Directors & Officers Liability Insurance

Non-Profit Organizations

 


A nonprofit organization in operated for the benefit of some group of persons. Those individuals, together with employees, creditors, customers, members, state regulators, etc. are all potential plaintiffs against directors & officers of nonprofit organizations due to mismanagement. The fundamental responsibility of directors & officers is to judiciously represent the interests of the organizationís members and other constituencies in directing the business and affairs of the organization with in the law.

 

D&O insurance responds to protect an organization for the insured perils surrounding an allegation of a wrongful act. An important feature of a D&O insurance policy is defense costs coverage. The costs associated with defending an allegation of a wrongful act can easily and quickly exceed $50,000.

 

EXAMPLE CLAIM EXPOSURES FOR DIRECTORS, OFFICERS, OR TRUSTEES

 

Allegation of Wrongful Acts

 

        Conflict of interests

        Fraudulent conduct, reports, financial statements or certificates

        Breach of contract

        Torts

        Violation of statute

        Violation of provisions of articles or by-laws

        Improper self-dealing

        Acquiescence in conduct of fellow directors engaged in improper self-dealing

        Transactions with companies in which officers or directors are personally interested

 

Allegation of Financial Mismanagement

 

        Inefficient administration resulting in losses

        Sale of assets for unreasonably low prices

        Wasting of assets

        Extension of credit where not warranted

        Failure to ascertain whether extension of credit is warranted

 

Allegation of Mistakes or Errors in Judgment

 

        Disclosure of material facts

        False or misleading reports

        Dissemination of false or misleading information

        Permitting organization to make improper guarantees

 

Allegation of Negligence

 

        Continual absence from meetings

        Failure to examine reports and documents before sighing

        Failure to detect and stop embezzlement of organizational funds

        Failure to file annual report

        Failure to require withholding tax

        Failure to inspect organization books and records to keep abreast of its activities

        Failure to supervise the activities of others in a proper manner

        Failure to verify facts in official documents before signing them and filing them

        Shirking responsibility

 

If your organization has exposure to any of the items as identified, it is strongly recommended that Directors & Officers' insurance coverage be secured.