Trade associations need to consider a broad range of unique risks that other not-for-profit entities may not face. Although trade associations are not designed with the sole goal of earning money, they may still face accusations of acting like conglomerate companies if the decisions they try to impose limit certain aspects of the free market.
In addition to antitrust claims, they face risks such as professional liability and cyber liability claims. Insurance provides valuable protection against all of these types of risks.
One of the biggest risks trade associations face are violations of antitrust laws. These laws were set to eliminate illegal behaviors such as price fixing that can harm competition. Directors and Officers insurance is essential for trade associations because it offers protection for the association’s decision makers against legal backlash related to antitrust laws.
Any individuals who are unable to defend themselves against claims of this type of violation could be fined as much as $1,000,000. While trade association officials should always make an effort to prevent any type of discussion that could be viewed as a violation of antitrust laws, having this type of insurance in place offers an additional layer of protection. Not every D&O policy includes coverage for Antitrust claims. It’s important to make sure yours does.
Suppliers are another significant risk area for trade associations. When an association gets involved in the relationship between its members and suppliers, it can lead to violations. In particular, associations must avoid recommending a specific supplier to their members and revealing standard pricing provided by suppliers. This type of behavior can be difficult to control among association members, so insurance provides additional protection.
Price fixing is one of the most targeted areas for antitrust laws. Trade associations are vulnerable to taking actions that may be viewed by others as a type of price fixing. Therefore, members should avoid discussions of profit margins and income and stay away from risky topics such as credit terms, pricing strategies, prices, and profit rates.
Even if discussing these topics results in lower prices for consumers, adjustments of prices because of discussions between competitors is considered a violation of the Sherman Antitrust Act and could lead to a lawsuit from private citizens or the government.
Trade associations are also vulnerable to professional liability claims. For example, a trade association that offers grants for research related to the industry could face a grant administration negligence lawsuit if they fail to get grant payments out in a timely manner and damage researchers’ opportunity to have their findings published in a scientific journal.
Another potential risk for trade associations that provide members with professional certification and training that can be used to enhance their resume is certification errors. Any mistakes in certification, such as processing it incorrectly or decertifying someone, could lead to expensive legal action.
Class Action Lawsuits
Class action lawsuits may arise as a result of certain benefits associations offer members, such as discounts. Should any link be uncovered between a board member and a retailer that offers savings to its members, concerns that the board member could be benefiting financially from the deal may spur a class action lawsuit.
In addition, trade associations that publish newsletters could face legal action if their articles are not properly vetted before being printed, putting them at risk of lawsuits for defamatory statements or libel.
A comprehensive professional liability policy can protect trade associations from these types of claims and help pay for any settlements, defense costs, witness fees, and judgments involved in defending these cases.
Cyber Liability Claims
One risk that trade associations have in common with other types of organizations is cyber liability. Trade associations typically collect sensitive and confidential data about their members and other parties.
As high-value targets such as banks make significant investments in protecting their systems, hackers are increasingly turning to smaller organizations such as trade associations and nonprofits who do not have the same resources to devote to cyber defense in order to gain access to data that can be used to steal identities and funds.
In addition to hacking, a trade association’s data could be released accidentally by a staff member who is not trained in working with computers safely, while mobile devices and laptops containing sensitive information could be misplaced and end up in the hands of someone with bad intentions. Therefore, trade associations need to consider a cyber liability insurance package that is tailored to their specific needs. Some associations might need crisis management coverage, network security liability coverage, and extortion liability coverage.
Reach Out To The Trade Association Insurance Professionals
Make sure your trade association is prepared for any claims that may be brought against it by discussing your needs with the insurance professionals at CI Solutions. Our commercial insurance brokers will develop a customized package that addresses your association’s needs and budget for greater protection and peace of mind.