The primary role of nonprofit directors and officers is to maintain financial stability and provide the necessary resources, direction, vision, and environment to accomplish the goals and mission of the organization.  The unique nature of nonprofit organizations presents directors and officers with difficult challenges in performing this role.

Most churches operate on very tight budgets.  One thing church can’t afford is an unexpected bill from a claim, especially if insurance could have been purchased to cover the expenses.  Having the right insurance and agent can be critical to the overall success and health of your nonprofit.

Your board of directors and officers (many of whom may be volunteers) could be sued for their actions for many reasons.  An example might be miss-management of the nonprofits investments.  If during an economic downturn investment returns are below expectations, the board could be sued for selection of investment advisor.

Typically, church Directors and Officers Liability Insurance will cover; administrative, civil, and regulatory proceedings based on actual or alleged acts, errors, omissions, misstatements, neglect, or breach of duty committed or allegedly committed by a director or officer while acting within the scope of their duties.  The policy also reimburses nonprofit corporations for any indemnification that their bylaws or state laws require them to provide to the directors and officers.

Directors and Officers Liability Insurance claim examples:

A discrimination suit was filed against the board of directors of a nonprofit rehabilitation center when the claimant requested a transfer within the housing complex and was denied. The claimant alleged discrimination based on national origin, religion, and sex. The claimant was a resident at a drug and alcohol rehabilitation center. The court dismissed the case due to a lack of evidence. $15,000 was paid in defense costs.

A church was sued by an organization for improperly infringing upon the claimant’s intellectual property rights after using logos and images owned by the nonprofit in a fundraising program. The claim settled for over $400,000 including defense costs.

The current market for Directors and Officers Liability Insurance is competitive, and there are many markets writing coverage. Nonprofit Directors and Officers insurance responds to protect the organization and its Directors and should be considered by every nonprofit organization.

Tags: Church insurance

This entry was posted on January 11, 2019 at 7:30 pm. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Posted in church board Church Insurance Church Risk by Scott Stuart Comments Off on Why Your Church Needs Directors & Officers Insurance