Insurance - Why does my group need it?

Some community groups believe that because they have become an incorporated association that they can no longer be sued. This is not the case. Incorporation creates a legal entity that is separate from the individual members. Members and committee or board members of unincorporated bodies can be sued as individuals. Incorporation provides a certain amount of limited liability for members. It may not, however, protect the organisation or individual directors in cases where negligence can be proven.

Even the most prudent and effective organisations can't foresee everything and prevent accidents from occurring and you can't avoid quite a lot of what you can foresee. Insurance is not a substitute for risk management. Getting insurance should only come into the picture when you've done all you can to minimise risk elsewhere.

It is therefore prudent to seek out insurance for your particular needs. You do want to make sure that the people who help you and are part of your organisation are covered for any potential liability and/or injury or loss. You also want to ensure that all possible equipment, materials and property are also protected. The key message to all community groups is that the more that you can minimize your exposure to risk through more rigorous processes and procedures (that should from then on only require review and maintenance) the better off everyone will be.

A major reason why you need insurance is to ensure that you are not forced to close if you are exposed to a claim. While some claims by insurers appear to focus on the extreme cases the possibility of multi million dollar claims does exist. At the same time burglaries and theft are also on the climb in some states and areas and the effects of losing equipment can often be devastating.

Obviously, insurance is not free so it is important that you ensure that you are insured for exactly what you need and not for things that are not relevant to your organisation.

Prior to seeking insurance ...

Check to see if you are already covered by a blanket government or funding body scheme. In some states, some Government Departments will cover groups who receive funding from them. If you are included in a blanket coverage, check your own insurance cover and see if you are now over-insured or double insured. There may be some components of your individual policy that you can scale back. Seek advice.

What are the different types of insurance that my group may need?

Some of the insurance detailed below will not be applicable to all organisations. It is worthwhile to discuss your particular insurance needs with an insurer or broker. It is important that you also evaluate that advice and seek alternative quotations. When seeking alternative quotations make sure that you are comparing the same products and cover as policies may sound the same but may have exclusions in them that could make them useless to your organisation.

The types of insurance that may be applicable to community groups in Australia are:

Public Liability Insurance
This is the insurance "hot potato" at present. Public Liability Insurance has risen substantially over the last couple of years and many community groups are having difficulty even obtaining a quotation.

A public liability insurance policy is necessary for an organisation to protect itself against negligent claims made by a third party in respect of bodily injury or property damage arising out of the operation of the organisation's business. For example, it is likely to cover a person who enters your premises and slips due to a wet surface and sustains a serious head injury. The policy may also cover injuries resulting from products sold or supplied.

You should check the extent of your cover to ensure that product liability is included in your policy if relevant. This is particularly relevant if you sell food or products either as part of your day-to-day activities or as part of a fundraising effort. You should also check to see to what extent your volunteers are covered.

Directors and Officers Liability Insurance
As mentioned above while incorporation does provide some protection to board and committee members it does not prevent individuals from being sued for acts of negligence. A board member may negligently give some wrong advice, request someone to perform a dangerous task or could dismiss staff without proper authority or process. Where such cases can be proven the personal assets of negligent board and/or committee members can be seized to meet any damages.

It is worth noting that generally under such policies the organisation itself is not covered for the wrongful acts. This would generally be covered through the public liability insurance.

Property Insurance
This is similar to normal household property insurance and generally covers contents held within a property owned or occupied by an organisation and other cover for items such as fire, storm or accidental damage or theft.

As with your normal household insurance you can minimise the cost of this type of insurance by providing better protection of any property. This can include deadlocks, alarm system, security lighting, placing prominent signage advising the property is patrolled for security etc.

Depending on where your property is located you can also think about working with neighbours to discuss out of hours protection through ideas such as having a couple of local residents keep an eye on the property, share the cost of a security patrol with a neighbouring business etc.

The longer it takes to get into your property the more likely you are to be successful in preventing break-ins.

Fidelity (Fraud) Insurance
Fidelity Insurance provides cover for your organisations against misappropriation of funds by employees or committee members. It is worthwhile evaluating this insurance against the level of your budget and the level of potential misappropriation. You can then weigh this up against the cost of the insurance.

Building Insurance
Building Insurance covers the physical premises against events such as fire, storm, vandalism etc. Please note that this insurance is generally not required if you do not own the facility (e.g. if you hire the facility or use council or crown land premises) but check the lease or hire agreement.

Product Liability Insurance
While this is may be covered under public liability insurance it is worth checking to make sure that you do have cover if you make or sell a product. This type of policy covers damages and legal costs that are incurred where you make or sell something that injures someone or causes damages to someone else's property.

Personal Accident Insurance (Volunteer Insurance)
Personal accident insurance (or as it is sometimes known - Volunteer Insurance) generally covers members, volunteers, officials or participants for any out-of-pocket expenses following accidental injury, disability or death while carrying out their work on behalf of the organisation. This type of insurance would normally cover loss of income if the injured party were unable to work through sickness or injury.

Whereas public liability insurance protects the organisation and volunteers when preforming activities approved by organisation against negligent actions involving third parties.

Professional Indemnity
Professional Indemnity Insurance covers individuals against claims for breach of "Professional Duty" arising out of any negligent act, error or omission committed or alleged to have been committed by the Insured in the conduct of the Insured's professional activities (their profession or "business").

This insurance is particularly relevant in the cases of service delivery such as health and care services but is equally relevant in terms of advisory services.

Travel Insurance generally provides cover to the organisation against risks during travel - both domestic and international.

Worker's Compensation
In almost all cases this is compulsory where you have paid employees and covers expenses such as wages and medical bills if a person is injured at work. You must meet your obligations under occupational health and safety legislation.

What you should investigate when looking at policies?

1. The limit of cover - how much does the policy cover you for?
2. Any excess on claims - is there an excess on a claim? If so what is the excess? Is the excess on each and every claim?
3. What is the geographic scope of the cover - does it cover you and your members when they are interstate or overseas
4. Be mindful that most policies will only cover your organisation and members when they are acting in authorised activities.
5. Make sure that you investigate any exclusions - it could well be that these exclusions make the policy irrelevant to you.
6. If you do require several different policies try and package them together as it can lead to savings.
7. If you belong to a group that is associated with other similar groups explore the possibilities of "pooling" your insurance needs. This will almost certainly lead to discounts.

What happens if you have an incident that could lead to a claim?

Your first responsibility is to whoever has been injured or distressed. Provide assistance and support and seek medical advice and treatment where required. Do so immediately and where there is some concern expressed by the injured person, express your concern and ensure that where there is any doubt, medical opinion is sought. This is to protect both the injured person and your organisation. Where there is a need to phone a parent or carer do so as soon as practical and do so in a caring manner. Stick to the facts in any conversation and avoid discussion on possible liability or blame.

If an incident does occur that even remotely may lead to a claim record the incident. In doing so stick to the facts of what happened. Don't attempt to allocate blame on any person or piece of equipment and avoid making personal comments or opinions. If you have employed staff ensure that they are all aware of a recording process and who should be advised in the event of an incident. Notify your insurer of all potential and actual claims as soon as possible.

A final point

Always make sure that your insurer is notified of any activities that you may wish to undertake outside of your normal operations as it may not be covered or may require an additional premium. While this may not be great news for your group it is preferable to attempting to make a claim and finding out that you are not covered and having to find funds to pay out a claim.

For more information relating to insurance issues for community groups visit the insurance centre at www.ourcommunity.com.au.

Over the coming months resources will expand rapidly together with a series of training seminars so continue to visit http://www.ourcommunity.com.au/insurance/insurance_main.jsp.

For feedback on this help sheet or for suggestions for future help sheets send an email to: service@ourcommunity.com.au.

This material has been prepared with the support of the Victorian Government through the Community Support Fund.

DISCLAIMER
While all care has been taken in the preparation of this material, no responsibility is accepted by the author(s) or the Municipal Association of Victoria ("the MAV"), its staff or volunteers, for any errors, omissions or inaccuracies. The material provided in this help sheet has been prepared to provide general information only. It is not intended to be relied upon or be a substitute for legal or other professional advice

No responsibility can be accepted by the author(s) or the MAV for any known or unknown consequences that may result from reliance on any information provided in this publication.