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                     Friday, August 21, 2015                                            



Liability coverage nonprofits should consider

Your people are your organization’s most vital assets. So it’s important to find the right insurance coverage to protect both your team and your nonprofit. Here are a few tips to make sure your staff and organization are safely covered.

Employer’s Liability

Did you know? Under most Commercial General Liability policies there are limitations, conditions and exclusions relating to employee injuries in the workplace. 

Canadian law doesn’t require all nonprofit organizations to carry Workers’ compensation. Workers compensation benefits are payments for injuries or diseases that are related to the work you are doing and are based on the health and safety risk of your type of business, the size of your payroll, and on your company’s health and safety record (see Workers Safety Insurance Board or Community Legal Education Ontario for more information). If you operate in an industry not required to carry this coverage and opt not to purchase it, consider adding Employer’s Liability to your insurance package. This coverage will protect you if an employee is injured in the workplace due to your organization’s negligence. 

Here’s an example to demonstrate how vital Employer’s Liability coverage can be for your organization in case of an onsite injury: 

Sabrina was working for a nonprofit that opted not to purchase Workers’ compensation. On a routine visit to the storage room for supplies, she found the room overcrowded with several boxes stacked on the floor, the clutter not allowing her to properly set up a step ladder to reach the top shelf. While on the ladder she fell and shattered her elbow on the cement floor.

Due to their negligence, Sabrina’s employers were legally obligated to pay damages for her injuries. Fortunately, the employer had purchased Employers Liability as an extension to their Commercial General Liability insurance, were able to put a claim in and have the insurance company pay her medical expenses.

This extension can usually be added to a Commercial General Liability policy for a small additional premium; or it may already be included in the coverages, depending on the insurer.

To determine whether your organization is required to have its employees covered by workers’ compensation, contact Workplace Safety and Insurance Board of Ontario. Community Legal Education Ontario also has helpful resources.


Employee Benefits Liability

The need for Employee Benefits Liability coverage varies depending on your employee headcount and the number of benefits provided. This kind of coverage protects employers against large claims by employees or their dependents. 

Here’s an example: 

Taylor, a new office employee, completes paperwork to enroll in the organization-sponsored health plan. Due to a clerical error by the staff member responsible entering this information, Taylor is not enrolled. Several months later Taylor is diagnosed with a serious illness and discovers he has no drug benefit plan. When his prescription drug bills begin to pile up, Taylor seeks restitution by suing the staff member and his nonprofit.

Claims like Taylor’s are not covered under commercial general liability policies because an administrative error is not an “occurrence”, as that term is usually defined. 

To insure itself against such claims nonprofits can purchase Employee Benefits Liability (EBL) coverage. EBL endorsements typically cover damages the insured becomes legally obligated to pay because of an act, error or omission committed in the administration of employee benefits.

The types of errors covered by a specific EBL endorsement are often determined by the definition of the word administration. This term generally applies to acts, errors or omissions in:

  • Describing the benefit plans and eligibility rules to employees, other eligible family members and beneficiaries. Example: A benefits manager mistakenly tells an employee that her live-in partner is eligible for the company-sponsored health insurance plan.
  • Maintaining files and records related to employee benefits, whether the records are electronic or paper. Example: A benefits worker accidentally erases an employee’s electronic file or loses his or her paper file.
  • Enrolling, maintaining and terminating employees, eligible family members or beneficiaries in benefit plans. Example: A benefits worker fails to add an employee’s beneficiary to a life insurance plan provided by the employer.

Employee Benefits Liability coverage should not be used as a substitute for good risk management, and isn’t essential for every organization. Nonprofits that employ a small number of workers, or that offer few or no benefits do not need this coverage.  

Contact your insurance broker or agent if you require these liability coverages; or to determine if they are included in your current insurance plan. You can also reach out to ONN’s insurance expert Paul Spark for advice.

Insurance Resource for the Sector

ONN offers a province-wide insurance program that specifically supports nonprofits and charities. Our exclusive insurance partner, Hub International, can provide more details and walk you through specialty insurance needs, such as cyber liability and more insurance questions and coverage. Our resident expert Paul Spark of HUB International is ready to help you: paul.spark@hubinternational.com, (416) 992-9390.

And check out ONN’s insurance page for more tips on risk management and other insurance resources: theonn.ca/services/nonprofit-insurance.





 Image provided under the CCO Public Domain. Pixabay. 

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