What Does Association Liability Insurance Cover?

Association Liability insurance is a niche type of insurance designed specifically for non-profit organizations and professional groups. It is composed of various coverage areas designed to fulfill the needs of associations, with the two primary coverages being Directors & Officers and Professional Indemnity (read more about professional indemnity insurance), but it also covers numerous additional coverage sections in a single package. Managing a Non-Profit Organization entails a large amount of liability risk for people. In some cases, board members and top management might be held personally accountable for their conduct or failure to do something a certain way. And, as a non-profit organization, Association Liability is a must-have insurance coverage.

Why is Association Liability Insurance needed?

Protection for directors and members

from association mismanagement and associated incidents (Directors & Officer Insurance).

Association security

  • Crime/Fidelity, Statutory Fines & Penalties, Employment Practices Liability, and so on.
  • Security from giving advice.  This might include guidance delivered at seminars, publications, sites, workshops, and so forth (Professional Indemnity).
  • Security from a violation of professional services, which might include the management of memberships, the creation and management of curricula, the establishment of regulations and standards, and so on (Professional Indemnity).

Covers the expense of defense

When unlawful conduct or allegations of a wrongful act arise, the Directors & Officers and the Association are held accountable.

What does this insurance cover?

Liability of directors and officers

This part protects the association’s principals, partners, trustees, directors, and officers against any lawsuits originating from any mistake, misrepresentation, omission, carelessness, negligence, violation of duty, breach of confidentiality, and mismanagement. This is comparable to the liability protection offered by Management Liability and Directors & Officers policies.

Association compensation

This section covers the same claims scenarios as Section 1 (D&O), but it only kicks in once the association has been forced to indemnify (pay) the covered persons. It reimburses the association for these expenditures, whereas section one covers the insured people directly.

Professional indemnity

This section protects the association in the event of a breach of professional obligation that results in financial loss. This involves processing memberships, building and administering curriculums, establishing regulations and guidelines, and so on, as well as providing guidance at seminars or through newsletters, websites, workshops, and so on.

Association liability insurance

This section covers a wrongful act committed by the association that has caused a legal action where the association is named.

Crime/fidelity protection

This section covers a variety of crime-related situations when there is a direct loss of money. This can involve employee dishonesty or fraud, third-party crime, computer and electronic crime, and so on.

Employment practices liability (EPL)

This part protects the association from claimed Employment Practices violations such as discrimination, harassment, bullying, unfair termination, and so on.

Fines and penalties / statutory liability

This section covers the association for fines and penalties incurred as a result of a claimed statutory breach, such as OH&S, employment practices laws, workers’ compensation legislation, industry-specific laws and regulations, and so on.

Frequently asked questions

How can an association’s director be in danger?

The Associations Act of 2009 imposed stricter legal requirements and harsher penalties on Directors and Officers who violate their legal obligations. Here are some violation examples:

  • Potential conflict of interest
  • Misapplication of Board Knowledge
  • Misuse of a Board position
  • Trading while bankrupt
  • Involvement with complicity

An Association Liability insurance will often cover your legal defense expenses, as well as compensation and legal fees paid in response to charges of ‘wrongful conduct’ done by a Not for Profit organization and/or its management.

What is the distinction between a Management Liability policy and an Association Liability policy?

A Management Liability policy is meant to satisfy the needs of a Pty Ltd firm, but an Association Liability insurance is a bundled policy designed to meet the very unique needs of Not for Profit Associations. Professional Indemnity protection is usually included in an Association Liability policy, but not in a Management Liability policy.

Is there coverage under an Association Liability policy if a member takes any of our fundraising?

Yes, it will give coverage under the Fidelity or Crime provision of the policy, subject to the policy’s excess. This section protects the organization against loss of funds, securities, or goods as a result of fraudulent or dishonest activities perpetrated by its workers or volunteers.

Would the association and its directors be protected if a volunteer filed a lawsuit against the Association saying he was bullied?

Yes, in the cover’s Employment Practices section. However, it is critical that the policy clearly identify volunteers as workers under its terms and conditions.


The risk may be reduced significantly by properly established organizational and board processes, but it is still critical to ensure your organization is adequately insured in the unfortunate event of legal action. The solution is Association Liability Insurance. It provides financial security and helps to ensure that your organization can continue to do what it does best: assist the community, for the foreseeable future.

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