General Liability Insurance Terms and Concepts for Nonprofits
By Patt Wilson McDaniel
The General Liability policy is designed to provide coverage (legal defense and claims settlement) for legal responsibility of the organization and its volunteers for bodily injury, property damage, personal injury and advertising injury to others due to an occurrence during the policy period. The ‘limits’ are the maximum amounts that can be paid in claims settlements. The defense costs do not usually deplete the amount available for claims but are paid by the company (‘outside the limits’). The coverages on General Liability are standardized and generally include the following coverages:
General Aggregate – This is the most that the company will pay out in claims in one year.
Products and Completed Operations Aggregate – This is the most that the company will pay out in claims due to Products and Completed Operations in one year.
Products – Property made or handled by your organization. Most nonprofits do not have products although food products at a dinner prepared by volunteers, for example, would fall under this category.
Completed Operations – Generally, work that has been completed by the insured for a client, as called for in a contract.
Personal Injury – This usually includes libel, slander, invasion of privacy, wrongful entry, wrongful eviction, wrongful arrest and/or similar actions.
Advertising Injury – Provides personal injury coverage for the insured organization’s advertising of its own goods and services.
Medical Limit - The medical expense limit is a ‘no-fault’ sub-limit of the GL. It can be paid out with relative ease but if the claimant feels it is not adequate, a claim can be put in against the General Liability coverage.
Non-owned and Hired Auto - If volunteers use their own autos in the business of the club (e.g., going to the bank or moving a display) and are involved in at-fault accidents, they are personally liable, but the organization may also be held liable. This coverage is designed to protect the organization in that event. This insurance is excess over other applicable insurance. Drivers are responsible for their own liability and should carry insurance.
Occurrence/ Per occurrence limit – General Liability claims must result from an actual occurrence. This can be defined as an accident, including continuous or repeated exposure to substantially the same harmful conditions. The term occurrence is also used in distinguishing the claims payment method of two types of policies “claims made” and “occurrence”. Nearly all nonprofit policies are on an “occurrence” basis. The explanation of the differences between these two types of policies is beyond the scope of this paper but Is available from McDaniel Insurance Services upon request.
Shared aggregate limit of liability – On policies with member clubs or chapters, the aggregate will apply to the group as a whole, not to each individual club or chapter.
Certificate of Insurance – If an individual or other entity requests that you provide proof of insurance, we will issue a Certificate of General Liability Insurance. The individual or entity that is requesting proof is the Certificate Holder and the certificate will be mailed to that entity. A copy will also be mailed to the appropriate representative of your organization.
Additional insured – Often someone will ask to be added on to your policy as an additional insured. This may be the owner of a meeting hall or land you use for an event. It may be a government entity that is issuing a permit or granting funding. It may also be a client paying you to do work on their behalf. There are specific endorsements (policy change forms) for each of these situations. These are usually easily issued, once we gather the necessary information.
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This information is for a general understanding only and the specifics of any particular policy may vary. Consult your policy for your coverages, it is the governing legal document and supersedes any information herein.