Nonprofit Organizations: Pushing Past the Pandemic

Professional
// September 3, 2020
Reading Time: 4 minutes

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When COVID-19 first hit the U.S. in March, both for-profit and nonprofit organizations were scrambling to navigate their new normal. Shutdowns, a loss of volunteers and a decrease in charitable donations created a bleak future for many nonprofits — especially small, less sophisticated operations. Now, nearly six months into the global pandemic, nonprofits are utilizing their resources to adapt. They are using creativity and ingenuity to pursue fundraising efforts and help their organizations thrive amid a crisis.

According to a new report from BDO’s Nonprofit Benchmarking Survey, 35% of nonprofits are self-reported as “thriving,” meaning that they are able to maintain more than adequate funding and/or are experiencing growth, 51% are described as “stable” and able to meet demand and 14% are “struggling.”

The biggest challenge nonprofits face is funding, and while most nonprofits have been experiencing an increased need for services, their overall funding may not be able to handle the increase. According to a recent article on Vault.com, many nonprofits have turned to technology to reimagine their events and fundraising efforts, taking them online.

Despite the fact that the outlook for post-pandemic nonprofits is seemingly good, these periods of heightened stress or strain on capital show that directors and officers (D&O) insurance is even more important as employees, volunteers and vendors can become desperate. Consider these D&O claim statistics cited by the Insurance Journal:

  • The average cost to defend a D&O claim is between $35,000 and $100,000
  • $457,000 was the total average indemnity payment for an adverse judgment
  • The average cost to defend a frivolous law suit is $5,000 (even ones that get thrown out)

Additionally, board members are making some of the toughest decisions nonprofits have ever faced on things like funding, employees, salaries, volunteers and program offerings. COVID-19 has also pushed many organizations to plan for how they can become better prepared for any future unforeseen crisis.

Virtual World — Increased Risk:
The Benchmarking Survey also states that nonprofits that have been the most successful over the last few months were those already utilizing technology; whether through online events or employees working remotely, their transition to the virtual world was more seamless. And while 64% of nonprofit organizations plan to invest in new technology this year, the increased utilization of technology presents an increased exposure to cyber and data breaches.

Small nonprofits are at greater risk for hacking due to a lack of information technology resources and unsophisticated systems that can make them an attractive target. COVID-19 spear-phishing attacks and Zoom-bombing (when a hacker gets into a video call) are already making headlines. For nonprofit organizations that may underestimate their potential to be cyber targets and that have limited resources to invest in IT infrastructure, the virtual world will present its own set of challenges.

USLI has a comprehensive Directors and Officers and Employment Practices policy that offers coverage to help nonprofit organizations and board members protect their assets:

  • Separate limits of liability for D&O and employment practices liability claims (D&O limit not eroded by employment claims)
  • Defense cost outside the limit of liability
  • Data & Security+ endorsement of $50,000 each expense sublimit for data breach, identity theft, workplace violence and kidnapping
  • Third-party discrimination and harassment coverage (available for most classes)

Product highlights for our cyber liability product include:

  • Separate aggregate limits of liability per coverage part with the option to combine into one aggregate limit
  • Liability arising from both data breach and security breach
  • Payment Card Industry (PCI) fines and penalties data breach expense coverage, including notification letters, public relations, forensics and credit monitoring
  • Website liability including libel, slander, misappropriation of ideas, plagiarism, piracy, copyright and trademark violations

2020 has been a tough year; however, despite the devastating impact COVID-19 has had on the U.S., nonprofit organizations have exhibited tremendous resiliency. Now, more than ever, we need nonprofits to continue their critical work — keeping us all hopeful for what is to come.

 

Chris Deveney HeadshotContact Chris Deveney
Product Leader | 888-523-5545, ext. 2756

 Jeff Zomorrodian HeadshotContact Jeff Zomorrodian
Underwriter | 888-523-5545, ext. 2489

Lauren Bennett HeadshotWritten by Laurel Bennett
September 3, 2020

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