NonProfit Dangers

I’m starting to hear rumblings that some not-for-profits are letting their directors and officers insurance expire to save money.

Many are working on misinformation. Here are facts:

-D&O policies pay for wrongful acts – bad decisions.

-D&O policies exclude bodily injury, property damage, and usually personal injury.

-The commercial liability policy covers bodily injury, property damage, and usually personal injury.

-There are no overlap in coverage between D&O and the general liability policy.

-The homeowners policy and the personal umbrella are no substitute for D&O – both provide bodily injury and property damage coverage – not coverage for bad decisions.

-While many states have volunteer immunity laws that offer protection, the acts do not provide a prohibition against a lawsuit. Directors can still spend thousands on defense costs. (Thanks Texican.) Such immunity laws also provide no protection for lawsuits brought based on federal law.

-True D&O insurance only covers individuals (no entity coverage). Some policies extend to pick up the entity, usually in regards to employment practices liability coverage.

-No two D&O policies are the same. Detailed analysis is required of any policy proposed as each has different terms, definitions, and exclusions.

I personally would never serve on a nonprofit board without D&O insurance. There is just too much at risk. Directors are personally liable for their actions on a board.

Scott Simmonds, CPCU, ARM, CMC
Providing Insurance Assurance