In this age of the Internet and burgeoning technology, thehigh-touch often is overshadowed by the high-tech. Far from beingobsolete, however, social-service organizations are more importantthan ever, as are the agents who arrange their insurance coverageand safeguard their financial resources. In this article, we'lldiscuss how we help social-service agencies and other nonprofitentities assess their coverage needs, enabling them to continuetheir valuable services to their communities.

Our agency is licensed in 45 states and writes more than 3,000real estate, sports liability and nonprofit accounts, but ourspecialty is social-service organizations. We first entered theniche by developing a program of risk-management procedures andinsurance for a national nonprofit organization. After about sixmonths, we started receiving referrals from its parentorganizations, including several government-sponsored entities.(Thousands of social-service organizations begin life as part of agovernment entity and then, after they've grown large enough, arespun off as independent nonprofit entities.)

Now, our typical nonprofit insured is an organization thatemploys 10 people and performs some type of human-servicesfunction. One of our largest accounts is the United PlanningOrganization, originally a social-service agency for the Districtof Columbia that now serves as an umbrella for many otherprivatized nonprofit entities. Other past and present clientsinclude some Meals on Wheels chapters, the NAACP, researchorganizations and financial-grant organizations.

Attracting new business

For new business, we rely heavily on referrals fromsocial-service organizations and associations that assist them. Wepurchase booth space, exhibit and conduct free risk-managementlectures at their seminars and conventions. The MarylandAssociation of Nonprofit Organizations endorses our agency, and itsWeb site refers visitors to us.

We also assist, and receive referrals from, many Interest onLawyers Trust Accounts (IOLTA) organizations. Many states requirelaw firms to remit to them interest earned on escrow accounts thatthe firms establish in their dealings with clients. The states thenforward that revenue to IOLTA, which manages and redistributes itto nonprofit organizations that promote the legal welfare ofindigent people.

Our agency has a wholesale arm, and agents and brokers fromaround the country call here to request help in securing coveragefor their nonprofit and social-service organization clients. As aresult of such referrals, we helped arrange professional liabilityinsurance for the League of Maryland Horsemen, a program thatteaches horsemanship, and for the which works with inner-cityyouths to promote appreciation and preservation of the bay and itstributaries and waterways.

Many social-service organizations have small staffs and nodedicated risk manager, so we typically meet with an organization'sexecutive director, who reviews our proposal and makes arecommendation to the board of directors. In our presentation, wehighlight key points-coverage features and pricing-and may offer alist of our current clients in the same geographic area andsocial-service field. Because nonprofits generally operate onshoestring budgets, we may also discuss premium-payment installmentplans and any dividend-paying programs that might be available.

Going to the market

We often encounter prospects who mistakenly believe thatcoverage for social-service organizations is difficult to obtain,expensive and only available through a nonstandard market. Inreality, though, standard coverage with appropriate limits can bequite affordable. Our main markets for human-services organizationsand other nonprofit accounts are Chubb, Great American, St. Paul,Fireman's Fund, Philadelphia Insurance Cos. and AIG. Carriersspecialize in different product lines, such as workers compensationor professional liability. We consider that factor-along with theinsureds' geographic location-when choosing a carrier. For example,we might choose Hartford for workers compensation coverage for anagency on the East Coast, but recommend the California state fundfor an organization in that state.

When we submit an application, we include the number of peopleemployed by the insured; payroll, revenue and loss-history data;and property schedules. We also provide a description of theoffice-age of the building, type of construction, square footage,etc.-and the agency's fund balances (to help establish its crimeexposure). Underwriters always ask us for the insured's URL, too,because they can glean much of the information they need byvisiting a Web site.

Underwriters generally are not interested in the composition ofan insured's board of directors. Unfortunately, directors in boththe for-profit and the nonprofit sectors are not always goodstewards of organizations' resources. The fact that a mayor,governor or business mogul sits on the board of a social-serviceagency does not guarantee that the board will judiciously overseethe agency's bank account or fleet of vehicles. Instead, they tendto take a hands-off approach and simply affirm administrators'decisions.

The easiest nonprofit accounts to write are those with fewemployees whose primary purpose is to fund social services; largerentities and “frontline” programs that actually perform servicesare more challenging. One example of the latter is FriendsResearch, which provides education and research support to combatsubstance abuse. Another client brings disadvantaged youths toBaltimore Harbor to work on boats and learn how to sail. Suchprograms present greater risks than do the charitable foundationsthat fund them because of their direct contact with the people theyserve and the nature of their operations.

Providing protection

A common misconception is that no one will steal from or filesuit against a human-services agency because its mission ischaritable or its cause is just. In reality, social-serviceagencies are just as vulnerable to crime and litigation as arefor-profit businesses, and their losses can be equally devastating.For instance, when we first met with officials at an organizationin the Midwest, they told us a former office manager had embezzledfunds from it, so they urgently wanted coverage for crime andemployee dishonesty, which we promptly arranged. Another prospectasked specifically about professional liability insurance becauseits staff had taken a group of inner-city youths on a field trip,and one of them had drowned. The agency had no professionalliability policy at the time, and the claim did not triggercoverage under its D&O or GL policy. Once we acquired theaccount, we immediately instituted professional liabilitycoverage.

Social-service organizations are concerned about theirdirectors' personal liability, so nonprofit D&O liabilityinsurance is a product we often sell them. Next we discussemployment practices liability-the primary source of claims for ournonprofit clients-and point out that coverage for it often isexcluded in the D&O policy and therefore must be bought back byendorsement.

We ask about the number of employees and volunteers and thetypes of work they perform. Are their duties mainly clerical, or dothey have direct contact with their clients? Do they provide anymedical services? Do they work with children or disabled adults? Ifso, how many?

We ask similar questions about such exposures as workerscompensation, employee dishonesty, crime and hired/nonownedauto-all of which are important issues. Do employees and volunteersdrive their own vehicles or the agency's? Who is authorized towrite checks? How much is kept in the organization's bank account?Who are the insured's vendors or other contractors? How frequentlydo clients or vendors enter the premises? Even if an insured has noemployees and no automobiles, it has a general liability exposureif it has an office with a desk and a chair. Someone could trip andfall while delivering mail, dropping off supplies or making a salescall.

Are you being served?

It is important to review nonprofit organizations' exposurescarefully to determine the best insurance and risk-managementsolutions. Suppose a government agency spins off a nonprofitorganization, then temporarily lends its employees to thatorganization. If one of those on-loan employees embezzles from theorganization, its D&O policy will not indemnify it, nor willits employee dishonesty policy (assuming it has one) if the policyis written to cover only the fraudulent acts of the insured's ownemployees. Unfortunately, such incidents are common toorganizations of all sizes. A simple solution is to manuscriptpolicy language so the definition of “employee” includesvolunteers, contractual workers or any other person working for theinsured. We routinely negotiate such policy language revisions forour clients.

We also explain that hired and nonowned automobile coverageprotects an organization when employees are involved in accidentswhile driving their own vehicles in the course of their work.Still, we encourage insureds to ask employees and volunteers tomaintain their own auto insurance with adequate liability limits.We also advise them to obtain hold-harmless agreements fromcontractors and ask major suppliers and frequent volunteers to addthe organization as an additional insured to their auto policies.In some cases, we suggest that insureds ask for volunteers' driverslicense numbers to verify that their licenses are valid. Thismeasure is especially important for such programs as Meals onWheels, because their hired and nonowned vehicle coverage requiresvolunteers or other drivers to be licensed.

The social-service and nonprofit niche is one in which aknowledgeable and conscientious insurance professional can trulyshine. Securing the appropriate coverage with the right market atan affordable price and teaching an insured to effectively managerisk can help it operate within a tight budget, protect itsofficials and perhaps even avoid a devastating loss. Just ashuman-service agencies are indispensable to their communities, thesupport of capable and dedicated insurance agents is crucial to thewell-being of nonprofit organizations.