LOOKING TO INSURE SOCIAL SERVICES AGENCIES?
by Curtis Pearsall
Traditionally, insurance agencies are extremely generous in giving their time and resources to benefit social service agencies. After all, although many social service agencies receive government dollars through grants, the recent economic crisis has caused many to depend heavily on money from the private sector. Insurance agencies and staff members know that social service agencies come in many shapes and sizes, with exposures that can be equally varied and are often unique.
When one thinks of social service agencies, operations such as the United Way, Family Services, Girl Scouts and various cerebral palsy groups come to mind. These are some of the more common and better-known organizations. However, not all social service agencies look alike. They can have different structures—from being a government entity, to a nonprofit, to a for-profit, to simply an association of members. Understanding their structure is important.
As board members, donors, or possibly recipients of services, many insurance professionals have had personal interaction with social service agencies. For those who have not, this class of business requires some homework before you venture on that sales call. I’d recommend starting with one of the various Exposure Analysis Checklists. These checklists will provide insight into the assortment of possible exposures, with details on how to address a broad range of issues.
Property Exposure
For agencies that rent facilities on an annual or as-needed basis, consider a sizeable limit of Fire Legal Liability. On the other hand, many agencies own their own premises. In fact, some of the larger ones even allow other agencies to use their facilities. Some of these structures might be older, which creates specific coverage needs. One that comes to mind is Building Ordinance coverage, which requires that any building damaged to a certain extent usually around 50%) be torn down, rebuilt or brought up to code. This issue can have a huge impact on a claim and add substantial dollars to the settlement.
In addition, be sure to determine if any cooking is done on-site and, specifically, what type of food is being prepared.
It’s easy to overlook the need for Boiler And Machinery coverage or Equipment Breakdown protection. Claims in this area can also be extremely significant. For example, some social service agencies are seeking to reduce energy costs by exploring alternative approaches for heating and cooling. Explore this issue to ensure that coverage is in place.
Reviewing the exposure for personal property of others and property in transit is also essential to ensure proper coverage. Some carriers include this protection at nominal, if any, cost.
Liability exposure
The liability exposure can also vary significantly because many of social service agencies have camps or take individuals whom they serve to playgrounds or beaches. To avoid any problems down the road, it’s imperative to uncover these planned activities and advise the carrier about them. If the agency uses volunteer labor, make sure that these volunteers are covered. A number of specialists in this class of business provide a broad additional insured endorsement at minimal, if any, cost.
Many of these agencies are quite active in fund-raising through a variety of methods. Explore this area to find out what the agency has planned. If liquor might be served at fund-raisers, be sure to discuss this exposure. Although claims involving abuse or molestation are rare, they do occur. Due to the potential for sizeable claims, secure this protection with its own limit so as to not impair the overall General Liability limits.
Many social services agencies have a significant Professional Liability exposure. Make sure that you understand the exposure completely, and ask the agency to give you a full list of the services it provides so that you can advise the carrier. If these services include counseling, be aware that this includes a wide variety of exposures. Because Professional Liability forms are not standard, do a proper evaluation to ensure an educated decision. Be aware that the company can write these forms on an occurrence basis or claims-made basis. The definition of “additional insured’ is extremely important, with many of the forms covering employees, volunteers, employed nurses, psychiatrists, medical directors, and administrators.
The risk will probably have a time element exposure. Uncover whether there are periods of fluctuation of revenue due to fund-raising efforts.
Optional Coverage
Unfortunately, Crime and Employee Dishonesty are also key coverages to explore. Although many specialty carriers provide this coverage, you must determine if the provided limit is satisfactory based on the exposure.
I would recommend offering the client several Umbrella limit options to consider. Sizeable Liability/Professional losses can occur where the underlying limit will not be sufficient.
Because some specialty carriers don’t cover the Workers Compensation exposure, you might need to explore the marketplace. The ease of placement will depend largely on the nature of the risk and the experience. Some social service agencies went with self-insured trusts (thinking they were saving money). Unfortunately, in some cases, the results were disastrous and a number of these trusts went under.
Do your homework
In many respects, providing coverage for social service agencies requires a strong degree of specialization. Google “insurance for social service agencies,” and you’ll find a number of entities that provide this coverage, many with very specialized programs. Because they might require their own application, determine this upfront. One advantage to these specialty markets is that their applications are highly detailed and designed to identify exposures that are unique to that social service agency.
This is a class of business where you need to do your homework. It’s essential to understand the issues social service agencies face and what coverages they need to provide the proper protection. Because carriers will ask for a variety of information, allow yourself enough time to gather it. Using Exposure Analysis Checklists will get you started in the right direction.
Curtis Pearsall, CPCU, AIAF, ARM, CPIA, is president of Pearsall Associates, Inc. (Whitesboro, NY), a risk management consulting firm that specializes in helping agents protect themselves against E&O claims. To contact him, call (315) 768-1534; e-mail: [email protected]; visit www.pearsallassociates.com; or blog: www.agentseotips.com. Reproduced, with permission, from Rough Notes magazine.