Non-profits are unique organizations, which means they come with unique risks. General Liability Insurance may not be enough.
When individuals join a non-profit’s board of directors, they are assuming a level of responsibility for running and managing the organization. So if anything goes awry, the board is exposed to claims of mismanagement.
General Liability Insurance will most likely cover board members for bodily injury claims, but it will not cover non-bodily injury claims. And while few non-bodily cases are reported, this does not mean that several claims are not filed per year and then dropped or settled outside of court.
Directors and Officers (D&O) Liability Insurance is specifically designed to cover an organization’s officers and directors – including its board – against claims related to employment, management of funds, and other non-bodily issues. As the Nonprofit Coordinating Committee of New York says, “D&O insurance is essentially legal defense insurance, noting that “99.99% of the cases brought against a board are going to be thrown out, but you’re still going to have to pay the legal fees if a claim is filed.’”
All it takes is one angry individual or an employee who feels wronged, and your non-profit board members could find themselves in a direct or third-party lawsuit. Even if the claim is completely baseless, you will most likely have to hire a lawyer.
And if you are like the majority of the nation’s 1.5 million non-profits with little reserve funds to spare, then you’ll need some type of risk financing that includes both General Liability Insurance and D&O Liability Insurance.
A little over a year ago, one non-profit BOD became an example of the importance of D&O Liability Insurance for non-profits when directors were not careful and became personally liable. While the exact reason for the board’s improper oversight was not publicized, the Huffington Post explained that “common reasons for board failures in general, absent fraud, include dominant executives, group think, a desire to avoid conflict, and the demands of other business activities.” Read more about this case in the Huffington Post article online.
Still unsure whether your non-profit organization needs D&O Liability Insurance? To talk specifics with one of our specialists, call us at 1.866.481.5262.