So, your nonprofit just signed a contract for a new grant through your local municipality. Now they want you to send them the required insurance documents. No problem. You just send a copy of the contract to your insurance broker and let them figure it out. That’s what they get paid for after all!
That’s when things start going downhill. Your broker tells you that you don’t have the nonprofit insurance coverages that are required in the contract. And she tells you that you probably don’t even need the limits or the coverages that are required. Now you have a contract where you have agreed to provide certain things but are unable to provide them.
So, what now?
First, a Quick Note…
The insurance and indemnification requirements in contracts have become more and more onerous. Specifically, grantors, municipalities, state and federal entities, and just about everyone else are trying to transfer their risk to others. In other words, through the contract language and the associated requirements, they are trying to make you responsible for as much liability and as many circumstances as possible. Fair? Absolutely not. True? Absolutely.
Prevention is the Best Medicine
It is common practice for insurance brokers to review the insurance and indemnity clauses in the contract. There shouldn’t be a charge for this service so, it’s as easy as emailing a copy to your broker and asking “hey, is our nonprofit insurance in compliance with this contract?”
Once you are armed with the analysis from your broker then if needed, you can negotiate the requirements. If you can’t negotiate out of the requirements, then see how much it will cost to get into compliance and determine if it makes financial sense.
But I already signed the contract
Of course, it’s always easiest to negotiate contract requirements before you sign them. However, that doesn’t mean you can’t still negotiate if you don’t have the required limits or coverages.
Simply explain that you didn’t realize your nonprofit insurance program doesn’t meet the requirements and provide the documentation that shows what you do have. Often this will be enough.
If you are uncomfortable discussing the coverage and the limits and how they relate to the contract then ask your broker if this is something he or she will do for you. This can be a successful strategy because your broker can “talk the talk.”
They won’t budge!
If you find yourself in a position that you cannot get out of the requirements then, unfortunately, you will have to comply or be in breach of contract. In this case, ask your broker to help you meet the requirements at the least possible costs. Then make yourself a note to try and negotiate out of the requirements when the contract is re-negotiated.
If you would like more information about managing your volunteers please feel free to reach out to one of our nonprofit insurance specialists for more information.