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Final Report and Recommendations
Introduction
The question of The Folk Project carrying Worker’s Compensation Insurance has been a contentious issue for some time, with strong feelings on both sides of the issue. Starting in 2009, when we first bought this insurance, we have spent on average over $2000.00/year to obtain it. Considering the ongoing cost, plus the lack of a strong majority Board consensus on the matter, we formed a commission to study the subject and report back to our Board of Directors with our findings.
Background
Insurance in general is known for it’s complexity and fine print. Worker’s Compensation Insurance is particularly so. This committee spent hours trying to tease apart all the layers surrounding this issue, considering current regulations, case law, and State dominance over Federal rule. In the end, we consulted experts in the field, including the Worker’s Compensation office in Trenton, an insurance agent who specializes in insurance for non-profits, pro bono lawyers who have advised us in the past, and a New Jersey Supreme Court certified Worker’s Compensation attorney. These experts echoed the same advice The Folk Project received back in 2009 - keep the insurance - it’s an unpredictable world and better safe than sorry.
One important unexpected finding concerns the legal exposure of a non-profit’s Officers. We discovered that Worker’s Compensation insurance does more than cover monetary losses of “employees” in the event of a covered accident. It also provides a legal shield for the Officers. If a suit is filed against a non-profit organization that does not have Worker’s Comp insurance, the Officers can be separated out from the organization they volunteer for, and their personal assets can be at risk. Plus all legal defense costs (whether found innocent or guilty) fall on the individual sued, not on the organization. With a Worker’s Comp insurance policy in place, the insurance company bears all costs of providing the legal defense, and while the organization’s assets may be at risk, those of any individual within the organization are not.
The insurance agent mentioned above advised that to mitigate, but not eliminate, the impact of a Worker’s Comp suit, we should use standardized performer contracts thru out the Folk Project. These standardized contracts would include a waiver stipulating that each performer agrees to provide their own Worker’s Compensation insurance.
Several times during our research, we were advised by the sources cited above to also consider E & O (Errors and Omissions) insurance, and D & O (Directors and Officers) insurance. Mindful of both this Commission’s limited time frame, and our limited “charter” (Worker’s Compensation insurance), we did not look into these policies. Recommendation #2 below addresses these issues.
After extensive investigation, this Commission has arrived at several conclusions:
- A Worker’s Compensation suit may have a low probability, but any such suit would also have a very high impact, both on unprotected Officers, and on the organization as a whole.
- The Worker’s Compensation landscape is very complex, and does not lend itself to any certainty about outcomes in the event of a suit. The legal issues involved in just one aspect of this landscape - the Employee Test - are so layered and involved, there is no way to reliably predict the resolution of any particular case.
Recommendations
- The members of this commission are unanimous in recommending that the Folk Project continue to purchase Worker’s Compensation insurance.
- This Commission also recommends developing a good working relationship with a knowledgeable insurance agent who can advise and guide us on all insurance issues. Lori Falco, a member of this Commission, has volunteered to do this, and with the Boards approval, can begin her work immediately.
Respectfully Submitted,
The Worker’s Compensation Insurance Commission:
Barrett Wilson, Chair
George Otto
Elizabeth Lachowicz
Lori Falco
Chris Riemer
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