Does your 501(c)3 Non Profit organization need Directors and Officers Liability Coverage?
The absolute answer is yes. The risks to your organization are both real and significant.
Allegations of improper business practices are common, as are employment related issues such as wrongful termination, discrimination and harrassment, to name a few. The cost of an award can be disastrous, much less the always-present defense costs.
Some non-profit organizations believe that it's not necessary to purchase Directors and Officers Liability coverage since board members are volunteers, and therefore not subject to being sued. This could not be further from the truth. Most by-laws contain indemnification clauses that state the non-profit organization will indemnify the officer or director for costs related to a claim. This indemnification is done via insurance. Without coverage, the organization would have to use it’s own cash funds to defend itself. Additionally, it would be very difficult to attract and keep qualified individuals on your board without this coverage.
While the frequency of true non-profit Directors and Officers Liability claims is low, there are substantial numbers of employment-related claims. As a result, modern-day policies combine non-profit Directors and Officers Liability Coverage with Employment-Related Practices Liability. Various limits and deductibles are available. With some insurance companies, it is also possible to include other coverage such as Fiduciary Liability, Workplace Violence and Internet Liability on the same policy.
Non-profit Directors and Officers Liability is easy to purchase and is not cost-prohibitive. A simple application, along with a copy of your organization’s by-laws and most recent financial statements, is all that is necessary. Non-proift Directors and Officers Liability is an absolutely necessary part of an organization’s insurance program. For more information, contact NRS.