Non Profit Director and
Officer boards can be sued
by donors, employees
(prospective, current or
former), the general public,
third parties, clients,
and/or government agencies.
The personal assets of the
individual board members are at
stake! Directors & Officers
(D&O) insurance can help protect
a board member’s home,
investments, or other personal
assets.
The bylaws of the Non Profit
may indemnify the Board but does
not guarantee the entity has the
resources to fund the cost of a
claim. The financial backing of
a Directors & Officers policy
will ensure financial solvency
to the organization.
Directors and Officers
lawsuits can have a devastating
impact on the operating budget
of the Non Profit organization,
and can even put the entity out
of business.
The average cost of a
Directors and Officers policy is
often under $1,000 with a zero
retention yet the average cost
of a claim is over $100,000.
Directors and Officers claims
are not covered under General
Liability or any other policy
form.
Corporate scandals have
heightened regulation of
accounting practices. The
Sarbanes-Oxley Act has also
impacted Non Profits.
The Internal Revenue Service
has increased their scrutiny of
Non Profits. Over 400 private
foundations have been audited in
the past year.
Directors of Non Profit
boards have the same fiduciary
duties as corporate board
members. Non Profit Directors
and Officers lawsuits may
involve a variety of issues
related to the daily operations
of the board including:
•Duty of Care – requires
Directors and Officers to
act prudently and reasonably
in regard to the management
of the organization’s
affairs
•Duty of Loyalty – prohibits
Directors and Officers from
using their position in the
organization to further
their own personal interest
•Duty of Obedience – requires
Directors and Officers to
ensure that the organization
is run in accordance with
it’s charter and bylaws, and
that the organization
complies with applicable
laws
