Directors and Officers for Non Profit Companies Face Many Serious Risks

It’s become common knowledge that nonprofit organizations, along with its directors and officers (D&O), face many of the same risks as any for-profit board of directors. The one issue they must consider is that they might have even more difficulty defending against claims brought against them.

 

Some see the fact that non-profits typically don’t have the same level of balance-sheet protection to support against litigation as the only significant difference between a private or public institution. Insurance, in this case, directors and officers for non profit companies is the solution for dealing with this issue.

 

Personal liability on the forefront of concerns

 

As their awareness of their exposures on this front increases, more nonprofits are becoming interested in securing D&O liability insurance, and people involved in nonprofits are smart to seek advice on how to approach an agent to find coverage for this growing risk.

 

It’s important for people thinking about serving on a nonprofit board of directors since they could be facing personal liability risks, and they should be aware of this fact. There is simply too much at risk for those who merely wish to serve, out of the goodness of their heart, on a board of a nonprofit without securing coverage.

 

The concerns of potential board members can be calmed by a phone call to an agent or broker for a quote. Prospective members should take the time to look at available coverage options before agreeing to sit on the board, and insist that they purchase coverage for this exposure. It also might be a good idea for board members to have a Personal Umbrella policy as well.

 

Because the organization can be sued for a wrongful act by anyone with any interest in the chapter’s activities, without nonprofit D&O coverage, individual officers could end up paying for their own defense, even if they are proven blameless. The list of possible reasons for a claim is long and growing; especially as government agencies increase their oversight activities of these institutions.

 

With so much at stake, including employment-related matters, civil-rights issues, fiduciary-duty breaches, fund misappropriation, improper conduct of volunteers or employees, and government claims involving conflicts of interest and antitrust exposure, directors and officers for non profit companies need the added protection for financial security and peace of mind.

 

photo credit: IAEA Imagebank cc

Frank