Are We Heading Towards Another Nonprofit Insurance Crisis?

The Nonprofit Property Protection Act would allow nonprofits to not be at the mercy of for-profit insurers.

Our story begins in middle of the nation, across the Mississippi River from the famous deserted city of Cahokia, an indigenous civilization. This is a tale of two cities, and of the venerable endeavor of rebuilding cities in the face of hardship. Our protagonist is modern-day St. Louis.

St. Louis is a “gamma” global city, a designation for a geographical area with a GDP exceeding $160 billion in 2017, but not all residents benefit from economic prosperity.

Rebuilding Against the Odds in North St. Louis

Sun Ministries is a 501(c)(3) nonprofit that you’ve probably never heard of. Unaccompanied by slick marketing campaigns or big budgets, Sun Ministries does the hard work to repair, rebuild, and restore inner cities. That work almost didn’t happen.

Community revitalization means creating a “bankable” neighborhood where residents can get loans to improve and buy housing. Before banks are willing to lend, they want to make sure other factors, such as insurance that covers organizations engaged in the neighborhood, are in place. Without insurance, any effort at revitalization is in jeopardy.

“We don’t go to places that are easy to insure,” says Dr. Terry Goodwin of Sun Ministries. “We went three years without insurance before we found a nonprofit insurance company willing to insure us. We were rejected from the major insurers.”

Sun Ministries’ work is having a significant impact and has been studied by local universities. “There are 700 vacant housing units. We want to rebuild the neighborhood, to make it a bankable neighborhood where residents can get loans,” says Dr. Goodwin.

Now, the organization is expanding into Oklahoma, where its current insurance carrier is currently unable to provide coverage due to limitations caused by federal law, and the organization has been unable to find any other insurance carrier to provide them with insurance. This means Sun Ministries will be operating to improve the condition of local residents of economically impoverished areas—at the risk of losing everything to a preventable crisis, like an insurance claim.

Nonprofits’ Own Insurer

Unfortunately, we’ve seen this happen before. The insurance crisis of the mid-1980s resulted in the cancellation and nonrenewal of insurance policies for afterschool programs, alcohol and drug rehabilitation programs, domestic violence shelters, therapeutic programs, and other vital social services that contributed to the safety and well-being of the country’s most vulnerable populations, often initiated by members of underserved populations to help those in need.

Emerging from that crisis, a group of nonprofits formed an insurance risk pool to do what nonprofits do best: take matters into their own hands to independently care for their communities. Since commercial insurers refused to insure nonprofits, the sector insured itself.

When the Liability Risk Retention Act (LRRA) passed in 1986 to allow Risk Retention Groups—an alternative form of insurance in which the insureds own the company—the nonprofits sector created its own Risk Retention Group (RRG). Alliance of Nonprofits for Insurance, RRG, an insurer and a 501(c)(3) nonprofit, provides liability insurance to nonprofits across the country, in 32 states and the District of Columbia.

Since then, a lot has changed in the insurance industry. But even now when some other commercial insurance companies will insure some types of nonprofits, many nonprofits are unable to find the insurance they need to operate. Unfortunately, nonprofits like Sun Ministries are not alone. But a new bill could change that.

Helping to Preserve the Environment and Protect the Nonprofit Sector in North Carolina

As of now, nonprofits cannot purchase standalone property insurance or auto physical damage policies, endangering the ability of small- and mid-sized 501(c)(3) nonprofits to provide services to vulnerable communities. H.R. 4523, the Nonprofit Property Protection Act, aims to change this.

“This legislation recognizes that a market failure is hampering nonprofits’ ability to secure insurance vital to their operations and the community services they provide,” writes Julie Mayfield, the co-director of MountainTrue, a small nonprofit focused on environmental preservation in North Carolina.

She continues, “One of the biggest challenges and financial burdens that nonprofits currently face is getting and keeping commercial liability and property insurance—insurance that many businesses take for granted. Like any business, we need commercial insurance to ensure we can do our work responsibly and to protect our volunteers and our property. However, over the 11 years I have led MountainTrue we have twice had our insurance cancelled though we never made a claim under either policy.”

MountainTrue’s experience with the insurance industry isn’t uncommon for nonprofits, who routinely see cancellations and non-renewals from commercial insurers that are inexperienced in writing risks for the 501(c)(3) sector. MountainTrue, along with a growing number of other nonprofits, are fighting to pass H.R. 4523, the Nonprofit Property Protection Act. More than one thousand nonprofits have written in support of this bill already.

Averting the Crisis

H.R. 4523 allows certain Risk Retention Groups like Nonprofits Insurance Alliance, Blue Avocado’s publisher, to insure nonprofits for standalone property insurance and auto physical damage policies. With this bill, 501(c)(3) nonprofits can continue to insure themselves and not be subject to the changing appetite of for-profit commercial insurers.

Across the country, nonprofits are banding together to support the Nonprofit Property Protection Act to allow nonprofits’ own insurers to provide the standalone property and auto physical damage policies that nonprofits of all sizes need to have competitive options in the marketplace. The bill aims to benefit tens of thousands of small and mid-sized nonprofits across the country.

Make Your Voice Heard

We don’t need to tell any Blue Avocado readers that nonprofits offer critical services, meaningful work, and economic stability to communities that other institutions have failed—and that those contributions are programs and services that we can’t afford to lose. But you have to tell your representatives. To write to your representatives in support H.R. 4523, first find your representative and then send a letter along the lines of the template below. And if you wish, copy us at editor@blueavocado.org.

RE: We support H.R. 4523, Nonprofit Property Protection Act

Dear [Representative],

I am writing to you about a matter of urgent importance to nonprofits across the country. Tens of thousands of community-based nonprofits like ours have to rely on obtaining affordable and tailored insurance from insurers they control and trust to protect them.

[Feel free to include a couple of sentences about your organization and your work in the community.]

H.R. 4523, Nonprofit Property Protection Act, is a narrow provision that will allow insurers from the 501(c)(3) sector to provide property insurance as well as the liability insurance we need.

Even in the best of times, finding affordable insurance was always a struggle before nonprofits worked together to provide coverages for the 501(c)(3) sector after facing abandonment from commercial insurers. After 30+ years, nonprofits’ own insurance companies are stronger than ever, but we must see H.R. 4523 become law if that success is to continue. Please help nonprofits help themselves.

Download this text as a word doc here: HR4523 Email

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About the Author

Nahida Nisa

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Nahida Nisa is a novelist and editor who serves her community through scholarship in human rights, feminist theory, and exegesis. She has a passion for scientific articles and legal intricacies, and she’s fascinated by the synchronization of different perspectives to form a unique angle. She holds a master’s degree in creative writing.

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