The increase of donations and influxes of volunteers that many nonprofit organizations see during the holiday season has caused those charities to seek directors and officers insurance to protect themselves from unique risks.
A Salvation Army bell ringer takes donations in Chicago.
Patrick Baker, the nonprofit D&O product manager for Travelers Cos. Inc., said the D&O line has become an important part of many charities' portfolios, while others are just starting to become more familiar with the idea.
"[The interest] is from people serving on the board of directors who come from corporate backgrounds and drive some of the insurance purchasing decisions," Baker said in an interview.
The exposures that nonprofits face during the holidays, such as personal conduct, injury liability and theft, are the same ones they deal with for the rest of the year. But as Christmas and New Year's Day approach, those risks are exacerbated because many new volunteers lack experience or familiarity with a particular charity.
"You think about folks who are out there collecting donations, and there's obviously an exposure from a crime perspective," Baker said. "That cash needs to make it back to the nonprofit and the exposure there is obviously heightened around the holidays."
William Henry, president of Volunteers Insurance Service Association Inc., said the challenge for nonprofits bringing on volunteers, be it during the holiday season or any other time, is ensuring they have adequate orientation and training programs, which include properly defining tasks and assessing physical capabilities, as well as performing background checks.
"When you have volunteers coming in contact with the public, all of those things will dictate how they should be prepared before they're actually given their assignments," Henry said in an interview.
That includes, for instance, the bell ringers in front of stores or on street corners taking donations for the Salvation Army.
"You need to know [the volunteer] has the physical ability to stand outside maybe when it's 10 degrees and the wind is blowing for three or four hours, but also where this person is coming from because there's that kettle stuffed with money right next to the volunteer," Henry said.
Baker said that scrutiny applies to the nonprofits' officers and board members as well. Agents associated with Travelers ask clients about policies and procedures around investments, how they are handling and using money, and if there are policies that address conflicts of interest, he said.
Cybersecurity has also become a part of D&O coverage now that many nonprofits are using the Internet to raise money, communicate with donors or simply to spread their messages. Cyber-related coverage includes the protection of donors' personal information, especially when there are third parties processing donations or cloud vendors storing data.
"You can't outsource that responsibility for your obligations," Baker said, noting that Travelers offers a free "cyber readiness assessment" to help determine if organizations might be vulnerable to attack.
"The insurance is there as protection should something happen, but we're really looking at doing some more things kind of on the front end as well," he added.