Understanding Association Liability Insurance: What Every Association Should Know *

Associations play a pivotal role in supporting communities, industries, and causes. However, these organisations also face unique risks due to their structure, mission, and range of activities. One way associations can safeguard their leaders, employees, and members is through Association Liability Insurance. This insurance may provide coverage for various risks, allowing associations to focus on their goals without undue concern over potential legal or financial liabilities. Here’s a look at what association leaders should consider when evaluating this type of insurance.

What Is Association Liability Insurance?*

Association Liability Insurance is designed to address the risks that associations and similar entities may face. These can include claims of mismanagement, breach of duty, or discrimination. The coverage may extend to the association’s directors, officers, and other members, providing a financial buffer for legal defence and potential settlements. Often, this policy may cover costs associated with defending against claims or compensation awarded to a claimant, should a court rule against the association.

Key Aspects of Association Liability Insurance*

1. Directors and Officers (D&O) Liability
   This coverage is often a component of Association Liability Insurance, focusing specifically on the actions of directors and officers. It may protect these individuals against claims that their decisions or actions led to financial harm or other issues within the association. Without D&O coverage, directors and officers may be personally liable for certain claims, posing significant personal financial risk.
2. Professional Indemnity (PI)
   Many associations provide advice, support, or training services to members. Professional Indemnity Insurance may be beneficial, as it can protect the association if a member or client alleges that the services or advice they received led to financial loss. This component generally covers legal defence costs and, if applicable, any compensation awarded.
3. Employment Practices Liability (EPL)
   Associations often have employees, contractors, or volunteers who contribute to their work. Employment Practices Liability coverage addresses risks associated with employment-related claims, such as discrimination, harassment, wrongful termination, or unfair employment practices. EPL coverage may assist with legal expenses and settlements related to these employment claims.
4. Fidelity and Crime Coverage
   Associations handle finances for membership fees, donations, and other sources of income. This coverage can address risks of theft, fraud, or embezzlement by employees or third parties. Having fidelity and crime coverage may provide associations with financial support to recover from losses if such incidents occur.
5. Tax Audit
   It can cover associations for professional fees (e.g., accountants fees) if the association has to undergo an official tax audit. 
6. Fines and Penalties
   This section indemnifies associations for fines or penalties which may arise due to Wrongful acts. The wrongful act must not be intentional, wilful, reckless or deliberate.

How to Evaluate the Need for Association Liability Insurance*

Before selecting coverage, associations may want to evaluate their specific risks and activities. Factors such as the size of the organisation, types of services provided, number of employees, and engagement with the public or members may impact the level of coverage required. Engaging with a qualified insurance broker can provide insights into the types of policies available and how they may address the specific needs of an association. 

Potential Benefits of Association Liability Insurance*

With this type of insurance, associations may experience several potential benefits, such as:

• Financial Security: Liability coverage may offer a financial safety net for legal expenses, protecting the association’s resources.
• Focus on Mission: By managing risks proactively, association leaders and members can concentrate more on their objectives and less on potential liabilities.
• Attracting Leaders and Volunteers: Knowing they’re protected, directors, officers, and volunteers may feel more comfortable in their roles. 

Final Thoughts*

For associations, managing liability risks is a complex but important aspect of organisational sustainability. By understanding and considering Association Liability Insurance, leaders may better protect their organisation, its mission, and those who dedicate their time to support it. Consulting with an insurance broker may help associations find policies suited to their unique needs.

Disclaimer: The content of this blog article is intended for general informational purposes only and should not be considered as professional advice. While we strive to ensure accuracy, we make no guarantees about the completeness or reliability of the information. For guidance regarding what and how much business insurance cover you need, we recommend consulting with a business insurance broker. Any actions you take based on any information provided here are at your own discretion.