Do Nonprofits Need Management Liability Insurance?


Print McNeil & Company 11:35 am

When you think of Management Liability Insurance, your first thought likely goes to large, publicly traded companies. However, many nonprofit organizations have similar exposures to personal liability risks. If one of these organizations doesn’t have a Management Liability policy in place, they could be leaving their board members and management team vulnerable to potential lawsuits.

Often times, directors and officers of nonprofit organizations serve in a part time capacity or lack a background in business and finance. It’s likely they know of the need for workers compensation, property and general liability insurance, but are blissfully unaware of their need for Management Liability insurance until a suit is filed against them and it’s too late.

It’s essential that you make your clients aware of the common risks they may face and how they can protect against potential losses!

Common Risks

Essentially, directors and officers are expected to act morally and in good faith with the best interest of the organization in mind. Management Liability Insurance provides coverage against acts that may include actual or alleged errors, omissions, neglect or breach of duty. Some of the common risks that nonprofits may face include, but are not limited to:

  • Discrimination
  • Harassment
  • Breach of Fiduciary Duty
  • Misrepresentation of Company Assets
  • Misuse of Funds
  • Fraud

When an allegation arises against an organization, the impending lawsuit could require significant financial and personnel resources; possibly even more than they have available to them. A proper Management Liability policy could provide coverage and help keep these organizations running as they settle or defend these cases.

Loss Control Resources

As you know, McNeil & Co.’s insurance philosophy places an emphasis on supplementing coverage with a proactive approach to risk management. It’s always best to implement policies and procedures to attempt to prevent losses before they occur.

Our risk management department has a bevy of available resources to help your clients prepare for and protect against the losses covered by their Management Liability policy. These include sample policies and loss control bulletins providing best practices and SOPs to prevent theft of funds and protect against cyber security risks.

Our team has also developed E-Learning courses, like our recently updated Sexual Harassment Prevention and Preventing Workplace Violence training’s, to help organizations maintain a safe work environment. All E-Learning courses are free of charge to all McNeil & Co. policyholders.

For more information on our loss control offerings, visit our resources page or call our Risk Management department at 800-822-3747 ext. 176.

So What About That Question…

This article opened with a single question: Do Nonprofits Need Management Liability Insurance? Although every client is different, you can see that many nonprofit organizations have a slew of potential exposures that would render a Management Liability policy necessary. Take a look at your existing book of business and see if there are any opportunities for you to help your clients cost-effectively manage their risk!

If you’d like more information on McNeil & Co.’s available coverage, please contact your marketing representative or visit our Contact Us page to submit an inquiry.

Looking for more information on Management Liability insurance for nonprofits? Check out articles from IA Magazine and Insurance Journal.

By: Tim Woitach