What is liability insurance?

Liability insurance covers an organization in the event that someone is hurt or property is damaged as a result of any action or inaction by your CHDO or its representatives. Liability insurance also covers your organization if faced with a lawsuit. A suit might be brought against your organization for anything, from damage of someone’s property by one of the organization’s employees to, for example, the injury of a customer who trips on your uneven front steps. The financial and staff-time costs of one lawsuit could potentially destroy your organization, so you should work with your insurance agent to plan a policy that is as comprehensive as you can afford.

Your commercial general liability policy (also referred to as “standard” or “basic” policy) will provide protection against lawsuits alleging personal or bodily injuries or damage to property caused by the operations of your organization.     

A liability policy does not, however, cover damages sustained as the result of governance and management decisions. The cost of defending against these types of lawsuits and of awarded damages is insured against with directors’ and officers’ liability insurance and professional errors and omissions.

According to Charles Tremper, Executive Director of the Nonprofit Risk Management Center, the surest strategy to avoid being sued is to avoid causing harm. This holds true for the board, the staff, and the volunteers involved in your organization.