters: Covering Specific Items
Adding a floater policy to your property insurance allows you to name specific property items that
are moveable and need coverage, such as an LCD projector or laptop computer.
In-Transit Coverage: General Coverage
An in-transit endorsement can also be used to provide coverage for items that are moveable. Under
this type of coverage, you do not need to name the specific items that are in-transit as this provides
blanket coverage.
Common Property Exclusions
Property insurance excludes a number of items and risks from being covered. While it is possible to buy an endorsement to cover some exclusions such as flooding and sewer backup, some things are never covered including mould, terrorism, data, and water seepage. Review your policy and make a note of the exclusions.
Special Events Liability
Nonprofits and charities often host special events to meet fundraising targets, raise awareness about their issue, or as part of their programs. Depending on the type of special event you are hosting and the risks connected to the activities, there are a variety of insurance products available including event cancellation, accident insurance, event liability, and liquor liability, among other types.
During the event planning stages, use the risk management process to assess the event’s risks and liabilities. Then, talk to your broker or agent to determine if you need to add endorsements to your existing policies, or purchase additional event-specific insurance. For a detailed event liability checklist, visit the Insurance Bureau of Canada online at www.ibc.ca.
Tenant’s Legal Liability:
Coverage When You Lease Property
As part of their operations, many organizations lease property, including an office, program space, or other buildings or structures. Under most leases, the legal liability for damage to the leased property falls on the tenant. Tenant’s legal liability coverage can protect against this type of loss. Read your lease carefully; it may broaden what you are already liable for under common law. Some leases have very broad hold harmless” clauses that try to transfer responsibility for everything over to the tenant and insurance may not cover it all. Tenant’s legal liability coverage may be included in your general liability policy, but often you have to request a separate endorsement. Work with your broker or agent to choose the right amount of coverage.