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Commercial General Liability Insurance
- Improper Sexual Conduct -
Previous issues of iNews have discussed the basics of General Liability insurance. To refer back to any of those articles, visit the iNews index page.
A nonprofit facing a claim of improper sexual conduct or abuse may look for coverage under the professional liability or commercial general liability policies. Many policies will contain specific sexual abuse exclusions, however, and silence on the subject does not guarantee that coverage will be provided. In order to be assured of coverage, nonprofits should seek a policy that proactively states that sexual abuse liability is included. This can be accomplished by purchasing a separate sexual abuse liability policy. Most often it is accomplished with an endorsement to the commercial general or professional liability policies.
Sexual abuse liability can vary widely between insurance companies. Some coverage considerations that should be evaluated:
- Are defense costs within the policy limit or outside of the policy limit?
When defense costs are within the policy limit, legal expenses will deplete the limit of liability. It is far preferable to have defense costs outside the policy limit. The insurance company will provide unlimited legal expenses in addition to the limit of liability.
- Is there any coverage for an innocent insured falsely accused of sexual abuse?
Many policies provide no coverage for anyone actually accused of sexual abuse and limit coverage to the nonprofit organization and managers for negligent hiring and supervision. Keep in mind that insurance companies do not intend to provide coverage for someone actually guilty of sexual abuse.
- What are the policy exclusions?
The separate sexual abuse endorsement will have its own exclusions particular to this coverage. For example, almost all sexual abuse policies will exclude coverage if the nonprofit managers were aware of the abuse and failed to immediately report the abuse to the police or otherwise allowed the abuse to continue.
- Is the coverage trigger 'Claims Made' or 'Occurrence'?
It is important to keep in mind that improper sexual conduct policies written on an occurrence basis typically limit coverage to acts occurring during the policy period. As a result, a nonprofit that purchases coverage for the first time would not be covered for claims based on years-old alleged acts of abuse. The same claim might also be denied under a restrictive claims-made policy that required that the event and the claim occur during the policy period. Assuming the insured had no knowledge of the incident prior to purchasing a policy; a claims-made policy with full prior acts coverage would address the claim.
It's important to purchase the appropriate coverage to protect your nonprofit organization. However, every nonprofit serving children, teens and vulnerable adults should adopt policies that limit opportunities for abuse to occur and ensure the prompt detection of abuse.
- Establish policies designed to protect the community you serve from harm.
- Carefully select paid and volunteer staff.
- Properly train and supervise staff and monitor compliance with the nonprofit organization's policies.
- Report suspected abuse to the proper authorities.
We know intellectually that sexual abuse may happen. Many times we cannot accept in our hearts that it could happen in our programs or be perpetrated by our staff or volunteers.
The staff at Nonprofit Resources is very knowledgeable about purchasing insurance to protect against sexual abuse. They have many years of experience helping organizations to determine the appropriate coverage. Give us a call if you would like to talk with us about our insurance programs.
Let us address one of your questions!
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