Association Liability insurance is a specialised product customised for not-for-profit organisations and professional associations. It is made up of several coverage sections designed to meet the needs of associations – the two key coverages being Directors & Officers and Professional Indemnity, but includes several other coverage sections into a single package.

Why does a Not-for-Profit or Professional Association need this cover?

What does Association Liability insurance cover?

Directors & Officers / Office Bearers Liability

This section provides cover for wrongful acts committed by the principals, partners, trustees, directors and officers of the association from possible lawsuits arising out of any error, misstatement, omission, neglect, negligence, breach of duty, breach of confidentiality, and mismanagement. This is similar to the liability cover provided by Management Liability and Directors & Officers policies.

Association Reimbursement

This section provides cover for the same claims scenarios as Section 1 (D&O) but is only triggered when the association has had to indemnify (pay) the insured individuals. It is reimbursing the association for these costs, whereas section one is directly covering the insured persons directly.

Professional Indemnity

This section provides cover for the association from a breach of professional duty resulting in a financial loss. This includes cover for the handling of memberships, creating and managing curriculums, setting policies and guidelines, etc. as well as the provision of advice at seminars, or through newsletters, websites, workshops, etc.

Association Liability Cover

This section provides cover for a wrongful act committed by the association which has resulted in a legal action where the association is named in the lawsuit.

Crime / Employee Theft Protection

This section provides cover for a range of crime related occurrences when there has been a direct financial loss. This can include employee fraud or dishonesty, third party crime, electronic and computer crime, etc.

Employment Practices Liability (EPL)

This section covers the association from alleged Employment Practices breaches, such as: harassment, discrimination, bullying, wrongful/unfair dismissal, etc.

Statutory Liability / Fines & Penalties

This section provides cover for fines and penalties incurred by the association when there has been an alleged statutory breach, such as: OH&S, employment practices laws, workers compensation laws, industry specific rules & regulations, etc.

Please note that each insurers product and policy wording can vary. Please consult your broker for the most suitable option.

Exclusions

Personal Conduct Exclusion

This is a standard exclusion that excludes dishonest or fraudulent acts committed by an insured. However, most policies defend the insured until final non-appealable adjudication and policies typically include clauses which state conduct by one insured shall not be imputed to other insureds.

Insolvency Exclusion

This exclusion removes any coverage if a claim arises out of insolvency. It can potentially be removed if the association can show they are in a good financial position and can cashflow the company for 12-18+ months.

Bodily Injury / Property Damage

The policy will not respond to a Bodily Injury & Property Damage claim, as this exposure is typically covered by a Public Liability policy. This exclusion usually has a write back (gives coverage back) for Defence Costs & Legal Costs, Employment Related Wrongful Acts and Security Claims.

Retroactive Date Exclusion

This excludes any wrongful act committed or alleged to have been committed prior to the inception of the policy. This is a way for insurers to exclude past acts and make the policy only forward looking.

Insured Versus Insured

There are many variations to this exclusion, but the main purpose is to not cover a dispute between insureds. I.e. a director or employee vs. the organisation.

Prior & Pending Exclusion

This exclusion states that the policy will not cover any pending or prior litigation involving the Company that has begun before the Prior & Pending date of the policy.

This list is not exhaustive and there may be additional policy exclusions applicable to your policy. Please consult your broker or insurance advisor for the exclusions applicable to your policy.

Landmines

Association Liability insurance is a complex product and should be structured accordingly. Full disclosure and monitoring throughout the year is important to ensure coverage will respond in a claim. Here are some areas to watch out for when managing an Association Liability policy:

Disclosure

In basic terms, an insured must disclose any matter they know to be relevant to the insurer’s decision to accept the risk. Continuous disclosure is also very important: If there is any material change to the association/organisation during the policy period, these must be notified to the insurer.

Claims Made Policy

Timing is extremely important, especially when it comes to reporting claims as these policies are written on a Claims Made policy form. This means that in order to trigger a claim, the demand/claim must be reported, and indemnity granted during the period of insurance. So, if a policy is lapsed and a claim is reported after the policy period, the claim could be denied.

Confusing Terminology

Association Liability is a broad term that can be confused with other insurance coverages. For example, Association Liability is not “Public Liability” and does not include “Workers Compensation” or “Voluntary Workers” insurance. There are several insurance policies that also need to be considered when reviewing an Association’s overall insurance program; this should be reviewed with your broker/insurance advisor.

Exclusions

It is crucial to understand your policy’s exclusions, what they mean and how they would apply to your specific association/organisation.

Claims Example