Nonprofits Insurance Alliance

During the current hard insurance market, defined as a market with increasing insurance rates and decreased availability of coverage, nonprofits are finding that coverage provided by commercial carriers is not consistent, affordable, or appropriate.

Furthermore, nonprofits’ contracts require certain types of coverages and policy limits, such as sexual abuse liability coverage, so when commercial insurance companies no longer offer the coverage policies nonprofits need, it can leave them in violation of contract terms with federal, state, and local municipalities.

The few commercial insurance companies that have provided sexual abuse liability coverage to community-based nonprofit organizations in the past are currently in a fit of angst about the extension of statutes of limitations that grant victims of sexual abuse an expanded window in which to bring their claims into court. This is what’s known as “social inflation” in the insurance industry.

For the past few years, many commercial carriers have opted not to renew existing sexual abuse and molestation coverage for nonprofits — and sometimes the complete package of insurance as well. Most other carriers have been lowering the limits of coverage they will offer and imposing large, self-insured retentions and significant premium increases.

Some insurers have even abandoned the social service market completely, citing the impact of these new laws. Are these actions justified based on evidence of more frequent sexual abuse claims against community-based nonprofits?

The answer is no.

Over the course of the past 10 years, the frequency of sexual abuse claims emanating from community-based nonprofits has not changed, despite changes to the laws providing more opportunity for claims to be brought.

Clear signs of the property and casualty market heading into trouble started showing in 2019. Nonprofit policyholders would be “treading water,” Insurance Journal reported. The Wall Street Journal reported in February that one nonprofit saw their renewal quote increase from $76,000 to $750,000.