INSURANCE IN THE CASE OF INJURY

This section discusses the kinds of insurance that volunteers and organizations may wish to have in case they ever have to face claims against them as a result of their volunteer work.

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Quicklook:

BUYING INSURANCE

Solicit bids every three to five years. Allow sufficient time for insurance companies to do a risk assessment of your organization. Find an insurance advisor with expertise in working with nonprofit organizations. Ensure that all of your activities are covered, such as claims by volunteers or participants, or coverage for off-site activities. If legal defense costs are to be covered, determine whether you can use your own legal counsel and whether costs will be paid at the time they are incurred. Be very careful to provide accurate information on the application form. Fully disclose the organization’s prior losses and provide details on ways the organization can avoid future losses. Report prior incidents that might give rise to a claim in the future. Ask each insurer to provide information on the insurance carriers’ financial strength. Keep in mind that many insurance agents operate on commission and may benefit from selling higher packages. Negotiate for coverage and pricing.

Those involved with volunteer organizations, from staff, to board members to the volunteers themselves should be aware of the expenses that may be incurred should they be held liable for any claims that might arise in the course of their duties, including the cost of paying for a legal defense. For more information on insurance and the voluntary sector, visit the Volunteer Alberta and look for the Insurance Toolkit interactive web tool.

I. TYPES OF RISK TO INSURE AGAINST

Before deciding on an appropriate insurance plan, it is important to identify the kinds of risk that might require insurance. Here are some of the common risks:

risks associated with the premises, such as fire or theft
risks to those involved in activities, such as volunteers and participants
risks to those working on the premises, similar to staff coverage for workplace injuries
risks related to activities away from the premises, such as sports or special events
risks related to advice that employees or volunteers give to clients or participants
risks related to the functioning of the organization, such as the firing of employees, and
risks related to the work of the Board of Directors.

In these situations, the organization could be liable and should consider insurance to cover the risks.

In some of these situations, individual volunteers may be personally liable. Those at risk should consider purchasing their own insurance or ensuring the organization can and will reimburse them for liability costs they incur.

II. OPTIONS FOR VOLUNTEERS

A. Volunteer’s own personal or home insurance

Volunteers’ own insurance coverage, such as homeowner or contents insurance, may protect against some of the risks involved in volunteer activities. For example, casualty coverage (for damage or loss caused by things like vandalism or fire) may cover some personal losses that occur as a result of volunteer activities. For example, if one of XYS Societies volunteers was using his own video camera to cover the organization’s summer camp and the camera fell in the lake, the homeowner insurance might cover that loss.

Liability coverage in a homeowner’s policy may insure against lawsuits from third parties, such as a participant who becomes injured on the homeowner’s property. Volunteers may also have access to comprehensive insurance covering a number of potential risks, or have particular coverage added to their insurance policy. An insurance agent will be able to suggest insurance options.

B. Motor Vehicle Insurance

Volunteers who use their own cars to transport clients of an organization must carry adequate third party insurance. It is the duty of the organization to ensure that this is the case, by reviewing the volunteer’s insurance policy or receiving confirmation from the volunteer’s insurers. It is sometimes appropriate for the organization to fund the cost of the excess insurance to ensure compliance.

Where organization-owned vehicles are used, it is equally necessary to ensure that volunteer drivers are covered by the organization’s motor vehicle insurance policy.

III. OPTIONS FOR ORGANIZATIONS

A. Insuring Volunteers against Injury

In most situations, it would seem that volunteers are not eligible for coverage under the Workers Compensation Act. For this reason, most organizations should extend their insurance to cover their volunteers in case of injury. In the case of most government departments, the same standard as that in the Workers Compensation Act is used in assessing the injury of the hurt individual. There is a special provision in most governmental organizations to compensate volunteers at the same rate and at the same scale of payment as though they were workers or employees when the injury occurred.

Supervisors of volunteers, on the other hand, may be employees and if so, would be covered by employment legislation and their contract of employment. Generally, no additional insurance provisions against injury are necessary.

B. Comprehensive General Liability Insurance

Basic insurance packages like comprehensive general liability insurance are necessary to protect organizations from losses and from claims made against them by third parties for injury or damage to property. This type of insurance is generally designed to cover claims arising from bodily injuries, property damage, lost wages, and other losses suffered because of the negligence of the nonprofit organization or its employees. Volunteers may also be included in the policy, or added by special agreement. However, this type of insurance usually protects volunteers only in the case of accidents. If a volunteer deliberately hurts someone, or damages his or her property, general liability insurance policies will probably not pay for the claim.

IV. OPTIONS FOR BOARDS AND DIRECTORS

A. Director Indemnification

Nonprofit organizations are permitted to indemnify (pay back) board members if they are sued. Indemnification covers the expenses a director incurs to defend a lawsuit or the cost of a settlement while the board member served on the board.

However, certain situations may not be indemnified. Some statutes limit organizations from providing indemnity. This can protect some of the organization’s funds from being used for purposes other than they were intended. Indemnification may also require board approval. For organizations incorporated under the Canada Corporations Act, for instance, the directors may be indemnified if the members vote in favor of such indemnification.

B. Directors and Officers Liability Insurance

Directors and officers liability insurance protects directors from personal liability in most cases when they are acting within their Board capacity. For example, if XYZ Society carried this type of insurance, they would be covered from such acts as an error made in good faith of granting money for a purpose other than was intended or employer responsibilities such as wrongful dismissal or non-payment of wages, or which directors may be personally liable.

Director and officers liability insurance may also provide coverage for directors and officers who are sued for negligently managing the company’s affairs. It covers the organization for its responsibility to reimburse directors and officers for their liability and may also extend to directors being sued by the organization itself. Coverage may include the costs that directors incur to defend a lawsuit and pay an awarded settlement.

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