Not-for-profit organizations (NFPOs) are no strangers to obstacles associated with sustaining their operations. However, longstanding systemic challenges such as maintaining staff, finding and retaining experienced board members, and grappling with strained budgets have been exacerbated by the pandemic, record inflation, shifting social environments, and turbulent financial conditions.
Resilient NFPOs are modifying how they do business to meet their constituents’ needs, and Management Liability Insurance products have also evolved to support them better. Management Liability Insurance is a suite of insurance coverages (Directors’ & Officers’ Liability, Employment Practices Liability, and Fiduciary Liability) designed to help protect a business and its leaders from lawsuits that may arise from organizational decisions. Whether reviewing current Management Liability policies or purchasing a new one, NFPOs should be aware of how those changes impact their operations and leadership and ensure they are sufficiently covered.
Changing Board Composition
NFPO Board responsibilities are largely unchanging. However, finding capable individuals to fulfill those responsibilities remains a struggle, especially among maturing organizations. As a result of expanded efforts to recruit and fill board seats with new leadership, board composition is shifting, forcing NFPO leaders to rethink their Directors & Officers (D&O) coverage.
While D&O coverage traditionally designated insured individuals as ‘executives,’ ‘directors,’ or ‘officers,’ today we see many other roles and positions assigned to boards with equal responsibility and potential liability as those defined titles. Thanks to broad D&O forms and an expansion of covered individuals, NFPOs can now more seamlessly add board roles and titles. Selective’s D&O coverage includes titles such as independent contractors, de facto directors, shadow directors, board observers, advisory board members, and other similar functionally equivalent roles.
With D&O coverage being a strong recruitment tool for board representation, an inclusive and expansive form can also help attract talent. NFPOs need to work with their independent insurance agent to account for any shift in their board composition and better understand how their D&O insurance addresses these changes in titles and different positions.
Employment Diversity, Inclusion, and Flexibility
Most NFPOs rely heavily on volunteers to execute organizational initiatives and programs. With the struggles of finding or affording qualified workers an ongoing issue, volunteers are critical to NFPO’s operations. NFPOs are not immune to employment matters, and Employment Practices Liability (EPLI) claims are a common claim type, no matter the organization. EPLI helps protect the business against the impact of employment-related wrongful acts, such as discrimination, harassment, sexual harassment, retaliation, and wrongful termination.
Most insurance carriers include volunteers as employees. However, when seeking a qualified talent pool and increasing the use of volunteers, EPLI coverage must remain broad and inclusive as NFPOs pursue various means to fulfill their operational needs. For instance, Selective Insurance’s EPLI product includes protection against discrimination based on gender or sexual identity, orientation or expression, and genetic information. Knowing that talent now also comes through remote work environments, Selective ensures all those employment-related acts are included when they occur via electronic means of communication.
Employee Health and Welfare Benefits
Virtually all employees seek health and welfare benefits, and they can be competitive tools used to attract and retain talent. Fiduciary Liability Insurance is an often overlooked coverage that helps protect the company in connection with decisions that impact participants (employees’) welfare, benefits, and healthcare plans. Anyone involved in those plans’ management, oversight, or asset control is considered a fiduciary and can be held liable for various claims brought by the plan participants or regulatory bodies such as the Department of Labor or IRS.
What once was a straightforward healthcare plan decision now includes options for PPO, HMO, HRA, HSA, FSA, etc., so carriers need to provide coverage for all plans sponsored by the NFPO. NFPOs should work with their independent insurance agent to ensure coverage extends automatically to any newly formed or acquired plans so they can continue focusing on providing the most competitive and comprehensive benefits.
Management Liability Insurance provides NFPOs a unique opportunity to attract and retain talent by protecting them against claims that may arise from their decision-making and providing the organizational and personal asset protection they need to focus on their programs and services. Learn more about management liability insurance from Selective Insurance.
Jeff Weaver is Assistant Vice President, Management Liability Insurance for Selective Insurance.