Claims against nonprofits on the rise

January 5, 2015       The NonProfit Times      

Once upon a time … nonprofit organizations had a certain amount of insulation from the big bad world because of their noble mission.

Well, it’s a new millennium, a new century, a new way of doing things.

During the 2014 Nonprofit Risk Summit, John Ergastolo, of Arthur J. Gallagher & Co., said that claims against nonprofits, those which involve an insurance carrier in one way or another, are on the rise. And, they are coming from everywhere. It’s not just the big bad wolf or the wicked stepmother. Everyone is getting in on the act.

For example, claims against nonprofits include:

  • Professional liability;
  • Challenge to nonprofit status;
  • Regulatory;
  • Antitrust;
  • Mergers and acquisitions;
  • Management of assets;
  • Claims from funders or donors to the organization, aka “Stakeholders;”
  • Beneficiaries of “clients” of organizations;
  • States’ attorneys general;
  • Securities holders of assets held by nonprofits; and,
  • The entity itself, believe it or not.

Ergostalo said this has caused insurance carriers to re-evaluate what they are doing about providing coverage, especially with Directors and Officers (D&O) insurance. For example:

  • Pricing has firmed for each of the past two years; larger percentage increases for smaller risks;
  • Retentions might rise; and,
  • Exclusions are being added for contract claims, professional liability claims, antitrust claims and absolute bodily injury exclusion.
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