Learning Modules

Welcome to CSC’s Insurance Learning module. Learn about insurance and risk management, download helpful resources and listen to audio clips of specific topics.

Start with a Quiz to test your knowledge about insurance in the community sector!

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Newfoundland and Labrador

Community Sector Council Research: Roundtables (2003 and 2004) identified:

The rising cost of insurance.

The inability to renew insurance or to get a preferred coverage type.
The inability to obtain coverage for volunteers.
Fundraising efforts would suffer as more funds are channeled to risk management.
Volunteers would be difficult to recruit due to concerns about liability.
Allocating increased amounts of money to insurance costs and risk management would curtail services and diminish mandates.
Some organizations would not endure the high cost of insurance and cease to exist.

CSC Survey in 2005 (responses) on lack on insurance and risk assessments showed:

While 80% of groups indicated they needed insurance coverage of some type, only 64% reported carrying any form of insurance;
Only 14% of groups surveyed have formally addressed a risk management plan. Download Insuring Sector Survival: Insurance and the Voluntary, Community-based Sector in Newfoundland and Labrador

Meanwhile: Provincial history and actions

Public Utilities Board (PUB) Inquiry and Report in 2005-2006

Presentation from CSC can be downloaded here.
Information about the PUB Report and a link to the full report can be downloaded here.

Provincial Working Group convened by government in 2006 (link)
Consumer Protection document for the purchase of insurance is released in 2007 (link)
Also see, Code of Consumer Rights and Responsibilities from the Insurance Bureau of Canada (link)

Canada:

    The cost of settling court cases and potential court cases has increased significantly over the past few years. 1999 Supreme Court of Canada decision extended vicarious liability. Vicarious liability means that an organization is liable for the negligent actions of its employees and/or volunteers. For example, if the organization assigns a supervisor to look after people using sports or recreational equipment and the supervisor’s negligence results in someone getting hurt, the organization may be held responsible.
    Courts have also extended host liability for serving alcohol. This includes non-profit organizations.
    Spillover from auto market for settlements of non-permanent injuries (slip and falls) (Insurance Bureau of Canada)
    Standard of care (agreed in court) is the same for non-profits as it is for others: no shield. The Standard of Care is the degree or level of service, attention, care and protection that a person owes another person according to the law.
    Other provinces – what they are doing – parallels with Newfoundland and Labrador. For example, see this report from Easter Seals Canada
    National Organizations (Imagine http://www.imaginecanada.ca, Volunteer Canada http://www.volunteer.ca are all very concerned about insurance issues)

Industry:

Hard Market in insurance industry from 2001 – 2006
Record low insurance profits, changes in court rulings and solvency regulations, insurance industry withdrew from certain markets (voluntary sector being one of them) all resulted in increased premiums
Task Force and Report in Atlantic Canada was released in 2005 (link)
Code of Practice, Insurance for Voluntary Organizations: Things to Consider from the Insurance Bureau of Canada (link)

Let’s Take a look at the product of insurance:

DISCLAIMER(s):

This presentation is not about medical or health insurance – it is about persons, properties and organizational risks or damages. We are not providing legal advice and nothing read here takes away your need to consult with an insurance professional.

What is Insurance?

It is not a financial service - you do not invest in it hoping for a return.
It is not a maintenance program - it is for sudden, unpredictable and accidental losses, not regular or foreseen losses or depreciation.
It is a sharing of risks - the payments of the many pay for the losses of the few . The premiums paid by the insurance company’s policyholders are pooled together and then used to pay claims.

Personal Lines (defined): insurance for things owned by an individual i.e., car and home insurance

Commercial Lines (defined): insurance for organization and business assets People are confused when they have to buy ‘commercial’ insurance – i.e., a “Commercial General Liability”, but quite simply, this is how the insurance industry is structured. There is no “non-commercial” or “non-profit” insurance line. Community groups come under the “Commercial Line.”

In some provinces, non-profits are required to carry insurance – but not in Newfoundland and Labrador. Our incorporation act, when dealing with limited liability, simply says (in part):*Directors' and officers' insurance* *208.* A corporation may purchase and maintain insurance for the benefit of a person referred to in section 205 against liability incurred by the person (a) in his or her capacity as a director or officer of the corporation, except where the liability relates to his or her failure to act honestly and in good faith with a view to the best interests of the corporation; (or if doing so at the corporations; request)

See Newfoundland and Labrador Corporations Act http://www.assembly.nl.ca/legislation/sr/statutes/c36.htm

Importantly – insurance coverage is only part of the picture as non-profit groups face the issues of conducting business which carries risks (and all activities carry risk).

So….What is Insurance?

Finances/pays for the cost consequences of risk
Only a source of funds – not an investment fund
Activates only after something has gone wrong
The “wrong” must be “insured” in advance
Transfers the financial consequences of the “wrong”
Transfer accepted by insurers in exchange for a periodic payment – the premium

Important: Insurance does not reduces the likelihood of a “wrong” occurring. You still need to manage and control risks.

Where Does Insurance fit with the Community Sector? Why is it important?

Incorporation

Legal status enables your group to conduct business as an entity
Can sue and be sued (limited liability, corporations act)
Vicarious liability (the discussion arises primarily from debate over abuse of children by employees or volunteers – the principle has been established in Canadian law, that employers are can be held (vicariously) liable for the actions of employees and volunteers; given certain circumstance: i.e., if the employer set up the conditions which allowed a wrongdoing (even if it is counter to the employer’s policies)

Direct vs. Vicarious Liability: a quick definition
A non-profit is liable for its own actions (direct liability) and may be responsible for the actions of an employee/volunteer acting within the scope of their duties for the organization (vicarious or indirect liability)

Assumption of risks

Your purpose for incorporating is to conduct group activities
All activities carry risk – and your group has, therefore, now assumed them

Purchase of Insurance

Purchase of insurance is ONE way to deal with risk (there are several others)
It enables you, at a cost, to share the potential costs of those risks if something goes wrong

Management of Risks

Prudent to do so, and fits with the reason you incorporated – to conduct activities, safely

Insurers may ask you to undergo risk management activities (or sometimes demand that you do) and possibly reward you for doing so, with lower premiums

Lets’ start with the basics: the bigger picture -- perhaps the only two policies you’ll ever need:

BOTH ARE LIABILITY INSURANCE – but they cover different things:

Directors and Officers’ Liability Insurance SEE HANDOUT

Why do you need it? Because you have offered directors a ‘limited liability’ by incorporating – so long as it is in your by-laws
What does it usually cover? Legal fees and damages arising from wrongful acts by board members
What does it do? Protects the personal assets of individual directors or officers

Commercial General Liability Insurance SEE HANDOUT

Why do you need it? Because others may get hurt while using the property, equipment, materials, you own or manage.
What does it usually cover? Bodily harm, personal injury +property damage + tenant’s legal liability.
What does it do? Protects third parties (Anyone who is not a party to an insurance contract is a third party).

Some of these can be separate policies and others can be riders or endorsements on a Commercial General Liability policy. Check with your agent or broker.

Property: Covers property that you rent or own and can include the physical assets your organization owns such as furniture and equipment.

Errors and Omissions Insurance: This coverage responds to claims arising from acts of professional negligence. This includes financial loss and bodily harm. Sometimes referred to as “malpractice” insurance, although malpractice insurance claims are always the result of bodily harm.

Automobile Liability (Owned and Non-Owned)

Owned: For automobiles your organization owns.
Non-owned: While you can’t insure a vehicle your organization does not own, non-owned automobile coverage protects your organization against liabilities connected to any individual or company using a vehicle to undertake work for your organization, including employees, volunteers, couriers, or other types of drivers. It is important to note that this type of insurance will only take effect after the individual’s personal insurance limits have been depleted.

Accident Benefits Insurance: The part of auto insurance that provides medical care and income replacement benefits to insured persons injured in a car collision, regardless of who caused the accident.

Tenants’ Insurance: Applicable if you lease space, buildings.

Crime Insurance and Fidelity Insurance: Protects your organization if you suffer financial losses due to embezzlement or other financial crime.

Events and/or Liquor Liability: When you serve alcohol at an event or function, your organization is exposed to a number of liquor-related liabilities including liability as a server (serving alcohol to persons), occupier (protecting the people on the premises from harm, whether or not you own the premise), employer (employees consuming alcohol). Event cancellation insurance, accident insurance and other types of insurance associated with a special event may also be available.

The Insurance Toolkit for the Voluntary Sector, available from the Insurance Bureau of Canada, lists a variety of types of insurance http://www.ibc.ca/en/business_insurance/documents/alberta_voluntary/insurance_toolkit_online.pdf

Obviously insurance is a commercial product and must be purchased from a supplier:

It is important to know the difference between Agents and Brokers as you shop for insurance; agents work for one company. Brokers work with a group of companies and may have access to more products.

Neither an agent nor a broker can guarantee access to every type of product you might wish to purchase.

Volunteer Canada – has taken one approach to increasing access to insurance coverage in Canada's voluntary community-based sector: In partnership with AON Reed Stenhouse, Volunteer Canada is offering access to policies, based on annual revenues, so:

You have access in the sector to two primary forms of insurance needed by voluntary groups
You can compare their costs and coverage to what you may be able to access locally (helpful while shopping around – they post their rates)

See Volunteer Canada’s website at http://extranet.aon.ca/volunteercanada/en/index.aspx

Also see Insurance Bureau of Newfoundland and Labrador at http://www.iban.ca/

After understanding your needs – you must know whether the insurance policy you purchase will cover your risks and meet your needs. Note:

Policies differ.
You have the right, as a consumer of insurance products, to know what a policy covers (see Consumer Protection Document from Government of Newfoundland and Labrador)
Know what is covered – know what is not (exclusions, there are ‘always’ exclusions.)
This is where Glossaries are helpful. (Link)

Deductibles: The portion of the loss covered by insurance that the policyholder must pay himself or herself; the amount appears on the policy. If a policy has a $1,000 deductible, the policyholder would pay the first $1,000 of any repair bill and the insurance company would pay the balance up to the policy limits.

Perils and Exclusions (know what is in your policy – do you need an endorsement? Also called a rider or amendment (used to add or remove coverage) Are you willing to pay extra for it? Can your agent can even offer it?

Limits: Know the dollar values in the policies you hold.

What Are the Best Practices?

(A Checklist on how your organization can be a wise consumer of insurance products)

If your organization has indemnified you against personal loss (check your incorporating documents, by-laws) and has assumed certain risks, it is still your job, as a volunteer director, to follow best practices on managing risks.

Indemnification: To cover the cost of, or compensate the director for, any loss or damage sustained as a result of the acts or omissions of the director in their capacity as a director of the organization. It is an assumption of risk and costs by the nonprofit on behalf of directors when the directors are acting on behalf of the nonprofit. It is only valuable if the nonprofit has the financial resources to be able to fund the indemnification of directors (which must be established in the bylaws in order for the nonprofit to legally transfer funds).

Ongoing: Share the Responsibility as a Board

Remember it is important to share the responsibility – this means you should have a risk committee in place at all times and it should be actively reviewing risk issues.

From Time to Time: Stay Informed

Do a spot check on procedures (are staff and volunteers following the risk plan) and check insurance coverages. They change form time to time and renewal is a good time to ask if new coverages are needed or old ones can be dropped.

Annually: Review an Insurance and Risk Checklist which the full board has access to:

Don Radford (Volunteer Alberta) recommends the checklist include, minimally:

List of insurance policies
Policy numbers
Details of coverage types and amounts
Deductibles
List of endorsements
List of notable exclusions
Renewal dates
For liability policies – record of all claims made
Name and phone number of insurance company
Broker or agent name and contact information
Insurance claims process

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Define Risk Management:

Risk management is the process of making and carrying out decisions that will reduce the negative effects of risk on an organization. Sometimes it is simply called “Loss Control”.

What does Risk Management have to do with insurance?

Insurance covers you in the event that something “goes wrong” in your organization. Risk Management is one way that your organization can reduce the likelihood of a “wrong” occurring in the first place. Purchase of insurance is only one way to deal with risk. It is advisable to identify and assess your risks before you can determine the type or amount of insurance your organization needs.

Why practice it:

Practicing risk management offers a real chance of reducing negative impacts, but also (many believe) it can save costs, save resources, protect your assets and importantly it MAY reduce your liabilities, MAY increase your likelihood of getting insurance, and MAY even reduce insurance costs.

The Insurance Industry is demanding better risk management techniques.

Employ best practices (insurers will want to know you do this – they practice risk management, too!)
Invest in safety (will be helpful to your organization in the long term).

This is a fairly straightforward process but it has to be adopted, agreed to, and actioned – this is not one person's responsibility! Form a committee and share the responsibility.

We will concentrate on points 2, 3, and 4

2. Identify your Risks
Risks in your organization may be different than the risks faced by other non-profit organizations. For example, if your organization deals with vulnerable clients, you face certain risks that other organizations may not. Similarly, if your organization hosts special events, it may face particular risks.

3. Evaluate your Risks
Some risks are more serious than others. Also, some risks may be serious but the likelihood of an occurrence is remote.

4. Control your Risks
This is where organizational policies come in. Your organization probably has certain risk management policies already in place, for example: cheque signing practices, volunteerⁱ screening, rules around confidentiality, etc.

Some ways to identify the risks faced by your organization:

Brainstorm as a Group
Compile a List
Ask opinions of others
Think of past losses
Ask others for examples
Research issues online
Seek examples
Seek employee feedback

A couple of examples:

Example 1: organization administers hiking trails around the communYour ity. Certain parts of the trails are dangerous; hikers could fall and injure themselves.

Example 2: Your organization operates a program that delivers meals to the elderly. A potential risk includes clients becoming ill from eating a meal prepared by your organization. The cause is determined to be food poisoning.

Tip: It would be helpful, when conducting this exercise with your Board to use a Flip Chart. Next,

List potential risks identified
Think of how often a problem might occur (a problem might be serious but the likelihood of it occurring may be slim)
Think of every problem you can

Think of: your activities, your sites, your staffing, your volunteers, your properties, your image…(the goal is to develop, quickly, a list of things that could go wrong – do not worry if they are reasonable or not, you will plot that later: right now, do a list of everything we can think of that can or might go wrong).

Example 1: The risk of a hiker falling on a dangerous part of the trail may be high but the severity may be minor (sore ankle) to moderate (broken leg).

Example 2: The chances of your food poisoning anelderly clients may be rare but the severity may be extreme, especially in cases where the client is already ill from a pre-existing condition.

Ask yourselves:

AVOID: Should we eliminate this activity? Perhaps the risk is so great that it does not outweigh the benefits of the activity. Perhaps it is not really related to our mission, anyway!

In the case of example 1 you might consider closing down the dangerous part of the hiking trail.
In the case of example 2 this may not be an option, delivering meals to the elderly is your organization's mission after all!

ASSUME: simply take on the risk – have some sort of plan to reduce harm in case something happens.

In example 1 you may post a sign that says “Dangerous Trail, Use at Own Risk”.
In Example 2 you may assume that food poisoning may occur from time to time and hope for the best (probably not a good idea in this case since you are dealing with vulnerable clients.)

MODIFY: What kinds of policies and procedures can we put in place that minimizes this risk? This means modifying an existing activity so that the risk is reduced. What can we do differently?

For example 1, you may hire a trained guide who can accompany hikers on the dangerous part of the trail or close the trail during wet weather.
For example 2, you may want to put in place safe food handling procedures and review and test them often.

TRANSFER OR SHARE the risk: Is there any way to share the liability of this risk? For example, perhaps you can use waivers, purchase insurance, or contract a particular service to a reputable organization (and let them assume the risk).

For example 1, perhaps you can require that hikers sign a waiver before using the dangerous part of the trail or you can purchase additional insurance to cover you in case you are sued by an injured hiker. Perhaps you can use a combination of several practices.
For example 2, perhaps you can purchase additional insurance or have another organization assume responsibility for enforcing the safe food handling practices and testing procedures.

REMEMBER – THERE IS MORE THAN ONE WAY TO LOOK AT THIS EXERCISE:
WHICHEVER APPROACH YOU ADOPT – will require policyⁱ and budget decisions. NOT ALL RISKS CAN BE INSURED (i.e., reputation loss, investment loss, loss of charitable status) so a risk management plan is important regardless of your insurance needs. For example, if an elderly client becomes very ill after consuming your food and this becomes public knowledge, your reputation will undoubtedly suffer. This will occur regardless of whether or not there is legal action taken against your organization.

“Insurance is one of many tools your organization can use to manage risk and liabilities.”

Let’s see if we can figure out (by example) some risks we would: assume, modify, transfer or avoid…..

This would be a useful exercise to conduct with your Board. You will:

Use a flip chart (to list risks and fears)
Divide a flip chart paper into Quadrants (use the grid)
Plot frequency (likelihood of occurrence) versus degree of Harm (severity of loss)

Volunteer Alberta’s Decision Analysis: Retain vs. Transfer

Low frequency / low severity losses: Consider retaining the risk (Assume)
Low frequency / high severity losses: Consider loss reduction and/or insurance transfer (Transfer)
High frequency / low severity losses: Consider loss prevention techniques if possible (Modify)
High frequency / high severity losses: Consider exposure avoidance (Avoid)

Let’s go back to our previous two examples.

For example 1, the hiking trail, the chances of a hiker being injured are high but the severity would likely be low. So this example would fall in section 3 – modify so perhaps you would use signage or trained guides.

For example 2, the meal program, the chances of food poisoning occurring are low but the severity is high. This example would fall into section 2 – transfer. You may choose to purchase insurance in this case or transfer the risk to the organization who prepares the food; perhaps they have sufficient coverage (if it is not your organization who prepares the food).

More examples:

Your organization has storm windows on its building. Occasionally a window is broken. You expect that this will happen infrequently and the losses will be low. This falls in section 1 - assume. In this case you may chose to assume the risks. The window may be broken occassionally and your organization will cover the costs when this happens.

Your organization operates a program that escorts children on outings, including overnight trips. With just a limited number of volunteers on hand you decide that the chances of a child becoming injured or lost on one of these outings is high. The severity of loss is too much to consider so you decide to cancel overnight outings, therefore avoiding the risk.

The following podcasts were recorded during a tele-learning session on Raising Insurance Skills and Knowledge (RISK) session held in January 2010, Facilitator is Darlene Scott, Program Associate at the Community Services Council NL. Information contained is for informational purposes only and does not constitute legal advice. If you have questions about your organization’s risks or insurance needs, please contact your insurance agent or broker.

Podcast 01: A brief overview of vicarious liability and the standard of care (1:24)
Podcast 02: Incorporation, indemnification and the role of insurance (3:11)
Podcast 03: The role of risk management in purchasing insurance (6:15)
Podcast 04: What is Directors’ & Officers’ Liability insurance? (3:49)
Podcast 05: What is Commercial General Liability insurance? (2:12)
Podcast 06: What are some of the other types of insurance that may be available to nonprofits? (4:56)
Podcast 07: What’s the difference between crime and fidelity insurance? (0:48) - Bill Mitchell, Account Manager Atlantic Canada, The Co-operators
Podcast 08: Practical tips to be a wise buyer of insurance for your nonprofit organization (2:58)
Podcast 09: Are waivers a legal way to reduce risks to our nonprofit organization? (1:55)
Podcast 10: Our volunteers transport children to and from sporting events. Is our organization liable in the event of an accident? (0:53) - Bill Mitchell, Account Manager Atlantic Canada, The Co-operators