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Faith-Based Nonprofits and Insurance Limits

August 1, 2018 jill Blog
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By Peter A. Persuitti

We are witnessing unrelenting pursuit by stakeholders and victims, seeking reparation for alleged wrongdoing done by a nonprofit, its staff, volunteers or board members. Some of the revelations come after years of latency from past actions; others are triggered by a fast-moving social media frenzy that changes our perspective in a heartbeat.

At Gallagher, we are fortunate to work with more than 24,000 nonprofits and charities around the world. We also have a third party administrator in Gallagher Bassett, which manages the claims of our self-insured clients and we lead in the formation of captives and underwriting programs like Charity First.

While this gives us a broad base from which to benchmark, I caution you to think strategically about these issues – beyond insurance limits or coverage terms.

There’s the big question – “what are we to do as a nonprofit board and executive team in terms of protecting our reputation, our assets, our board members’ personal assets and our sustainability?”

This strategic issue might be more effectively addressed initially through a business continuity exercise rather than a simple study of what others buy for excess limits. We raise them for your consideration as examples.


There is no question that a nonprofit should be prepared to protect its endowments and other physical assets, but quite frankly, much of this could be mute if there were severe harm to its reputation. Reputation risk is a tough one to insure, but a great risk to discuss as a standing item on every board meeting – “What are we doing to protect our reputation?” This is a natural part of the “enterprise risk management” process.


This is a critical evaluation. What is it we do that could put us at risk? Do we work with children, the mentally challenged, the aged? Are we exposed to antitrust litigation? Do we transport? Are we in 24/7 care? How about heavy lifting?

Each day, nonprofits are being asked to take on the compounding challenges of society and this is a great opportunity. However, we need to measure again the mission and the risk-reward analysis. Risk management becomes a vital part of the operation.


More and more, we are seeing states exercise control over prior protections such as charitable immunity and statute of limitations. Your jurisdiction has a history and track record of verdicts and lawsuits that you need to be familiar with. It becomes another factor to weigh in your overall strategy.

Limits as Targets

Have you ever thought of limits as targets for litigators? While limits give comfort to protecting your assets, you have to weigh the reality of this being discovered and a case ending up being a full limit loss. You also should consider the harm this can cause, not only to your reputation, but also to your future ability to buy and/or afford coverage and appropriate limits.

Duty of Care

Perhaps the most critical discussion that board and staff leaders must have revolves around this concept of “duty of care” and potential breaches.

In today’s world of transparency and accountability, along with the plethora of easily accessed information on any topic, there is no excuse for not knowing the risks – you must be prepared.

You evaluate the risks, you mitigate where you can with insurance, risk management and operational best practices, and you make informed decisions every day. You can’t prevent the black swan and the fortuitous occurrences, but you can always be prepared by pursuing business continuit’ evaluations and making duty of care your top priority.

At the end of the day, negligence’s biggest enemy is reasonable precaution – then worries about appropriate limits may subside.

Peter A. Persuitti is managing director, Religious Practice, for Arthur J. Gallagher & Co., a global insurance brokerage, risk management and consulting services firm,