The Need for Nonprofits to Carry D&O Liability

While many people assume Directors and Officers Liability coverage mostly applies to large corporations, they are not the only type of business that needs this protection. In fact, nonprofit directors face an enormous amount of risk in their daily operation, especially in today’s tumultuous legal environment. In addition to working with fewer resources, these professionals are held to a high standard in terms of legality. As we explore the need for such coverage, ensure your clients have the information and coverage they need to thrive.

Whether your clients operate a public benefit or a mutual benefit organization, their directors and officers are still at risk. According to Insurance Journal, variables, which may affect the degree of D&O exposure, include whether the organization is operated as a corporation, trust or association, whether it is exempt from federal income tax as either a private foundation or public charity, and the number, wealth, and degree of interest of the organization’s constituents.

An estimated 20% of all corporations are nonprofit, which implies a significant number of directors and officers, many of which are not experienced in operating a business or navigating the legal implications of their roles.

In such a litigious society, directors and officers are facing an increasing number of claims. While many rely on their immunities and limitations granted to them by the state laws under which they operate, this strategy doesn’t always pay off. In turn, they rack up extensive legal bills, lose productivity, decrease morale, and even threaten to jeopardize their organization’s future. It’s also important to note that directors and officers should not be too confident that claims against them will turn out in their favor as more and more laws have yet to be tested.

What’s more, nonprofit organizations and their board members commonly face lawsuits for an extended list of alleged wrongdoings: Discrimination (age, race, sex, employment, membership), harassment, wrongful termination of employees, inefficient administration or supervision, waste of assets, misleading reports or other misrepresentations, libel and slander, failure to deliver services, all of which extend beyond the scope of their granted authority, explains the article.

With all of these factors to consider, a proper Directors and Officers Insurance Program is a must. With the right tailored coverages, your clients can rest assured knowing they are protected in the event of alleged wrongdoing, negligence, and more.


About Domenick & Associates

At Domenick & Associates, we have a unique understanding of the nonprofit sector and how to properly secure your clients’ operation. From personal and advertising protection to volunteer coverage, we offer a range of products that are necessary for their success and longevity. For more information about our products, contact our experts today at (855) 745-3636.



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