California Non-Profit Insurance

Nonprofit organizations seeking insurance in California face a variety of liability exposures and policy options. Each type of liability exposure corresponds to a different category, but, in reality, each category is truly defined by the type of insurance coverage that relates to it. The main liability exposures facing California nonprofit organizations in today's world are:

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General Liability Exposures – For any California non-profit seeking to obtain insurance, general liability coverage is the most basic and will respond in cases of bodily injury as well as advertising injury, often required by landlord to occupy space. Can often be found on a BOP.

Workers' Compensation – Workers' Compensation is required under California State law for any organization with employees. Often Principals and shareholders can be excluded.

Professional Liability – Covers professionals for negligent acts that cause injury to clients. Often termed E&O this coverage an cost varies widely and depends on the profession.

Employee Practices Liability Insurance – AKA EPLI will protect the business from suits that originate from wrongful termination, discrimination and other violations of California State employees’ legal rights.

• Fiduciary Liability – It is a fiduciaries legal responsibility to safeguard assets of beneficiaries. Many California non-profits hold funds in the trust or employees (401 K, pensions, etc) or on behalf of other organizations. Fiduciary Liability coverage will respond should an organization mishandle funds.

• Auto Liability – IF the organization owns vehicles this coverage is similar to any auto liability coverage. *Your organization may have this exposure even if it does not own vehicles. Does anyone run errands, deliver, or drive during the course of doing work?

Directors and Officers Liability – Will cover directors and officers for negligent acts that can result from acts or omissions that cause suits to be brought against the organization. This coverage can be expanded in some cases to cover EPLI.

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General Liability Exposures

General liability exposures are also called office liability coverage or premises liability. These liability exposures are the most commonly insured and are usually found as part of a package. These packages offer building and contents coverage, as well as other components. The Insured Perils that are covered by this are:

• Bodily Injury – This means injury, sickness or disease as it applies to any single person within the scope of the policy. However, the injury must be sustained after the policy period. It also includes death resulting from any injury that falls into this category.

• Property Damage – This refers to physical destruction or damage of any tangible property that occurs when the policy is in force. This includes the loss of property and the loss of property use at any time because of the damage. It also applies to tangible property that has not been damaged or destroyed, but of which you have lost the use, during the policy coverage.

• Personal Injury Offenses – Personal Injury Offenses cover several areas that are not covered by Bodily Injury. These include false arrest, detention or imprisonment, malicious prosecution, slander in oral or written form, libel in oral or written form, and violation of privacy in either oral or written form.

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Coverage and Exposure of Workers' Compensation

There are two parts to Workers' Compensation coverage in the state of California; one part is designed to provide statutory benefits for the employee who was injured, while the second part is entitled Employer's Liability coverage and affects the benefits to the employer of the injured worker.

Employers are required by law to provide specific benefits to any employee injured in the workplace or "on the job." The employee gives up the right to take direct legal action against the employer in exchange for these benefits. However, the employee is entitled to take action against any third party involved in the situation. This third party can then take legal action against the employer. Employer's Liability is the part of the policy that protects you in claims involving a third party.

For instance, if an employee is harmed by malfunctioning equipment, that employee can take legal action against the manufacturer of the equipment. However, the equipment manufacturer can take action against the employer if the correct maintenance and safety precautions were not followed. Employer's Liability protects the employer in this instance.

Please note that in the state of California Workers' Compensation coverage is mandated by law and is required at all times. If an employee is injured and the employer does not have Workers' Compensation coverage, there is no defense or protection afforded the employer. The employer will have to pay the statutory benefit to the employee, regardless of the employer's current financial situation. Even bankruptcy does not protect the employer from this. During the legal action, personal assets of directors and officers can be seized and Directors and Officers coverage will not protect them, or the employer from this action.

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Professional Liability

Professional Liability is covered by Directors and Officers Insurance, but there are several vital reasons that an employer should not rely solely on this protection.

Bodily Injury Claims Not Protected by Directors and Officers Insurance

In certain nonprofit organizations such as counseling centers or treatment clinics, it is possible that the act or decision of any professional within that organization will lead to a bodily injury lawsuit. Directors and Officers Insurance does not protect against this circumstance. General Liability Insurance does provide coverage for bodily injuries, but not for professional liability exposures. A Directors and Officers Insurance policy may specifically denote a lack of coverage for certain types of business practices that occur in an organization.

Coverage for Employee Benefits Liability Exposure

This type of insurance provides vial protection in the event of human resources errors during the administration of employee benefits. For instance, any liability arising from incorrect or falsified information within COBRA, Workers' Compensation, any group health policy or any other employee benefit can be insured through this type of policy. In addition, an employer can extend this coverage from General Liability Insurance; however, Directors and Officers Insurance does not offer this protection in most cases.

Exposure to Fiduciary Liability

Fiduciary Liability is the direct result of an accusation of poor financial advice, or when promised results fail to appear within the specified or reasonable amount of time. Directors and Officers Insurance will provide a minor amount of protection against these claims; however, pension investment recommendations are not covered. A wide range of financial choices and a third party administering your pension plan will help reduce the risks involved in this instance.

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Coverage for Auto Liability Exposure

This area covers any liability related to owning or operating an automobile. If you own any vehicles, this type of insurance is required. However, even if you do not own any vehicles, this type of insurance can offer benefits. For instance, hired and non-owned liability insurance coverage can be added to any type of General Liability policy. Hired physical damage coverage can help you waive fees associated with car rentals, as well.

Coverage for Directors and Officers Liability Exposure

As mentioned earlier, this is an extremely gray area, entailing numerous types of coverage to protect in the instance of a vast number of exposure types. You will find more information within the Directors and Officers Insurance portion.

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Some additional coverages available to this class of business:

• General Liability
• Commercial Automobile 
• Workers' Compensation
• Umbrella 
• Crime 
• Directors & Officers Liability 
• Bonds
• Earthquake
• Internet Liability
• Foreign Liability
• Computer Virus
• Property
• Inland Marine/Equipment Coverage
• Builders’ Risk
• Self Insurance Alternatives
• Professional Liability
• Employment Practices Liability
• Mergers & Acquisitions
• Warranties & Reps
• Tax Opinion Liability
• Contingent Liability Buy-Outs
• Intellectual Property
• Identity Theft


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