Key Features in D&O Liability Insurance

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Nonprofit organizations are in jeopardy when attempting to exist without Directors and Officers Liability insurance. Liabilities, which are best defined as obligations that legally bind an individual or organization to settle a debt or to settle a wrongful act they may have committed, need to be anticipated and accounted for.

Given that you have taken the responsibility to acquire Directors and Officers Liability insurance, what happens when a claim is filed. Depending on the event, it would be covered either under the claims made form or under the occurrence form. The event that triggers coverage under either form is known as the "coverage trigger". If the determination of coverage comes under an occurrence trigger, the policy in force on the date of the event causing the loss must respond with both the defense and indemnity. Occurrence policies do not provide coverage for prior acts. However, they remain available for claims that arise years after they have expired.

If the determination of coverage comes under a claims made trigger, the policy may reach backwards in time and provide coverage for claims made today from negligent acts or errors and omissions that occurred before the policy was purchased. In that this form covers prior acts, a good faith statement (or either a certification of warranty) that the organization had no knowledge of the mistake, error, or controversy on the date that the coverage was purchased, is a necessity.

The best type of insurance coverage for board members would be coverage which includes both forms and therefore both triggers. 

It is a must for board members to get expert consultation regarding these key features before making a purchase.

If you have any questions, contact me for a free consultation.

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