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D&O insurance for nonprofits

Directors and officers can be held liable for losses or damages resulting from their actions or inactions. D&O insurance can help protect against claims.

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Directors and officers can be held personally liable for losses or damages resulting from their actions or inactions. D&O insurance for nonprofits can help protect against claims filed by shareholders, competitors, investors, vendors, customers, or other parties. SECURA’s D&O insurance can also help protect the organization, covering legal fees, settlements, and other costs.

D&O coverage is crucial for nonprofits, and features protection for wrongful acts of a director, officer, or trustee, including:

  • Act, error, omission, misstatement, misleading statement, or breach of duty
  • Any matter asserted against a director, officer, or trustee solely because of his or her status as a director, officer, trustee, employee, volunteer, or member of a committee of the insured entity

Learn more about SECURA’s D&O insurance for nonprofits.

Who needs D&O insurance?

Nonprofit organizations with directors and officers should consider D&O coverage to help protect past and present board members, including:

  • Directors
  • Officers
  • Trustees
  • Employees
  • Volunteers
  • Estate, heirs, and legal representatives of deceased person who were insured
  • Lawful spouses of insured persons

SECURA can insure many types of nonprofits that would benefit from D&O coverage. This includes any organization federally filed as a 501c3 nonprofit, including:

  • Civic clubs
  • Chambers of commerce
  • Community centers
  • Food pantries and banks
  • Meal delivery programs
  • Social clubs
  • Sports clubs
  • Sports teams
  • Vocational training and work centers

Benefits of D&O insurance for nonprofits

D&O coverage picks up where General Liability leaves off. Directors and officers can be included as policyholders on General Liability policies, but General Liability is not intended to insure D&O coverage perils.

Many nonprofits include indemnification provisions in their key documents. If bylaws or articles of incorporation include language that promises to indemnify board members, then there must be a procedure to do so. To fulfill the promise, a nonprofit could set up a legal defense fund or purchase a D&O policy. Because defense costs alone can be very high, it may be financially impossible to establish a legal defense fund. A D&O policy could be the only cost-effective way to indemnify board members.

Many corporate citizens realize they have a personal exposure when they volunteer for a board. With that in mind, many potential board members require that D&O insurance already be in place before they agree to serve on a board. Advertising the existing D&O coverage to potential new board members can be an effective recruiting tool.

Nonprofit D&O insurance claim examples

Directors and officers are exposed to risks that can be protected by D&O insurance for nonprofits. Having a D&O policy gives nonprofits access to immediate and expert defense. Below are some examples of claims that could be protected by D&O insurance for nonprofits.

Example 1: A youth soccer club expands

A youth soccer club was formed in 1995, and its bylaws, articles of incorporation, and mission statement were written to say that the club was to work with the youth of one specific county. Over the years, the club expanded into three counties. Unfortunately, the key documents were never updated by the board members. Even though no specific party complained, the state’s attorney general brought an action alleging operations outside their charter.

Example 2: A community shelter receives a donation for a new building

A local donor helped a community shelter fund a new building. But, after discussion with contractors, the nonprofit determined the cost of building a new structure would be too high. The board decided that the money raised for a new building would, instead, be used for other projects. The donor sued, alleging misappropriation of funds.

Example 3: A board vacancy is filled by the executive director’s friend

An executive director of a literacy program filled a vacancy on its board with a friend. The organization did have procedures to fill board vacancies but did not follow them. Concern arose when it became public that this friend owned a local bookstore and profited from the relationship. Many people — including other board members, clients, and donors — alleged wrongdoing.

Example 4: The scope of a mission statement is extended

A nonprofit was established with a specific mission statement, but the board’s decisions extended the scope of the nonprofit. The nonprofit’s beneficiaries claimed that the new operations weakened the quality of service they received.

Example 5: A nonprofit attempted to influence legislation

A nonprofit attempted to directly influence legislation beneficial to its cause. The nonprofit was accused of misusing government funds it received in a local political campaign.

Additional insurance coverages for nonprofits

Nonprofit organizations can face a variety of risks, including theft, cyberattacks, and personal injury claims. With the right insurance coverages in place, nonprofits can minimize the financial impact of unexpected events and continue to focus on serving their communities. D&O insurance is not the only coverage nonprofits should consider — learn more about other types of insurance for nonprofits.

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Coverages may not be available in all states. Coverages described are subject to all the terms and conditions of the policy, including deductibles, exclusions, and limits of liability. Not all agents are authorized to write all types of insurance. Policies may be underwritten by SECURA Insurance Company or SECURA Supreme Insurance Company, affiliated companies referred to collectively as SECURA Insurance Companies. Please read the policy carefully. Any claim example is for educational and informational purposes only. The information in this document will not be used to determine the coverage of an actual claim presented. All claims are adjusted based on the relevant facts, conditions and coverages at the time of loss. For specific terms and conditions, please refer to your coverage form. Coverage is also subject to applicable deductibles and limits of coverage.

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