Less than half of America’s 2.3 million nonprofit
organizations have the proper liability insurance coverage. With such tight
budget restraints and socially desirable goals, many nonprofit board members
dismiss director and officers coverage as an unnecessary investment; who would really sue the directors of a nonprofit?
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Beyond
this, directors and officers are in serious risk of
losing personal assets such as retirement savings, investments and even
homes. These board members can be held personally liable for any
decisions that are made within an organization. Directors and
officers are expected to act with care, loyalty and obedience. It is
their duty
to act for the benefit of the organization, avoid any conflicts of
interest and
exercise the utmost skill and care in decision making. Any perceived
breach of
these duties and members of non profit boards are in serious risk of
being sued. Take a
look at some of the more common claimants and real life examples played
out.
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Real Life D&O Claims: Most Common Claimants
1. Donor Claim
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An organization filed a suit against a foundation and its
Board of Directors for improperly infringing upon the claimants intellectual
property rights. The claimant filed suit seeking injunctive and monetary relief
for the Foundation’s alleged improper use of trademarked property while
promoting their fundraiser. The claim settled and the total loss including
defense was over $400,000.
3. Employee Claim
After 10 years of employment, an employee was fired for poor work
performance. This employee brought a discrimination suit against their employer
under the Americans with Disabilities Act (ADA). The individual alleged lack of
work place accommodation and constructive discharge. The claim was closed for a
total loss of over $80,000, including more than $20,000 in defense costs. 85% of all nonprofit D&O claims are employee related.
4. Governmental Agency Claim
The United States Department of Justice brought suit, alleging
misappropriation of funds and failure to revert unused money back to the
government. The insured received federal grant money and allegedly used
leftover grant money to renovate office space instead of return it to the
government. The case closed for a total loss of over $60,000, including $21,000
for defense costs.
5. Volunteer Claim
A
volunteer claimed the denial of a full time position was due to her sex, race
and pregnant condition. She filed a lawsuit claiming discrimination. The claim
is pending further litigation and defense costs paid to date total over $10,000
with an outstanding loss reserve of $65,000.
6. Member Claim
A
law enforcement fraternity began proceedings to have a member removed from the
organization. This member then sued the organization in order to have the
proceedings halted. While there was no monetary settlement, the defense costs
were $15,000.
7. Beneficiaries Claim
A
discrimination suit was filed against the Board of Directors when the claimant
requested a transfer within the housing complex and was denied. The claimant
alleged discrimination based on national origin, religion and sex. The claimant
was a resident at a drug and alcohol rehabilitation center. The court dismissed
the case due to a lack of evidence. More then $10,000 was paid in defense
costs.
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D&O insurance is essential in protecting board members
beyond what general liability coverage can offer. With the average cost of a
Directors and Officers premium under $1,000 with a zero retention and the
average D&O claim being well over $100,000, there is no reason not to
invest in this essential liability coverage.
Apogee is here to provide specialized coverage for nonprofits around the country. With access to large markets and a team of D&O specialists, Apogee can help insureds acquire the necessary coverage with competitive rates.
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Documents
See more reasons all nonprofits should have D&O coverageLearn more about D&O coverage at Apogee
Nonprofit FAQs
What Defines a Nonprofit?
Who Sues Nonprofits?
Nonprofit D&O Duties and Responsibilities
