As an insurance professional, you know errors and omissions (E&O) coverage provides financial protection for legal expenses associated with litigation, settlements, and damage awards. But for nonprofit organizations, it can be a challenge to explain the importance of spending a portion of their budget on additional insurance such as E&O coverage. After all, lawsuits don’t happen to nonprofits, right? Wrong!
When it comes to insurance, nonprofit organizations all too often only purchase the coverage they need to conduct business. Any additional insurance may require explaining why the coverage is important and how it works in the nonprofit sector.
Research shows that individuals learn best by example. Therefore, presenting scenarios may be an effective approach to help your clients understand how E&O insurance works. Here are three common E&O insurance coverage examples and how they apply to nonprofits, according to Investopedia:
1. Failure to deliver a specific service promised to a customer
A person looking for a specific service to help them with an issue reaches out to a nonprofit. The organization agrees to provide the individual with the resources they need through a referral. Unfortunately, the individual does not receive the help because an employee at the organization failed to submit the proper paperwork. Feeling that their needs weren’t met and that the organization’s error exacerbated the problem, the individual files a lawsuit against the nonprofit, accusing it of making a professional error.
Take note! Whether or not a lawsuit is warranted, going to court takes time and costs money — even if the case is dismissed or settled in court. E&O insurance protects nonprofits against claims of inadequate work or irresponsible actions a client might allege an organization made.
2. Professional negligence
A nonprofit that specializes in family counseling hires a professional to work with teens who have special needs. Later, it is discovered that the counselor was not specifically trained to work with children and is accused of improperly treating young adults. A lawsuit is filed against the organization accusing it of professional negligence, claiming it did not properly vet the counselor.
Take note! Even if counselors or other professionals are properly licensed, a client who feels they have been given incorrect information and/or been impacted negatively by the error can file a lawsuit against the nonprofit, citing professional negligence.
3. Errors, mistakes or oversights
An employee of a nonprofit that operates an animal shelter tells a caller they are happy to take in unwanted pets free of charge. When the caller arrives with the animal, they are told that not only is there a fee to surrender the animal but the shelter is also currently at capacity. The individual sues the nonprofit for providing incorrect information that caused unnecessary stress to them and their pet.
Take note! Even the most seemingly insignificant error or mistake made by an employee of a nonprofit can result in a lawsuit. This includes actions or information provided by volunteers!
At first glance, E&O insurance may seem necessary only for businesses in the for-profit sector. After all, who would sue a nonprofit? At Charity First, we understand the importance of E&O insurance and have the market reach to help you secure the right coverage, features and rates for your nonprofit clients.
About Charity First
The incredible services nonprofits provide come with unique and complex risks that are part of their everyday work in serving the elderly, children and other vulnerable populations. This is why Charity First is committed to providing our retail partners across the country with best-in-class underwriting, consistent and responsive service, risk management services and accident insurance for volunteers and participants.
To learn more, please contact us at 800-352-2761 or firstname.lastname@example.org.