Essential Takeaways
- Certification and standard-setting programs draw antitrust, negligence, due process, defamation, and Americans with Disabilities Act claims against the association itself.
- General liability policies generally exclude professional services, and directors and officers (D&O) policies may cover certification claims only by endorsement or with sublimits.
- Claims-made timing, standard-setting exclusions, and the way an application labels each program all affect whether an errors and omissions (E&O) policy responds.
- A list of every dues-funded program, with a plain description of how each operates, is the starting point for a renewal review.
Member-funded programs such as certification, continuing education, industry standards, publications, and member benefit offerings put an association’s judgment in front of people who can dispute it. An applicant denied certification, a member disciplined under a code of ethics, or a buyer who relied on a certified product can each bring a claim against the association itself. Association errors and omissions insurance may cover those claims, while the general liability and D&O policies most associations already carry address different exposures.
Policy language, application wording, and claims-made timing all affect whether an E&O policy responds to a program claim, and each can be reviewed long before a claim arrives. Nonprofits and trade associations in Virginia, Maryland, and the D.C. area that run these programs work through the same questions at renewal.
Certification Decisions Draw Antitrust, Negligence, and Due Process Claims
A professional liability executive interviewed by Associations Now places standard-setting and certification at the top of the claims list, citing a case in which an association certified a manufacturer’s 10,000 widgets that later failed to perform and was sued over the certification.
Antitrust, negligence toward third parties, due process, defamation, and Americans with Disabilities Act (ADA) compliance account for a large portion of claims against certification programs. A denied applicant can allege antitrust violations or unfair procedure, a public comment about the denial can prompt a defamation claim, and an exam site without accessible arrangements can prompt an ADA complaint.
In Camarda v. Certified Financial Planner Board of Standards, two certified planners challenged a public letter of admonition. The D.C. Circuit ruled for the board in 2016 because it had followed its own disciplinary process. Historically, associations win most such disputes. Still, Venable notes that mounting a defense can overwhelm an organization even in a winning case.
Legal defense expenses alone can strain a trade association’s finances, and many nonprofits operate on tight budgets where one unexpected expense can cause serious financial harm.
Where D&O and General Liability Policies Stop
A general liability policy covers claims like a visitor slipping in a meeting room. These policies generally exclude bodily injury and property damage arising from professional services. The Insurance Information Institute lists negligence, misrepresentation, violation of good faith and fair dealing, and inaccurate advice among the claims that professional liability insurance may cover. General liability may not.
D&O vs. E&O for associations can vary in who is being accused. D&O may address alleged wrongful acts by directors, officers, and staff, and employment claims are the most common ones under it. E&O may focus on claims about the services an association delivers, such as a certification decision about an applicant. Venable’s 2016 analysis adds that some D&O policies cover certification claims only by endorsement or with sublimits, and that D&O policies generally do not cover breach of contract claims, one of the allegations in Camarda.
Exam applications and member registrations collect personal data, which cyber liability coverage targets. Crime coverage may cover employee theft and fraudulent fund-transfer instructions involving program fees.
Policy Terms Worth Checking Before Renewal
Claims-Made Timing
Most professional liability policies are claims-made, so the policy must be in effect both when the event occurred and when the suit is filed for a claim to be paid. A suit can arrive years after the certification decision behind it. A lapse in between can leave an association funding its own defense, which the policy may otherwise pay up to its limit.
Professional Services Exclusion
Coverage for standard-setting and certification is a must-have provision for certification organizations, but an exclusion for those activities is common in E&O policies. The professional services exclusion in a general liability policy means that organizations may benefit from examining E&O alongside other policies. An exclusion inside the E&O policy can leave certification program liability insurance with no policy to respond.
How Programs Are Described
Insurers sometimes label a certification body’s work as consulting or education, and an inaccurate label can put a claim at risk of denial because the work falls outside the described scope. Venable‘s standard-setting guidance recommends fully disclosing those activities on the insurance application. Member benefit program insurance is similar, so endorsed products, publications, and education offerings each deserve a plain description of how they operate.
Bring Your Member Programs to CI Solutions
CI Solutions, an independent brokerage in Fairfax, Va., works with associations and nonprofits on E&O and D&O coverage, along with cyber and crime policies. For trade association insurance in Virginia and E&O insurance for nonprofits, the first step is a list of every program funded by dues and fees, how each operates, and what current policies say. Our team can work through that list with you and bring options from multiple carriers. CI Solutions has also published material on common insurance mistakes new trade associations make and on assessing E&O needs.
Call 703.988.3665, contact us online, or request a quote before your next renewal.