Some not-for-profit organisations believe that because they have become an incorporated association, they cannot be sued. This is not the case. Incorporation creates a legal entity that is separate from the individual members. Board members of unincorporated bodies can be sued as individuals. Incorporation provides a certain amount of limited liability for members. However, it may not protect the organisation or individual directors in cases where negligence can be proven.
For most not-for-profit organisations, insurance is an essential component of risk management and a key way to manage losses. Even the most prudent and effective organisations can’t foresee everything and prevent accidents from occurring. You want to make sure that the people who help you and are part of your organisation are covered for any potential liability, injury or loss. You also want to ensure that your equipment, materials and property are protected.
Types of Insurance
Public and Product Liability Insurance
A public liability insurance policy is necessary for an organisation to protect itself against claims of negligence made by third parties in relation to injury or property damage arising from the organisation’s operations.For example, it is likely to cover a person who enters your premises, slips on a wet surface and sustains a serious head injury. The policy may also cover injuries resulting from products sold or supplied by your organisation. You should check the extent of your cover to ensure that product liability is included in your policy if relevant. This is particularly important for organisations that sell food or products as part of their day-to-day activities or for fundraising.
Directors and Officers Liability Insurance
While incorporation does provide some protection to board and committee members, it does not protect individuals from being sued for acts of negligence. A board member who negligently gives wrong advice, asks someone to perform a dangerous task or dismisses staff without proper authority or process exposes themselves to being sued.
Where such cases can be proven, the personal assets of negligent board/committee members can be seized to meet any damages. This is where Directors and Officers Liability Insurance comes in. It is worth noting that generally under such policies the organisation itself is not covered for the wrongful acts. This would generally be covered through the public liability insurance.
Building insurance covers your physical premises (offices, clubrooms) against events such as fire, storms and vandalism. This insurance is generally not required if you do not own the facility (e.g. if you hire the facility or use council or crown land premises) because the owner will generally have their own insurance, but do check the lease or hire agreement.
Professional Indemnity Insurance
Professional indemnity insurance covers individuals against claims for breach of “professional duty” arising out of any negligent act, error or omission committed or alleged to have been committed during the conduct of professional activities. This insurance is particularly relevant for organisations involved in providing services such as health care, or those providing advisory services
Personal Accident Insurance (Volunteer Insurance)
Personal accident insurance (or, as it is sometimes known, volunteer insurance) generally covers members, volunteers, officials or participants for any out-of-pocket expenses following accidental injury, disability or death while carrying out their work on behalf of the organisation.It normally covers loss of income, too, if the injured person is unable to work as a result of the incident.This is different from public liability insurance, which protects the organisation and volunteers against negligence involving third parties.
Tailored insurance for NFP organisatons
AON Insurance Website
AON Insurance Website: https://business-insurance.aon.com.au/Associations/oc.aspx