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Insurance: What You Should Know

Are you covered? To make sure your parent group's insurance policy will protect members if a claim is made, there are a few key things you should learn about.

December 2010

More and more PTOs are learning the importance of having insurance coverage for their activities. But do you know whether your policy will actually cover potential claims? Here are a few things to look for.

General liability policy: This policy should cover third-party bodily injury and property damage claims that occur during activities both on and off school property. “Third party” means non-participant, such as if someone who is walking by the baseball toss gets hurt by a stray ball.

If you have an unusual or large event, such as a festival or fun run, make sure that the general liability policy covers all activities at the event. For example, if your school PTO is planning a fundraising festival that includes a baseball toss, ring toss, fortune-telling, magic shows, and an auction, check that the PTO’s liability policy covers any accidents or claims related to all these activities.

Director and officer liability: This is a separate policy. It covers claims directed at an organization’s individual officers/board members resulting from decisions made on your group’s behalf. Make sure the policy’s definition of “insureds” covers all the different types of volunteer leaders your group uses. Also, it’s best to specify which officers sign contracts for the group, then make sure no one else does.

For example, your PTO hires a company to provide a bounce house for the back-to-school carnival and it turns out that the company is uninsured. If an incident related to this vendor occurs at the carnival, the PTO’s officers might be sued for their decision to hire the uninsured vendor. (There does not necessarily have to be bodily injury or property damage for a D&O claim to be filed.)

Bonding/crime insurance: This covers claims related to theft or loss of your group’s funds. Bonding generally applies to activities of a PTO’s treasurer and any other officers who handle funds. The policy should cover the positions and not name individuals. That way, you won’t have to worry if a different person starts handling the money during the period covered by the policy.

Also, make sure to follow any financial controls and procedures required by the policy for coverage to be effective. For example, a policy might require a minimum of two signers for each check. It might also require that someone other than the check signers authorize payments before they are made. Although it’s hard to believe, theft of money from PTOs and other nonprofits is more common than you might think. One client of mine recently discovered that its trusted volunteer treasurer embezzled $100,000 over several years.

Excess accident medical: Excess accident medical insurance provides excess medical coverage to participants at PTO-sponsored events. If an injury at one of your events results in significant medical costs (such as surgery or a hospital stay), this policy will cover the costs that exceed the injured person’s primary insurance coverage. It is separate from general liability coverage, although often both are purchased together.

Other Common Requirements

Most policies require that you notify the insurance company immediately when you have a claim or potential claim. If prompt notice is not given, the company may deny the claim, even if it would be covered otherwise.

In addition, some insurance policies require extra protections against losses, damages, or liabilities be included in contracts the group signs. For example, the insurance company might require that the vendors providing certain equipment, such as moon bounces or skating rinks, be listed as additional insured parties and that they be liable for any damage or injuries directly resulting from the use of the equipment—rather than the PTO being liable. If these requirements (known as indemnification provisions) are not included in contracts, the insurer might not cover related claims.

Finally, you should have your own policy regardless, but it’s worth checking for coverage under the school’s policy, too.

For more information on parent group insurance available for PTOs and PTAs through PTO Today, go to ptotoday.com/insurance.

Sandra Pfau Englund contributed to this article.

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