Low power FM and Insurance

(How) do LPFMs Insure Themselves?

So you’ve got your license and you’re on your way to getting on the air! Depending where you are in the process of obtaining a construction permit, you may have some concerns about protecting your staff and board from lawsuits, not to mention all the expensive equipment you’re about to buy.

There are four main kinds of insurance policies which pertain to running a radio station.

  • General Liability is the standard policy for most businesses and nonprofits, usually involving coverage such as on-site injury and other things people might sue you for.
  • Directors & Officers Liability insurance (or D&O) protects your board of directors’ personal assets in the event that your organization is sued into bankruptcy and covers legal defense if civil or criminal legal action is brought directly against an individual director.
  • Errors and Omissions (or E&O) is a kind of liability insurance that indemnifies against lawsuits for mistakes or unfair practices. In the case of radio, E&O will most likely have to do with on-air transgressions such as profanity, misinformation, or libel.
  • Commercial Property. Lastly, stations may insure their transmitters, antennas, studios and buildings against flooding, fire, theft and other tragedies which may befall the physical components of your radio station.

General Liability

General Liability insurance protects your company or organization from lawsuits. Depending on the policy, coverage usually includes personal injury on your premises or damage to others’ property for which you’re liable. This may be relevant to stations who bring in a lot of guests or frequently host events for live music or fundraising.

Depending on how frequently you plan to host events you may choose not to buy a General Liability policy, opting instead to insure each event on an ad-hoc basis. Some companies will offer Special Event Insurance, calculating one-time premiums and deductibles based on factors such as whether alcohol will be served.

Director & Officer

D&O insurance will do one of two things. In the event that your organization is sued, a D&O policy will protect the personal assets of your board of directors. Should a director be sued personally, or worse, brought to trial in a criminal proceeding, D&O will cover the legal fees for that director’s defense. While D&O insurance is effectively a pre-emptive legal defense fund for board members, the premiums are most often paid by the organization itself. This is because potential board members have come to expect this from organizations, and organizations often pay for this insurance to attract quality directors.

The National Federation of Community Broadcasters(NFCB) has a negotiated a discount rate with Beehive Insurance, a Hartford-affiliated agency headquartered in Salt Lake City. This discount is only offered to NFCB members and is only for Directors and Officers’ insurance. NFCB’s CEO Sally Kane says, “The way it works is that NFCB members can contact Susan and get a quote on D&O. There aren't set rates because the policy price changes based on annual budget size and a few variables. Susan then gets back to them with a quote at a discount for the NFCB members. If they want to go for it, they just work directly with her. When I was at KVNF we bought D&O through this arrangement. Our annual budget was 400k and we spent $1,500 a year on it. It was about 300 below other policies I checked out.”

Errors & Omissions

Errors and Omissions is a type of professional liability insurance that indemnifies the insured against mistakes. Errors and Omissions (E&O) covers a more specific category of incidents not covered by General Liability policies. A General Liability policy typically only covers occurrences when a person, product, service, or property caused bodily injury, property damage, advertising injury, or some other damage to another business or person. Professional liability begins where general liability ends, covering cases where some defect or negligence has caused financial losses. According to a feature in the industry publication Insurance Journal, “Errors and omissions (E&O) is the insurance that covers your company, or you individually, in the event that a client holds you responsible for a service you provided, or failed to provide, that did not have the expected or promised results.” E&O covers the damages or losses that the policyholder’s hypothetical mistake may cause a client or partner. For doctors, this is malpractice insurance. For lawyers or financial advisors, E&O may cover the financial losses caused by bad advice, misfiled forms, or simply overlooked details. In the case of radio, E&O has to do with on-air mistakes and violations, such as misinformation, profanity, or libel. In addition to lawsuits, a good E&O policy will also cover FCC fines for profanity or otherwise inappropriate on-air conduct.

Commercial Property

Obviously, operating a radio station entails buying some pretty expensive equipment. Depending on exactly how expensive, you may consider taking out policies on your antenna, transmitter, studio, and office.

One of the best ways of going about this is a Commercial Property policy. Commercial Property policies protect buildings as well as property housed therein. A good agency will allow you to choose specifically what properties you want to insure. For instance, you may elect not to pay for coverage on the building itself, but still cover your studio equipment and any moneys or documentation you may be storing inside. Or you may want to protect your stuff from theft but not from natural disasters or vice versa, depending on your location. Some property insurance policies might include certain liability coverage, usually personal injury on premises. This might fill in some gaps if you’re not interested in buying a separate General Liability policy but you’re worried an on-air guest may hurt themselves at your station and sue.

If you rent your space, your renter’s insurance may cover the equipment inside. These premiums will naturally be higher than the ones protecting the contents of your apartment but they may be cheaper than a commercial property policy.

So now what?

Prometheus talked to a few LP stations about what kind of coverage they buy; the variety of responses was staggering.

If you really can’t afford certain coverage you’re not alone. Many smaller stations have found that they can’t afford to insure parts of their operation. The good news for you is that many of these have devised inventive ways to protect themselves in the absence of the funds for liability insurance.

You may invest in a 7-second delay device, but these tend to cost between $1,500 and $3,000. This one-time payment can save you loads over time in annual premiums, but even that can be a substantial strain. If, like quite a few stations we know, your entire annual budget is around $3,000, you can decrease the risk of profanity fines by disallowing on-air call-ins.

FCC fines for LP tend to be a lot less hefty than the ones for bigger stations, so most stations report that E&O simply isn’t worth the premiums. Of the stations we surveyed, E&O was certainly the least common among policies stations actually bought.