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Michael S. Little: Where nonprofit organizations need protection

It's The Law

Posted: July 16, 2009 3:52 p.m.
Updated: July 17, 2009 4:55 a.m.
One of the most important skills any successful nonprofit organization must develop is the ability to raise capital through fundraising events. Fundraising events are even more important in today’s tough economy as many nonprofit organizations and charities struggle to survive amid the decline of charitable contributions by both private and corporate donors.

All fundraising events — including luncheons, annual meetings, receptions, walk-a-thons, golf tournaments, seminars and carnivals — are conducted with some degree of risk.

This “risk” can take the form of personal injuries sustained by event participants (i.e. John Doe suffers a heart attack and collapses while participating in a charity 5K run to raise awareness for cancer) or property damage to the venue (i.e. intoxicated participants of a charity bowling tournament damage several pin-setters at the bowling alley used to host the event).

Unfortunately, the parties injured or harmed as a result of a nonprofit fundraising event are not always inclined to forgo legal action just because the event host is a charitable organization. If someone is injured during a fundraising event or the venue is damaged, lawsuits typically follow.  

The monetary costs of defending these lawsuits and paying resulting judgments or settlements can cripple many nonprofit organizations struggling to survive.

Moreover, corporate sponsors interested in lending their name, resources and personnel to these fundraising events often refrain from doing so in light of concerns that the corporation, as a sponsor or major donor for the event, might get dragged into litigation alongside the nonprofit organization if something goes wrong.

Fortunately, there is a solution. Many insurance carriers offer specialized general liability policies, referred to as special events liability insurance, that cover a broad range of fundraising events commonly used by nonprofit organizations to generate money and awareness for their respective causes.

Depending on the type of fundraising event to be insured, these policies are typically inexpensive and protect the nonprofit organization from personal injury liability, property damage liability and the litigation costs to defend these claims.

Although nominal in cost, Special Events Liability Policies may provide broad coverage for:
  • Injury or death of event participants;
  • Injury or death to spectators at the event;
  • Injury or death of event volunteers;
  • Property damage liability;
  • Host liquor liability to protect against bodily injury or property damage claims arising from acts of an intoxicated guest served alcohol at the event;
  • Activities necessary to plan and carry out the event;
  • Accidents stemming from street closures to accommodate the event; and
  • Coverage for rented equipment, signage and supplies used for the event.
These policies are designed to afford coverage only for the specific fundraising event specified in the policy.

As a result, the policies have extremely short effective dates (i.e. typically no more than 15 days) and the limits of liability apply separately for each fundraising event encompassed in the policy.

An interesting aspect of special event liability policies is that they can be used as a tool to lure corporate sponsors for fundraising events.

As stated above, many corporations may want to co-sponsor and/or lend their name to a charity event but refrain from doing so for fear of potential liability exposure if someone is injured or the venue sustains property damage.

After obtaining a special event liability policy, nonprofit typically have the option to add corporate sponsors (including corporate vendors providing complimentary food and/or services at the event) as additional insureds under the policies.  

Although an additional premium charge is usually required, non-profit organizations can more readily obtain support and participation from businesses in the communities they support by assuring these potential corporate donors that they will be protected from liability should an unforeseen accident occur at the proposed charitable event.

While corporate donations and sponsorship are often difficult to secure, corporate contributions are more likely to be obtained if the nonprofit organization demonstrates that the proposed event is fully covered by a special event liability policy and that the corporate donor will be listed as an additional insured under the policy to eliminate any risk of exposure to both the non-profit organization and corporate donor.

The breadth of coverage offered in the marketplace varies by event type and the amount in premium a nonprofit organization is willing to spend. However, for many non-profit organizations, obtaining a special event liability insurance policy for each fundraising event scheduled throughout the year helps ensure that fundraising goals are met, corporate sponsorship is secured and costs are contained should an accident occur at a fundraising event.

Michael S. Little is an attorney with the law firm Poole & Shaffery LLP. His column represents his own views, and not necessarily those of The Signal. “It’s The Law” appears Fridays and rotates among members of the Santa Clarita Valley Bar Association. Nothing contained herein shall be or is intended to be construed as providing legal advice.


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