Nonprofit Volunteer Liability and Special Events Coverage: Protecting the People Who Show Up for Free

Why are volunteers a coverage gap in most nonprofit programs?

Workers compensation covers employees. Volunteers are not employees, so when a volunteer is injured while serving meals, building a habitat home, or staffing a fundraising gala, workers comp does not respond. The general liability policy covers claims by third parties, not the volunteer's own medical costs. The result is a gap where the person most committed to the mission, the one who showed up without pay, has no coverage for their injury unless the nonprofit specifically bought volunteer accident insurance. Most nonprofits have not.

• Workers comp excludes volunteers in virtually every state
• General liability covers third party bodily injury, not the volunteer's own injury
• Volunteer accident insurance pays medical expenses and sometimes disability benefits for injured volunteers
• Limits commonly run 25,000 to 100,000 dollars per volunteer per accident
• Premium is modest, often 500 to 2,000 dollars annually for a mid size volunteer program

What does volunteer accident insurance cover?

Volunteer accident insurance is a medical expense reimbursement policy that pays the volunteer's out of pocket medical costs after an injury, regardless of fault. It is not liability insurance and it does not require the nonprofit to be negligent. It simply pays the bill so the volunteer does not have to. Many forms also include accidental death and dismemberment benefits, and some include a disability income component for volunteers who lose income during recovery. The coverage is excess over the volunteer's own health insurance in most forms, which keeps the premium low.

• Medical expense reimbursement for injuries sustained while volunteering
• No fault trigger, so the volunteer does not need to prove the nonprofit was negligent
• Accidental death and dismemberment benefits, commonly 10,000 to 50,000 dollars
• Excess over the volunteer's own health insurance in most forms
• Coverage applies during authorized volunteer activities, including travel to and from the site in some forms
• Some forms extend to board members and committee members as well as field volunteers

What special event exposures do nonprofits face?

A fundraising gala, a 5K run, a golf tournament, or a community festival concentrates liability exposure in a single day in a way that the annual policy was not designed to absorb. The per occurrence limit on the annual policy may be adequate for a typical day of operations but inadequate for an event with 500 guests, a temporary structure, a catered bar, and a silent auction. Special event policies or endorsements provide additional per occurrence limits for the event date and address the specific exposures the event creates.

• Temporary structures, tents, and stages create property and injury exposure
• Alcohol service at fundraising events requires liquor liability coverage
• Amusement and entertainment activities such as bounce houses and carnival rides require specific coverage
• Vendor and contractor activities at the event create additional insured and indemnity questions
• Cancellation and postponement coverage protects against non-refundable deposits and contracted expenses
• Participant injury at athletic events such as 5K runs and golf tournaments

How should a nonprofit handle liquor at fundraising events?

Liquor liability at a fundraising event is not automatically covered by the nonprofit's general liability policy. Many policies exclude liquor liability unless the organization is in the business of selling or serving alcohol, and a fundraising gala with an open bar is exactly the situation where the exclusion applies. Confirm coverage by endorsement before every event that involves alcohol, and consider whether the event's liquor liability limit is adequate for the guest count and the duration of service.

• Confirm liquor liability coverage by endorsement, not by assumption
• Check whether coverage applies when a licensed caterer or bartender serves the alcohol
• Review dram shop liability exposure in the event state
• Consider a separate event liquor liability policy for large events
• Document responsible service practices, including a cutoff time and a designated driver program
• Confirm the venue's liquor license covers the event and that the nonprofit is not the license holder

What does the Volunteer Protection Act actually do?

The federal Volunteer Protection Act of 1997 provides limited immunity to individual volunteers for harm caused while acting within the scope of their responsibilities, but it has significant exceptions. It does not apply to acts involving willful or criminal misconduct, gross negligence, reckless misconduct, or conscious indifference. It does not protect the nonprofit organization itself, only the individual volunteer. And it does not preempt state laws that provide greater protection. The Act reduces some individual volunteer exposure but it is not a substitute for insurance, and relying on it without coverage is a serious risk management error.

• Protects individual volunteers, not the nonprofit organization
• Does not apply to gross negligence, willful misconduct, or criminal acts
• Does not apply to operation of a motor vehicle
• Does not preempt state laws that provide greater protection
• Does not eliminate the need for volunteer accident or liability insurance

Ready to review your nonprofit's volunteer and event coverage?

Grandbay Financial Services builds nonprofit insurance programs that cover the people who show up for free as well as the events that fund the mission. If you are planning a major fundraiser or expanding your volunteer program, let us review the structure before the event date. Schedule a review at calendly.com/grandbayfinancial.