Leadership is necessary for any organization to grow and thrive. Therefore, it is important to mitigate the risk associated with leading a nonprofit to ensure you are able to attract and retain the top talent.

Unfortunately, lawsuits are common in our culture, and board members are not immune to the risk. Directors and Officers Liability Coverage, also known as D&O Liability Coverage, is a business insurance policy that provides protection for board members if they are sued for decisions they make on behalf of the nonprofit organization.

Common types of claims directors and officers may face include:

· Breach of Fiduciary Duty – Board members are expected to act solely in the best interest of the organization. Accusations that a director or officer is misusing organizational funds is a common claim that can lead to a costly lawsuit, regardless of whether the claim has merit.

· Employment Practices Liability – It is becoming more and more common for disgruntled employees to bring charges against an organization for issues such as wrongful termination, discrimination, invasion of privacy, sexual harassment, and wage violations. D&O Liability Coverage provides an additional layer of protection for board members who may or may not be covered by an employment practices liability coverage policy.

· Claims by the Competition – There are a wide range of claims that can be brought against board members by the organization’s competition or other interested groups, including claims of defamation or libel, trademark infringement, or unfair competition.

Why is Directors and Officers Liability Coverage Important?

If a lawsuit is brought against a director or officer of the organization, D&O Liability Insurance can help pay for the legal fees associated with mounting a defense, as well as settlement costs or damage awards if the individual is found to be at fault.

Here are some of the main reasons D&O Liability Coverage is important for your nonprofit organization:

1. Regardless of whether they are paid or volunteers, anyone involved with managing a nonprofit organization is at risk for having a lawsuit brought against them.

2. Board members can be held personally liable for errors and omissions.

3. The Volunteer Protection Act doesn’t fully protect directors and officers of nonprofits. It doesn’t provide for the cost of defense, nor does it apply to cases surrounding gross negligence or reckless misconduct.

4. Legal fees and resulting damages from lawsuits against directors and officers can often exceed the organization’s assets. This would prevent the organization from indemnifying directors and officers, leaving their personal assets at risk.

5. The community risks losing your services if a lawsuit leaves the organization without the funds to continue operation.

Does My Nonprofit Need Coverage?

Regardless of whether your nonprofit is large or small, D&O Liability Insurance is an important type of business insurance to consider. At Clemente Insurance, we work with you to fully understand your business needs, weigh your risk factors, and ensure that you have the proper business insurance coverage, including D&O Liability Coverage. Contact Your Insurance Experts at Clemente Insurance and Financial Services by calling (888) 995-9098.

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