Non-profit organizations are subject to many of the same liability exposures as for-profit organizations. For this reason, it is vital for a non-profit to carry all of the insurance coverage necessary to protect its employees, directors and officers, and its mission.
Non-profit directors and officers are charged with maintaining the organization’s financial stability and providing the necessary resources and environment to accomplish its goals. Nearly any decision or action by anyone in a non-profit organization can trigger a lawsuit. Lawsuits can hurt the non-profit financially and even threaten the personal assets of its directors and officers.
General liability insurance provides coverage for claims or lawsuits arising from bodily injury, property damage and personal injury. It does not cover a non-profit for claims resulting from things like discrimination and wrongful termination—two common types of suits involving the directors or officers of non-profit groups. Damages rewarded to claimants in suits of this type can financially ruin the organization and the individuals involved.
Directors and Officers (D&O) Liability Insurance protects the assets of individual directors and officers, employees and an organization from the allegations of a covered wrongful act. Each insurer defines coverage in its own way, but a wrongful act is typically described as “any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.”
D&O liability insurance pays defense costs, damages, settlements and judgments related to covered claims. It can also protect the assets of spouses, domestic partners, heirs and estates of a non-profit’s directors and officers.
Liability claims against non-profits typically come from employees or volunteers in the form of employment practices complaints. The most common types of claims made against non-profits include:
Employment practices complaints such as wrongful termination, harassment and discrimination
Civil rights violations
Conflicts of interest
Violation of by-laws
Breach of contract or fiduciary duty
Financial mismanagement or bankruptcy
Mistakes or errors of judgment
Directors and officers liability insurance is not a standard form policy. There are a variety of different coverage areas to consider.
Are you involved in the operations of a non-profit organization? Does your organization have D&O liability coverage? Has your non-profit organization ever been sued?