January 2004 Newsletter NO MASTHEAD VERSIONportal.nonprofitrisk.org/library/newsletter/RME_0104.pdf · or finance committee to examine the wisdom of retaining all but the largest

ave you heard these jubilantwords from your staff or boardlately? Even worse, do you

comfort yourself with this thoughtwhenever some accident strikes yournonprofit? If so, then everythingdefinitely is not fine within your riskmanagement program.

An “insure-against-everything”strategy is not good risk managementbecause:❑ Insurers will not let you do it.❑ Trying to do it wastes your

nonprofit’s money.❑ This strategy may encourage your

staff to be dangerously careless.

Our Key ThoughtThe central theme of this article is

that a better risk financing strategy putsinsurance last, not first, among thesources of funds for financing recoveryfrom accidental losses. Before relying oninsurance, which at best only lets yournonprofit share covered losses with aninsurer, it’s best to explore various waysof using your organization’s ownfinancial resources to finance recoveryfrom accidental losses. The more youcan rely on your own resources, the lessexpensive accidents will be for yournonprofit and the more you and yourstaff will become focused on preventinglosses. Over time, this sharper focus onsafety will increase the financial andother resources you can direct toward

Volume 13, No. 1, January/February 2004A publication of the Nonprofit Risk Management Center

continued on page 2

Develop an Accountability Action Plan in 30 Minutes!

“Everything’s Fine—We’ve Got Insurance!”

Hby George L. Head, Ph.D.

Visit www.nonprofitrisk.org to check out Version 2 of Pillars ofAccountability, the Nonprofit Risk Management Center’s freeaccountability tool for nonprofits. Version 2 features brand-newmodules on Dynamic Programming and Leadership Sustainability.Generous funding to support the development of Version 2 wasprovided by the Public Entity Risk Institute (www.riskinstitute.org).Spend 30 minutes online and create a practical, accountability“things to do” listfor your nonprofit.Spend less timeworrying aboutaccountability anda little time doingsomething about it.Check out Pillars ofAccountability today!

achieving your mission. This willdecrease the amount of yourorganization’s money that flows intoinsurers’ profits.

Let’s look at the several specificpoints that underlie this central theme.

1. Insurance Never Pays for Everything

First, when you insure, the insurernever pays your entire loss—you arealways left with a significant share:Often there is a deductible you mustpay, a deductible that leaves you payingmost or all of the smaller, more frequentlosses.

COMMUNITYRisk Management & Insurance

2 Community Risk Management & Insurance • January/February 2004

continued on page 3

“Everything’s Fine—We’ve Got Insurance”continued from page 1

Then there are the really big losses—theones that exceed the top limits of yourinsurance. Any costs beyond these topdollar limits on what the insurer willpay for any one loss or for a series oflosses in any consecutive 12 months, areyours to pay.

Then there are the losses that fallwithin the exclusions written into yourorganization’s insurance policies (“Wedo not pay for…”). Again, these are notcovered by your insurance.

Finally, the work of collecting themoney an insurer will pay you costs youmoney. These include:❑ maintaining insurance records,❑ documenting your claims,❑ spending your and others’ time,❑ negotiating with insurance adjusters

or attorneys, and❑ going to court, if necessary, to

protect your rights.

These are all costs your nonprofit mustpay to get the benefits your insurance issupposed to provide.

2. Retention’s More Cost-Effective

Moreover, insurance premiums areonly the beginning of the true costs ofthe insurance your nonprofit buys. Partof every premium dollar that youspend—from a few pennies to a dime;and rarely two dimes or a quarter forcoverage of losses that are very unusualbut can be catastrophic when theystrike—are coins that you do not needto spend if you can just find ways to beready to pay for accidental losses out ofyour own resources rather than buyinginsurance. Relying on yourorganization’s own resources to pay foraccidents is known in risk managementcircles as “retention.”

Some retention alternatives toexplore as ways of reducing your costs ofaccidents include:❑ drawing on your current revenues to

absorb minor losses (like wind-damaged roofs or dented fenders),

❑ setting up reserves for losses likedefects in any products yournonprofit sells or shortfalls in fund-drive collections,

❑ borrowing from banks or otherlenders to replace damagedmachinery, and

❑ requiring outside contractors toassume liability for any losses thatarise out of their work, regardless offault, as a condition for winningthe contract.

These strategies are all ways of retainingexposures to loss—relying on yourorganization’s own internal resources(including bargaining power withoutside contractors)—rather thanturning to insurance. In the long run,retention is less costly than insurance,leaving your organization with moreresources to fulfill its mission, bysurrendering less to insurers’ bottomlines. Insurance certainly can stabilizeyour accident-related costs, but at asignificantly higher long-term cost thanif your organization plans for thesefluctuations and absorbs these moredirectly.

3. Insurance May Encourage Carelessness

Beyond wasting money on insurers’profits one of the reasons insured lossestend in the long run to be much greaterthan internally financed (retained)losses is that insurance reduces people’sincentives to be careful. If someone else(an insurer) is paying, there is—at leastfor many people, some of whom surelywork in your nonprofit—a greaterhuman tendency to be less cautious,thus more willing to take needlesschances.

Consider an analogy. When you aresomeone’s dinner guest at a finerestaurant you do not visit very often,especially when your host is not aparticularly close friend, do you spend abit more than you would spend if youwere paying the bill yourself? Mostpeople, perhaps not you but mostpeople, have to admit “Yes” if they arebeing honest. The “damages” most

Volume 13, Number 1January/February 2004

Published three timesannually by the NonprofitRisk Management Center,1130 Seventeenth Street, NW,Suite 210, Washington, DC20036, (202) 785-3891, FAX:(202) 296-0349, orwww.nonprofitrisk.org

Questions about the contentof this publication should bedirected to the editor, BarbaraOliver. For information onadvertising contact SuzanneHensell. They can be reachedat (202) 785-3891.

Sheryl AugustineCustomer Service Representative

[email protected]

Suzanne M. HensellDirector of Marketing & Education

[email protected]

Melanie L. HermanExecutive Director

[email protected]

Barbara B. OliverDirector of [email protected]

John C. PattersonSenior Program [email protected]

Special AdvisorGeorge L. Head, [email protected]

Staff Directory(all staff can be reached

at 202.785.3891)

3Community Risk Management & Insurance • January/February 2004

continued on page 7

“When smaller,

more-predictable

losses become

expenses that over the

long run are handled

as basically normal

“retained” expenses,

your nonprofit will

spend less on

insurance, thereby

devoting more

resources to its

mission.”


people cause through an evening’srestaurant bill often are greater ifsomeone else is paying. Being evensubconsciously aware that someone else,especially a seemingly distant andimpersonal insurance company, will payif anything goes wrong, allows manypeople to relax, allows inattention andperhaps a bit of carelessness to creepinto the work habits of even the best ofus. In short, an insurance-will-paymindset opens the door to morefrequent, and/or more serious accidents.

In contrast, if safety and efficientjob performance is everyone’sresponsibility—and if everyone knowsthis is a shared responsibility—cautionbecomes a group norm. (If we’resplitting the restaurant bill equally,most of us will not order a crab cocktailand a filet mignon when we see that theothers are having soup-of-the-day andchicken fingers.) But for this sharedresponsibility to improve safety to work,everyone must know—perhaps must bereminded occasionally—that accidentsimpose real costs that fall personally oneveryone committed to your nonprofit’smission. Retaining many conceivablyinsurable losses within your nonprofitunderscores this shared commitmentand gives everyone an opportunity todemonstrate through individual safework practices a personal dedication tothat shared mission.

So Plan to Retain; Cut YourResource Drain

Insurance clearly has its proper, butlimited, place in risk financing, which isto pay the truly unpredictable, trulycatastrophic loss for which no one canplan or take effective precautions.Relying more on retention for lesser,more predictable and preventable losses,however, leaves your nonprofit withmore money and a more safety-conscious staff, and better prepared totreat at least some seemingly accidentallosses as rather routine expenses. When

smaller, more-predictable losses becomeexpenses that over the long run arehandled as basically normal “retained”expenses, your nonprofit will spend lesson insurance, thereby devoting moreresources to its mission.

Effective planning iskey to changing theseemingly unpredictablecosts of many accidentsinto budgetable expenses.This planning begins withthe losses—bothaccidental and business—that your nonprofit andsimilar organizations havesuffered in the recent past(perhaps since 1995) if thisdata is available. Somevery important questionsare:❑ What were the causes

of these losses—and, therefore,what can we do now to preventsimilar future losses?

❑ For each cause of loss, how oftendid the losses occur—and, therefore,how often can we expect futurelosses to strike?

❑ For each cause of loss, what werethe smallest and the largest losses—and could we have sensibly andcomfortably planned to pay forsome of these smaller lossesourselves rather than spendingmoney on insurance?

For some causes of loss—perhaps vehicledamage, robbery, product defects, orwindstorms—your answers to thesequestions will lead you and your boardor finance committee to examine thewisdom of retaining all but the largestlosses rather than trying to insureagainst every possible loss. Retentionmay be especially attractive if you haveeconomical, effective loss controlmeasures against these potential losses.For other causes of loss—perhapsemployee injuries, earthquakes, fire, andautomobile liability claims—the lossesmay be so unpredictable andpotentially very severe—that insurance


n the next several years employerswill see a definitive upward shift inthe age of available workers. The

renown baby boomers (born between1946 and 1964), who were expected toleave the workforce starting in 2011, arereconsidering retiring at 65, and thepool of younger workers is predicted toshrink report the U.S. Bureau of LaborStatistics and AARP. Many older workers,because they need the money, want tobe productive or useful, and wantmental stimulation, plan to continue towork in positions that use theiraccumulated knowledge. Some seecontinuing in related fields; othersenvision entirely new positions thatkeep them learning and involved.

By 2010, the number of workers 55and older will grow 4 percent, whileworkers between ages 25 and 54 willshrink 4 percent, predicts the U.S.Bureau of Labor Statistics in The laborforce: study growth and changingcomposition by Howard N. Fullerton, Jr.,and Mitra Toossi, www.bls.gov/emp/home.htm.

Staying Ahead of the Curve 2003: TheAARP Working in Retirement Studyexplodes some of the myths yourorganization may be operating under.The nationwide telephone survey of2,001 individuals between the ages of 50and 70 years old employed on a full- orpart-time basis found these individualswork not only for money but also forintangible benefits, such as enjoymentand a sense of purpose. For many(particularly baby boomers), jugglingwork and personal responsibilities is apervasive feature of their lives.Among other amenities, these workerswant respect, training, benefits and jobflexibility. Although optimistic abouttheir own ability to find and retain ajob, 67 percent have concerns that agediscrimination remains a major barrier

Board of Directors

PresidentArthur F. Blinci

Adventist RiskManagement, Inc.

Riverside, CA

TreasurerLinda P. VarnadoAmerican Red Cross

San Antonio, TX

SecretaryPhillipa Taylor

Public Welfare FoundationWashington, DC

Karen BeavorGeorgia Center for Nonprofits

Atlanta, GA

Samuel C. BennettThe Salvation Army

West Nyack, NY

Pamela E. DavisAlliance of Nonprofits

for Insurance,Risk Retention Group

Santa Cruz, CA

Michael DownsPension Boards -

United Church of ChristNew York, NY

Debra C. GriffithBoy Scouts of America

Irving, TX

David L. MairSatellite Beach, Florida

Judy NolanAmerican Red Cross

Falls Church, VA

John B. PearsonBig Brothers of Massachusetts Bay

Boston, MA

Ann Mitchell SackeyGreater Philadelphia

Federation of SettlementsPhiladelphia, PA

Marty ScherrChild Welfare League of America

Washington, DC

Jo Sachiko UeharaWashington, DC

continued on page 5

by Barbara B. Oliver

I

Maximizing SeasonedEmployees’ Contributions

to their advancement and well-being inthe workplace.

The AARP study reveals whatchanges may make your organizationmore appealing to older workers, asection of the workforce that will growinto 2050. The Executive Summary ofthe study (12-page pdf) or Full Report(150-page pdf) is available online atwww.aarp.org/bestemployers.

We’ve adapted the questions thatAARP poses to applicants for its annualBest Employers for People Over 50 awardsto help you assess where yourorganization stands as a “bestemployer” and how to make your workplace more enticing for workers over 50.

RecruitmentAARP finds that an organization’s

recruiting policies reflect its inclinationto consider candidates of different agegroups and backgrounds.

What variety of sources does yourorganization use to seek candidates forposition openings:❑ Newspapers?❑ Internet?❑ State or local employment agencies?❑ Job fairs?❑ Senior placement agencies?❑ General placement agencies?❑ Employee referrals?❑ Retired employee referrals?❑ Former employee referrals?

Do your organization’s recruitingmaterials (print, video, artwork andgraphics) fully reflect the diversity of thepeople you wish to recruit?

Workplace CultureAARP’s research suggests that

workplace culture is important to olderworkers. Factors such as a friendly workenvironment, respect from boss and co-workers, and training opportunities are


continued on page 6

Maximimizing Seasoned Employees’Contributionscontinued from page 4

all considered to be essential parts of anideal job. By answering the followingquestions, assess how yourorganization’s culture stacks up.❑ Does your organization have a

formal mentoring program, wheremore experienced employees areteamed up with “‘junior”employees?

❑ Does your organization offer careercounseling to your employees?

❑ Does your organization offer atuition assistance program to youremployees?

❑ Does your organization offer youremployees formal training, on siteor off site, that helps them keeptheir required competencies up todate?

❑ Do your managers and supervisorsactively promote available trainingopportunities to all employees?

❑ Does your organization offer any ofthe following areas of training tomanagers and supervisors:■ Policies and practices related to

diversity?■ Managing an age-diverse work

force?■ Policies and practices on age-

related employment law anddiscrimination?

■ Policies and practices onworkplace accommodations fordisabled employees?

■ Age-related health and mentalhealth issues?

■ Managing the work-life concernsof staff?

■ Other training related toeffectively managing olderworkers?

❑ How does your organizationcelebrate an employee’s long-serviceanniversaries?■ Announcement?■ Publicity?■ Parties?■ Awards?

■ No celebration of longevity withnonprofit?

❑ Does your organization have anactive task force, committee, orother formal process thataddresses diversity?

❑ Does your diversity programinclude age-related issues?

❑ Within the past three years,have any of the task force orcommittee’srecommendations resulted inimprovements to policies orbenefits, particularlyimprovements that maybenefit older workers?

❑ Does your organizationregularly conduct employeeopinion surveys?

❑ Within the last three years,have any improvements have beenmade in policies or benefits basedon the results from the employeeopinionsurvey, particularlyimprovements that relate to anolder workforce?

Continued Opportunities forCareer Success

According to AARP’s research, themajority of older workers believe thattheir best work years are ahead of themand feel that they still have a lot toaccomplish, demonstrating that theseworkers value organizations thatprovide them with continuedopportunities for career success. Byanswering the following questions,assess how your organization providesyour employees with continuedopportunities for career success.❑ Are formal performance evaluations

required for all or most of yourorganization’s employees?

❑ Are the managers and supervisorstrained in techniques forconducting formal performanceevaluations?

❑ Are these formal performanceevaluations reviewed or audited bythe next level of management?


“Wise risk

management practice

recommends your

organization begin

making changes in

policies and procedures

now to accommodate

the changing

demographics of future

job candidates or you

may lose out to more

worker-friendly

environments as you

look to fill critical

positions...”

❑ Do employees have an opportunityto challenge any part of theirformal performance evaluation?

❑ When the performance of managersand supervisors is evaluated, dothese evaluations examine theirperformance in the following areas:■ Managing work-life issues (e.g.,

flexible work arrangements,dependent care issues andresources, leave policies, etc.)?

■ Hiring practices?■ Discipline or termination?■ Giving rewards (compensation,

awards)?■ Providing opportunity

(promotions, new assignments,training)?

■ Performance evaluations?■ Valuing and promoting

diversity, including age?

❑ Do managers and supervisorsprovide workers with opportunitiesor assignments that may help themgain new experiences or develop newskills (e.g., temporary assignments,new roles, team projects, crosstraining, etc.)?

❑ Does your organization have aformal procedure to handleemployee grievances?

❑ Does your organization offer youremployees workplaceaccommodations or job redesigndue to disabilities?

BenefitsAARP’s research indicates that the

majority of older workers view benefits,such as health insurance coverage,retirement savings plans, adequate paidtime off, flexible work schedules, andpart-time work, as essential parts of theirideal job. For a list of questions that willhelp you evaluate the benefits yourorganization provides, visitwww.nonprofitrisk.org and type“Seasoned Employees” in the searchfield.

How Enticing Is Your Organizationto 50+ Workers?

Wise risk management practicerecommends your organization beginmaking changes in policies andprocedures now to accommodate thechanging demographics of future jobcandidates or you may lose out to moreworker-friendly environments as youlook to fill critical positions in yourorganizations over the next decade andbeyond. Your answers to the previousquestions provide a foundation forplanning to enhance yourorganization’s current practices andphase in additional policies andprocedures over the next six years. Thebeauty of the process is that thesechanges will make your workplace moreattractive to employees of all ages, whilemaking your organization competitiveto mature workers who will make upmore of the work force until the mid-21st century.

Barbara Oliver is Director of Communicationsat the Nonprofit Risk Management Center.She can be reached at (202) 785-3891 [email protected].


Apply for 2004 “AARP BestEmployers for WorkersOver 50”AARP’s “Best Employers” award focuses

on employers who are addressing the

changing needs of workers as they age in

the workplace. The program rewards

innovative organizations of all sizes,

budgets and types, offering policies and

features that appeal to workers 50+,

including flexible work options, training/

learning opportunities, and age-neutral

performance and appraisal systems.

Visit www.aarp.org/bestemployers for

information on eligibility, application and

judging process. The deadline for

applications is March 15, 2004.

The AARP Best Employers for Workers

over 50 will be announced in the fall

followed by a dinner honoring the

winners in New York City in September.



Make the Most of Your Seasoned Talent Pool❑ Provide fair and adequate compensation.

❑ Consider flexible schedules, including letting staff set their own hours, offer theoption of rotating part-time and full-time assignments, provide phased-inretirement, and allow time off for care-giver rolls.

❑ Capitalize on experience and talent while broadening skills and knowledgethrough new experiences.

❑ Provide age-neutral training regardless of job function.

❑ Offer enhanced benefits reflecting current and future lifestyle (i.e., long-termcare insurance).

❑ Ensure age-neutral hiring, performance and evaluation systems.

❑ Inspire management values that support employee opinions and input.

❑ Provide retirement security (i.e., pension plans that allow for phasedretirement without significant financial penalties).

❑ Recruit seasoned employees to serve as mentors for younger employees.

is your only sensible financing option.Each cause of loss (each “peril” to useinsurance-policy language) must beevaluated separately, and differentnonprofits will quite correctly finddifferent answers to how extensively itshould retain rather than insure againstlosses from each peril.

Each organization’s best set of“how-much-to-retain” answers dependon its history, objectives, resources,ability to limit its loss exposures, andtolerance for risk. But, an automatic“O boy, we’re insured!” is almost neverthe right, the responsible, the mission-responsive answer.

George L. Head is Special Advisor to theNonprofit Risk Management Center andDirector Emeritus at the Insurance Instituteof America. He can be reached [email protected].



This article first appeared in Don Kramer’sNonprofit Issues, and is reprinted herewith permission from the publisher. Formore information on Nonprofit Issues, visitwww.nonprofitissues.com.

Veterans of Foreign Wars Posthas no insurance to defend itagainst a suit for injuries caused

by a person drinking at the Post andthen causing an automobile accident,according to an appellate court inMissouri.

The coverage is precluded by anexclusion for activities “in the businessof” serving alcohol. (Auto Owners(Mutual) Insurance Co. v. Sugar CreekMemorial Post No. 1976, WD 62120, 9/30/03.)

Coverage for accidents caused bydrunk drivers is a recurring problem fornonprofit organizations. Different

courts havetakendifferentapproachesto resolvingthe issue. When thePost was suedby relatives ofindividualskilled in anauto accidentcaused by adriver whohad allegedlybeen

furnished alcoholic beverages whilevisibly intoxicated, it turned to itsinsurer for defense.

Its commercial general liabilityinsurance policy excluded injury causedby furnishing drinks to a person underthe influence, but only if the Post was“in the business of manufacturing,distributing, selling, serving orfurnishing alcoholic beverages.”

Insurance Fails to CoverDrunk Driving Accident

A

The carrier sought a declaratoryjudgment that it was not responsible forthe claim. The trial court agreed and thePost and the plaintiffs appealed.

The Post had operated a licensed baropen to the public since 1975. Itemployed a bar tender and a club roommanager and generated severalthousand dollars of gross revenue amonth.

Neither side of the litigation founda Missouri case interpreting the “in thebusiness of” provision.

The Post and the plaintiffs,however, cited a line of cases in otherstates, including New York,Massachusetts and New Hampshire,holding in favor of the nonprofitsinsured under similar language.

In those cases, the courts generallytook the position that the provision wasambiguous because a nonprofit couldnot be in the business of selling alcoholwhen its nonprofit purpose wassomething other than business.

In one case, a court said that thefact that the nonprofit American LegionPost derived substantial revenues fromthe operation of its bar did notdetermine the outcome. “It is thecharacter of the organization, not theprofitability of its liquor sales...whichdetermines whether or not anexclusionary clause...applies,” it said.

The Missouri court was morepersuaded, however, by another line ofcases, including decisions in Wisconsin,Washington, South Dakota, andLouisiana, which had generally heldthat the exclusion describes the activitiesof an organization rather than itscorporate purpose or character.

“When determining whether aliquor-related liability is excluded fromcoverage, the focus of the analysis sholdbe on the activities of the insured andthe risks inherent in those activities,”the Missouri Court said, “rather thanon the corporate status of the insured.


Insurance Fails to Cover Accidentcontinued from page 8

“The VFW’s bar exposed its insurerto the same risks inherent in otherdrinking establishments operated byfor-profit entities.... We find that in thecontext of the policy at issue, given theactivities of the VFW, a reasonableperson in the position of the VFWwould have understood that the VFW

Serving Alcohol at Special EventsPlanning to serve alcohol at your event?

1. Make certain that the facility permits it and inquire about

any special conditions (requiring the use of professional

bartenders or limiting the time liquor can be served).

2. Research laws specific to your community and state that

govern the sale and consumption of alcohol. Some states

impose very strict liability on organizations that sell or

provide alcoholic beverages, while other states hold the

drinkers solely liable for their actions. It may be necessary to procure a special

license from the appropriate regulatory officials to serve alcohol.

3. Ask your insurance agent or broker for assistance in determining whether your

current insurance policy covers events where alcohol is served or if additional

liquor liability coverage is needed.

4. Decide if the nonprofit’s paid or volunteer staff, or an independent contractor

will serve the alcohol. If using a caterer, most of the risks can be transferred to

that company when you have obtained the proper additional insured

endorsement from the company’s carrier. However, if your organization is going

to furnish the alcoholic beverages:

❑ Identify the controls needed to make sure that intoxicated or underage

patrons aren’t served.

❑ Determine how you will handle someone who becomes intoxicated.

❑ Decide whether to serve beer, wine and/or hard liquor.

❑ Choose an open bar or cash bar.

❑ Ask if the bartenders have any special training, such as TIPS responsible

alcohol management program.

❑ Arrange with a local transportation company to provide services for

intoxicated guests.

❑ Decide how long before the close of the event will you stop serving.

Adapted from Managing Special Event Risks: 10 Steps to Safety available at

www.nonprofitrisk.org.

was ‘in the business of...selling...andserving alcoholic beverages.’ Therefore,the VFW was excluded from liabilitycoverage for selling alcohol to [thedriver].”

“We do not believe that the term‘in the business of’ is ambiguous asused in the policy issued to the VFWsimply because the dictionary holdsmore than one meaning for the term‘business’.”


Theft of Funds Is NotCovered By InsuranceThis article first appeared in Don Kramer’sNonprofit Issues, and is reprinted herewith permission from the publisher. Formore information on Nonprofit Issues, visitwww.nonprofitissues.com.

he employee dishonestyprovisions of a standardinsurance policy do not protect a

charity from loss when an employeeconducts an unauthorized fund raisingcampaign and uses the proceeds forhimself, according to the First CircuitCourt of Appeals. The Court hasaffirmed a District Court decision

denying coverage for the SpecialOlympics International and itsMassachusetts affiliate. (Fireman’sFund Insurance Co. v. Special OlympicsInternational, No. 03-1322, 10/10/03.)An area manager hired atelemarketer to begin a fund raisingcampaign in 1991, using the SpecialOlympics name but without theorganization’s knowledge. Hedeposited the money in anunauthorized bank account in theorganization’s name and then wrotechecks to himself, with only a smallportion of the $1.1 million raisedbeing used for Special Olympicsactivities. When the situation wasdiscovered, Special Olympics soughtto recover under its employee fidelitypolicy.The policy said it covered “dishonestacts committed by an

employee...with the manifest intent” tocause loss to the employer and to obtainfinancial benefit for the employee or athird party. It specifically excluded“indirect loss”, which it defined as lossresulting from the organization’s“ability to realize income that [it] wouldhave realized had there been no loss” of,property.

The District Court found thatSpecial Olympics was not the “owner”of the funds raised in its name andtherefore had no loss under the policy.

T

In its view, the victims were the personswho donated the money after beingdeceived into believing they weresupporting Special Olympics. TheDistrict Court recognized that there wasa loss ofreputation, andperhaps futurecontributions, butreputation was anintangible assetnot covered by thepolicy.

On appeal.Special Olympicsargued that thefunds were, infact, owned by Special Olympics whendeposited into a bank account in itsname. Recognizing that the charitymight be right on the ownershipquestion, the Court of Appealsnevertheless said the issue was whetherthe loss came within the definitions ofthe policy. It concluded that thedishonest acts were not committed“with the manifest intent” to hurt thecharity.

The Court noted that the manifestintent language had been added to thestandard policy about 25 years ago tonarrow the scope of coverage. Here, itsaid, “the facts reveal a scheme that wascarefully crafted to bypass the insuredentirely; although [the manager]capitalized on the organization’ssympathetic charitable mission, hisdeception was directed at individualdonors. And, unlike the classic case ofembezzlement, [this] scheme generatednew funds, unanticipated by [SpecialOlympics], specifically for his ownbenefit. This scenario falls outside evena broad interpretation of what it meansfor an employee to have a ‘manifestintent to...cause the employer to sustainloss’.”

While the Court was “sympathetic,”it said it was constrained by the policy.

Lessons LearnedGenerally, ambiguity in an

insurance policy is interpreted in

favor of the insured and against

the insurance company. This case

illustrates a narrow reading of a

policy by an appellate court. The

case also demonstrates the

importance of taking time to read

and understand your nonprofit’s

insurance policies, and

remembering that not all losses

will be covered. Finally, it’s never

safe to assume that ambiguous

policy language will be

interpreted in your favor.


Welcome to the Risk Management Marketplace, a regular feature in Community Risk Management & Insurance. TheMarketplace provides information on the product and service offerings of a number of companies serving the nonprofitsector. Inclusion in the Marketplace does not constitute an endorsement by the Nonprofit Risk Management Center. Toinquire about advertising rates and space availability for future editions of the Risk Management Marketplace, contactSuzanne Hensell, Director of Marketing & Education, at (202) 785-3891 or [email protected].

Risk Management MARKETPLACE

Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the

nominal winner is often a real loser—in fees, expenses, and waste of time. As a peacemaker the lawyer has a

superior opportunity of being a good man. There will still be business enough. —Abraham Lincoln



320 PARK AVENUE NEW YORK NY 10022-6839212 224 1600 www.mutualofamerica.com

Mutual of America Life Insurance Company is aRegistered Broker-Dealer. For more information

and a prospectus call: 1-800-468-3785. Theprospectus contains complete information onall charges and expenses, including separateaccount and portfolio company expenses, and

an annual contract fee. Please read it carefullybefore you invest.

We Specialize in Retirement Plans

Why Mutual of America?

• Salaried sales and service representatives

• HotlinePlus, our online, Internet-basedsystem provides employers with immediateaccess to plan information

• Administration, record-keeping and claimsservices all provided by one company

• Toll-free number and Web site for employeetransactions

• Quarterly statements mailed to employees’homes along with informative newsletters

• Twenty variable Investment Alternativesand an Interest Accumulation Account

Mutual of America is dedicated toproviding employers of not-for-profitorganizations with comprehensiveretirement plan products and services.

1-877-888-2081 www.mariskpartners.com

Rely on the experience of our staff.

No matter how unique your situation, Munich-American RiskPartners has

the talent and expertise you’re looking for. Specializing in alternative solutions, we help

clients control the total cost of risk.

And when it comes to stability, we’re the only alternative risk specialist that offers the

resources of American Re—a member of the Munich Re Group—which has been standing behind its commitments and

paying claims for over 86 years.

So call Munich-American RiskPartners with your alternative risk needs today.

We’ll bring plenty of know-how to the table.

Seasoned.

Munich-American RiskPartners is a division of American Re-Insurance Company. Risks are underwritten by

American Re-Insurance Company and other members of the Munich ReGroup. The Munich-American RiskPartners name and logo are

trademarks of American Re-Insurance Company.

©2004 American Re-Insurance Company. All rights reserved.



Remember when closing your eyes and hanging on tight were all you needed

to feel secure?

800-253-3104www.markelsocialservice.com

Now that you run a social service agency, your eyes arewide open. Where others see only your good works, yousee that things can spin out of control. Markel sees thingsyour way, and can design an insurance program that protects your staff, clients, board members, and volunteers.

Feel secure with Markel.



Nonprofit CARES™ VNonprofit CARES™ VNonprofit CARES™ VNonprofit CARES™ VNonprofit CARES™ Version 2.0ersion 2.0ersion 2.0ersion 2.0ersion 2.0AAAAAvailable on the Wvailable on the Wvailable on the Wvailable on the Wvailable on the Webebebebeb

Take a minute, visitwww.nonprofitcares.org.

What a Bargain!Simply pay the onetime licensing fee of $89 online by credit card, OR transfer your registration ofCARES™ Version 1.0 at no additional cost.

■ Access to a detailed report containing specific recommendations for your nonprofit.

The advice in the report is based on your answers to the assessment.

What’s New?Modules covering:

■ Technology■ Internal Controls■ Facilities

Sign Up for Monthly RiskManagement Tips in Youre-mailbox

The Nonprofit Risk Management Center’s shortelectronic newsletter offers tips and useful hints. Topicsin recent editions of the e-news have included tamingjunk e-mail, documentation for volunteers who drive,the importance of job descriptions, and changes in theFair Labor Standards Act. Because your organization isa nonprofit, you may receive this timely informationabsolutely free. To startreceiving your copy of themonthly e-news, just fill out theshort online form atwww.nonprofitrisk.org/nwsltr/nl_sub_f.htm. Please fill in thedemographic information,which will help us serve youbetter. Questions about our e-news? Call Barbara Oliver at(202) 785-3891.


Shipping & Handling$1.50 for orders of $7.50 or less

$5.00 if subtotal is $7.51 - $25.00$7.00 if subtotal is $25.01 - $50.00

$10.00 if subtotal is $50.01 - $75.00$13.00 if subtotal is $75.01 - $100.00

Actual shipping cost will be billed for orders over $100.00,Next Day UPS, or 2nd Day UPS.

Telephone: (202) 785-3891; FAX: (202) 296-0349

Mail or fax this form with payment to:

1130 Seventeenth Street, NW, Suite 210Washington, DC 20036-4604

SUBTOTAL

Int’l Checks, please add $12.00

Shipping & Handling

TOTAL

Visit www.nonprofitrisk.org for a complete description of allcurrent titles, including tables of contents. Also available: e-books—download our current titles and save shipping and handling costs.

Customer Information

Name

Title

Org

Address

City State Zip

Tel ( )

FAX ( )

E-mail

Method of Payment Check enclosed P.O. # ____________________ Charge my: Visa MasterCard AmEx

Card No.

Exp. Date

Signature

New Address!

New Address!

Call (202) 785-3891 to inquire aboutquantity discounts.

Order online atwww.nonprofitrisk.org

Products / Publications Order Form Price No. Total

NEW! Managing Facility Risk: 10 Steps to Safety $15.00

NEW! Playing to Win: A Risk Management Guide for Nonprofit Sports & Recreation Programs $20.00

NEW! Staff Screening Tool Kit—3rd Edition $30.00

NEW! No Surprises: Harmonizing Risk and Reward in Volunteer Management—3rd Edition $15.00

Ready in Defense: A Liability, Litigation and Legal Guide for Nonprofits $20.00

A Golden Opportunity: Managing the Risks of Service to Seniors $20.00

Enlightened Risk Taking: A Guide to Strategic Risk Management for Nonprofits $25.00

Enlightened Risk Taking: The Workbook $15.00

Coverage, Claims & Consequences: An Insurance Handbook for Nonprofits $30.00

The Season of Hope: A Risk Management Guide for Youth-Serving Nonprofits $30.00

Nonprofit CARESTM –Version 2.0—Computer Assisted Risk Evaluation System (visit www.nonprofitcares.org to order!)

Vital Signs: Anticipating, Preventing and Surviving a Crisis in a Nonprofit $20.00

Full Speed Ahead: Managing Technology Risk in the Nonprofit World $25.00

Taking the High Road: A Guide to Effective and Legal Employment Practices for Nonprofits $45.00

No Strings Attached: Untangling the Risks of Fundraising & Collaboration $15.00

More Than a Matter of Trust: Managing the Risks of Mentoring $15.00

Managing Special Event Risks: 10 Steps to Safety $12.00

Healthy Nonprofits: Conserving Scarce Resources Through Effective Internal Controls $15.00

Leaving Nothing to Chance: Achieving Board Accountability Through Risk Management $12.00

Prepared for distribution to:Prepared for distribution to:Prepared for distribution to:Prepared for distribution to:Prepared for distribution to:Big Brothers/Big Sisters of AmericaBoy Scouts of AmericaCalifornia Association of NonprofitsChild Welfare League of AmericaDelaware Association of Nonprofit AgenciesGeorgia Center for NonprofitsKansas Non Profit AssociationLaubach LiteracyMaine Association of NonprofitsMichigan League for Human ServicesMichigan Nonprofit AssociationMinnesota Council of NonprofitsNorth Carolina Center for NonprofitsOhio 4-H Youth DevelopmentPresbyterian Church USAPro Bono PartnershipTexas Association of Nonprofit OrganizationsUnited Way of Central IndianaY Services Corporation

Please route to:

Executive DirectorDirector of VolunteersRisk ManagerLegal CounselHuman ResourcesFinance/Administration

1130 Seventeenth Street, NW, Suite 210Washington, DC 20036-4604

Inside This Issue

“Everything’s Fine—We’ve Got Insurance” .............................................................................. 1

Maximizing Seasoned Employees’ Contributions ................................................................... 4

Insurance Fails to Cover Drunk Driving Accident ................................................................... 8

Theft of Funds Is Not Covered by Insurance .......................................................................... 10

Risk Management Marketplace ............................................................................................... 11

Publications from the Nonprofit Risk Management Center ................................................. 15

C O M M U N I T Y

Risk Management & Insurance

Documents

January 2004 Newsletter NO MASTHEAD VERSIONportal.nonprofitrisk.org/library/newsletter/RME_0104.pdf · or finance committee to examine the wisdom of retaining all but the largest