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 experts agree that nonprofits need Directors and Officers Liability Insurance. Whether you are appointed, elected or asked to be a board member of a nonprofit organization, you assume a level of responsibility for the organization and expose yourself to claims for not running and managing it in a proper way.

Directors and Officers Liability Insurance is not part of the general liability coverage that most nonprofits purchase.  Lawsuits against directors and officers of non-profit boards of directors are increasing at an alarming rate. Whether a major social service organization or a local shelter, informed leaders understand they place their personal assets at risk by serving on a board of directors.

Typically nonprofit 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 by, 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.

Key features of nonprofit Directors and Officers Liability Insurance may include:

• Entity coverage.  Most policies now include coverage for claims made against the organization itself, even if no directors or officers are named in the claim.
• Employment Practices Liability coverage.  Directors and Officers Liability policies also help protect insured persons of the organization against damages from claims for wrongful termination, sexual harassment, discrimination and unfair employment practices.
• Duty to defend. Most policies are committed to fair resolution of claims and the insurance company has the obligation to defend.
• Defense coverage.  Many Directors and Officers Liability Insurance policies offer defense coverage outside the limit of liability. This means that defense costs would not reduce the overall limit of liability.

Directors and Officers Liability Insurance claim examples:

A discrimination suit was filed against the board of directors of a nonprofit drug and alcohol 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 court dismissed the case due to a lack of evidence. $15,000 was paid in defense costs.

This entry was posted on December 15, 2021 at 6:48 pm. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

Posted in Uncategorized by Scott Stuart Comments Off on Why Your Nonprofit Ministry Needs Directors and Officers Liability Insurance