Friday, February 24, 2017

Directors and Officers Liability Insurance - A Must For Non-Profit Organizations

Many of us serve as volunteers on boards of non-profit organizations. If we do so we not only need to be respected for our service, but also protected from any potential law suits. 

Directors and officers of non-profit organizations who generously donate their time to advance the cause of an organization created to serve the public shouldn't have to be concerned about a lawsuit. 

However, at least 45 percent of non-profit organizations can expect to experience at least one directors and officers' liability claim during its existence.

The Necessity of D&O Insurance and What it Covers

Directors and officers liability insurance therefore, has become a necessity. This type of insurance protects board members from financial loss due to alleged wrongful acts, including conflict of interest; financial mismanagement; dissemination of false or misleading information; and negligence, including the failure to supervise the activities of others and evading responsibilities. Whether or not there is an actual liability, a lawsuit filed need to be defended and legal costs will accrue whether your organization wins or loses the suit.

Who Sues Non-Profit Organizations
A close look at who would be likely to sue the organization reveals that it is most likely to be one of the organizations' own employees with claims of sexual harassment, discrimination, wrongful termination, retaliation, invasion of privacy, failure to grant tenure, negligent evaluation, failure to employ or promote, wrongful discipline, deprivation of career opportunity, wrongful infliction of emotional distress, and mismanagement of employee benefit plans. 

In fact, among other potential plaintiffs such as benefactors, members, and clients, 80 percent or more of all claims against non-profit organizations are from the organization's own employees.

Directors and officers liability insurance has continued to evolve over the last 35 years from just covering officers and directors in the beginning to now covering acts by other personnel including trustees, employees, volunteers and the organization itself. 

What Does D & O Insurance Cover 
The coverage includes the cost of defense which can mitigate the risk of serious financial harm to the organization and its board members. Recent data indicates that the average cost to defend a claim is approximately $150,000, and the average settlement or damage award is approximately $375,000.

D&O Insurance - A Necessity in Today's Litigious Society
Once again an organization cannot afford to be without directors and officers liability insurance in these litigious times. A half million dollar law suit can easily wipe out most nonprofit organizations. Furthermore, for an organization to be fully protected it needs directors and officers liability insurance, general liability insurance which covers injuries and damages resulting from the organization's premises, products, and operations; workers compensation which covers a work-related sickness or injury; and a fidelity bond which protects the organization against financial embezzlement, forgery or theft.

Call (773) 614-3201 if you have any questions or interested in this coverage.

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