Nonprofits carry insurance as part of a risk management strategy. These plans help spread risk and protect balance sheets against large losses.
Before you sign your nonprofit up for an insurance plan, there are some questions to be answered. In her book “Good Counsel,” Lesley Rosenthal presents nine questions your legal counsel should ask about your nonprofit’s insurance arrangements:
- What kind of insurance does the organization carry, and to what limits? How much are the deductibles and premiums?
- When was the last time the insurance arrangements were reviewed, and who was in charge of that?
- Does the organization disclose any information to the insurance provider as a condition of receiving certain discounts? If so, has counsel reviewed these to ensure their accuracy?
- Whose responsibility is it to inform the broker or provider if a claim is made?
- If the carrier assigns an adjuster and/or outside counsel to look into or defend the claim, who monitors their progress and provides a primary point of contact within the organization?
- How will the legal department coordinate management of litigation with the organization’s handling of insurance matters?
- Does the nonprofit have a good idea on the potential size of risks from the uninsured or self-insured? If so, how are these reviewed by staff and discussed with the board and/or legal or audit committees?
- Who is responsible for reviewing the costs and benefits of the organization’s relationships with insurance advisors, consultants, brokers, carriers, etc?
- How else can counsel help analyze risks and participate in mitigation strategies?