Are Your Fundraising Proceeds Insured?
This morning I’m wondering how many nonprofits in Houston and Florida had their fundraising proceeds protected from the ravages of Hurricanes Harvey and Irma by insurance.
Frankly, until yesterday this wasn’t a question that would occur to me in a 100 years. But then I received a note from my friend Chuck Longfield, the Chief Scientist at Blackbaud. He reported a conversation with a friend who “told me something that I had never heard of, that nonprofits could claim damages against their insurance policies for lost fundraising revenue due to natural disasters.” [Emphasis mine]
Now I know about nonprofits taking out ‘rain insurance’ for special events, and nonprofits insuring the lives of major donors, but this was a new one to me.
I figured that if Chuck and I — with a collective experience of … (well, let’s just say far longer than most large trees lost to hurricanes) — didn’t know about this, then it was something worth tracking down for all Agitator readers.
When the storm struck, Michal’s Houston Public Media was right in the middle of not only its fall on-air pledge drive, but also its membership renewal effort. A disastrous trifecta of hurricane, cancelled pledge drive and cancelled renewal mailings.
Hoping that the station’s business interruption insurance would cover this lost income Michal and the CFO set out to make their case. Michal assembled 5 years’ worth of data on pledge drives, renewals and corporate sponsorships. Then he calculated not only the immediate lost income, but also the 5-year life-time value of the new members the station would not be getting because of the storm.
The amount was substantial — Michal recalls it as somewhere north of $700,000. When all was said and done the insurer paid more than half of that claimed amount.
Two elements of Michal’s report impress me. First, that Houston Public Media was prescient enough to carry business interruption insurance. Second, that Michal had the records and skill required to construct five years’ of past transaction history and forecast five more years of revenue going forward.
Frankly, I have no idea how many nonprofits in the Houston area or the State of Florida were carrying business interruption insurance when Harvey and Irma hit. And I haven’t done any research to find out exactly what’s involved in a nonprofit securing such a policy; or what it costs.
I am however willing to bet that while plenty of nonprofit boards carry “directors liability” insurance, precious few have carefully examined their organizations’ insurance needs for other contingencies — like hurricanes, or forest fires, earthquakes or sea surge.
At a time when climate change seems to account for more powerful, more frequent disasters, isn’t it time that organizations seek answers for how best to guard against the sort of calamity that thousands of nonprofits experienced this month?
I think so.
What do you think?
And do you have any other examples or insights to share?
Agitator thanks to Chuck for alerting us to this issue and to Michal for providing information on his Houston experience.
P.S. While I had Michal on the phone I asked him about the timing of fundraising recovery after Hurricane Ike hoping his memory would prove helpful to fundraisers in 2017 Houston and Florida.
Michal reported that he held off soliciting Houston prospects and donors to Houston Public Media for between 5 and 8 weeks. He explained that this is the period it generally takes before homeowners receive their storm damage checks from insurers. Until then, most folks are too uncertain to make giving decisions. Once the uncertainty lifts the giving resumes.