Directors & Officers Liability (Non-Profit)
Here’s answers to some fundamental questions about the importance of non-profit D&O:
WHY DO I NEED THIS COVERAGE?
Non Profit Directors and Officers are legally responsible for the day-to-day decision-making of their organization. Corporate responsibility applies to Non Profits just as it does to For Profit organizations. Whether publicly traded, privately held, or non profit, Directors and Officers can be held personally liable for any breach of duty.
WHAT CAN I LOSE?
A board member’s personal assets may be at stake in a claim: Retirement savings, investments, a home – even one held in a spouse’s name – could be at risk.
WHAT WOULD I BE SUED FOR?
Ever have to fire someone? Organizations are now more likely to be sued for discrimination, harassment, or wrongful termination than to suffer a general liability or property loss. In addition, Directors and Officers must always act for the benefit of their organization, avoid any conflicts of interest, and exercise the utmost skill and care in decision-making. Any perceived breach of these duties can result in a suit that will at the very least incur defense costs.
WHO IS GOING TO SUE ME?
Employees, members, volunteers and donors, to name a few. Even if a director or officer hasn’t done anything wrong, lawsuits must still be answered and defense can be costly, often approaching or even exceeding the annual operating budget of the organization.
COULD THIS REALLY HAPPEN TO ME?
It may only take one suit to shut down a Non Profit Organization forever. In today’s litigious society, defense costs alone can cripple even the most financially stable entity.
WHAT TYPES OF APPLICANTS SHOULD CONSIDER D&O?
- Adoption agencies
- Agricultural cooperatives
- Alumni associations
- Athletic clubs
- Centers for developmentally disabled or elderly
- Chambers of commerce
- Charter schools (not requiring educator's legal liability)
- Civic organizations
- Community development corporations
- Community groups
- Court appointed special advocate organizations
- Cultural centers
- Electrical/utility cooperatives
- Faith-based organizations
- Fraternal organizations
- Golf and country clubs/yacht clubs
- Humane societies/animal shelters
- Museums and historical societies
- Performing arts organizations
- Public broadcasting stations
- Social and recreational clubs
- Social service providers
- Student exchange programs
- Trade and professional associations
- Youth homes
- Youth sports organizations
Limited Eligibility or Ineligible Classes:
- Educational institutions
- Financial institutions/lenders
- Government entities
- Hospitals/healthcare organizations
- Insurance organizations
- Political action committees (stand-alone)
Directors & Officers Liability (For-Profit)
- Directors and Officers of private companies risk their personal assets; they are personally liable for their business decisions and can be sued as individuals
- Fiduciaries of pension and benefit plans are personally liable for their decisions as well as for the actions of outside providers
- Small companies cannot bear the financial impact of unexpected and costly directors and officers, employment practices or fiduciary liability litigation without insurance
- Private companies face claims from their employees, customers, suppliers, competitors, lenders and shareholders
Example Coverage Terms:
(Individual quotes will vary depending on Carrier)
- Matching directors and officers liability defense limit up to $1,000,000 (for firms with up to 200 employees)
- Defense outside the limit for employment practices liability for up to 200 employees
- Defense and settlement provision (“hammer clause”) – 75/25
- Individual director or officer payment protection (“order of payments”)
- Punitive damages, where insurable by law, included automatically (available in most jurisdictions)
- Fiduciary liability coverage can be added to the directors and officers liability section up to $1,000,000
- Fair Labor Standards Act (FLSA) - $100,000 sub-limit for defense costs and loss (available in most jurisdictions if employment practices liability is purchased)
- Optional third party discrimination coverage
- Unlimited extended reporting period for former directors and officers
- Separate limits for directors and officers liability and employment practices liability
- Automatic outside directorship liability coverage for service on 501(c)3 boards
- Standalone directors and officers liability policy is available
- Duty to defend and full prior acts coverage
Other D&O Related Products
- For Community Associations (HOAs/COAs), see their Package or D&O page
- Packaged coverage for risks in the Social Service sector
- Employment Practices Liability (EPL)