Directors and officers insurance protects publicly-traded companies and non-profits from any errors or damages perpetrated by their board members that might cause financial loss. It’s a smart decision to purchase this insurance before it is needed – even if every board member seems like a flawless addition to your agency.
Running a non-profit is hard work – but greatly satisfying to the volunteers, staff board members and the people you serve. It pays to provide them with protection against claims of negligence or mismanagement.
Why Consider D&O Insurance?
In many cases, non-profits operate on a razor thin budget: adding lawsuits to the mix can be financially devastating. Especially if your non-profit is relatively new, considering D&O insurance is important. One lawsuit (even if you don’t lose!) could drain the agency of its financial stability. Similarly, a startup company can be at the mercy of one major lawsuit.
Board members are meant to be nothing but an asset to the agency or company they serve. They use their skills, expertise and connections to help further the organization’s goals. But sometimes, board members can become liabilities.
Do I Need D&O Insurance?
When a board member is acting as part of a non-profit or company, his or her actions are the responsibility of that organization. If one of your board members is negligent in their duties, that can open the door to a lawsuit or criminal proceedings – you need to be covered.
If a board member commits damaging action in the name of a company or non-profit, that organization is open to some serious losses. For example, if a board member harasses a staff member, that staff member can sue the agency. Similarly, if a board member misuses the non-profit’s funds, donors can file a lawsuit. Even if these do not lead to actual losses in court, the legal fees can be extensive.
When your non-profit or company has D&O insurance, the losses incurred by board members are far less likely to be substantial. Your agency is covered: legal fees, lawsuit losses, damages, etc. Likewise, the professionals on your non-profit or company’s board can be at risk when acting in the name of your organization – having directors and officers insurance can protect them, too.
An agency that does not have proper insurance can be a hard agency to run. Not only will donors shy away from such a non-profit, but it could also be hard to find board members as they would bear the brunt of lawsuit liability themselves without D&O insurance.
D&O insurance can protect your company or non-profit from losses incurred by your board members. Choosing the right policy for your directors and officers insurance is an important decision to make, and one to consider at any point in your organization’s life.
Does your organization carry D&O insurance? Do you know if board members and managers carry personal liability umbrellas?