Directors and Officers Liability Insurance

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Manufacturers buy liability insurance to safeguard against the risk of legal action in case their products harm someone. Similarly, business owners purchase liability insurance to protect themselves from lawsuits owing to accidental harm caused to their employees. Similarly, directors on a company’s board or other senior officers, who shoulder significant responsibilities, also need protection. Any unexpected lawsuit can cause them severe professional and personal loss. Non-profit organizations D&O liability can be protected with directors’ & officers’ liability insurance.

What is D&O liability insurance?

Employees, competitors, regulators, and others may file lawsuits against the directors or officers of a firm for their actions while discharging their duties. D&O liability insurance can offer protection in the case of such lawsuits. It covers the legal fees that the individuals or the firm may have to bear. While most D&O policies exclude fraud and criminal offenses, some insurers extend cover to criminal and regulatory investigations or trial defense costs as well. The policies also include cover for the liabilities of the corporation as well as the personal liabilities of its directors and officers. Common exclusions to these policies involve intentional damage and contractual commitments related to insured individuals.

Additional Read: How can you protect a company’s biggest asset?

Why do non-profit organizations need D&O liability insurance

It is a misconception that only for-profit organizations need D&O liability insurance. Even the directors and officers of non-profit organizations have considerable exposure to personal liabilities.

Often, directors and officers in non-profits lack experience and are unaware of their legal duties and responsibilities. Some directors are recruited for their passion for the cause the organization supports, not their expertise. Even those with knowledge or experience might adopt a more informal approach to deal with legal issues, thus making themselves more vulnerable. All these factors increase the risk of claims against their organizations.

Even with the right people for the job, there is a risk of liabilities arising against the individuals or organizations. Thus, D&O liability insurance is important in the case of:

  • investigations by regulators
  • irregularities in the organization’s accounts
  • meeting corporate governance needs
  • ensuring legal compliance
  • allegations from stakeholders of sexual harassment, discrimination, etc.
  • claims made by shareholders

In some cases, the compensation for just one claim can turn out to be much larger than the cost of a D&O insurance premium. Hence, it is better for non-profits to invest in D&O liability insurance.

Additional Read: If you own a small or medium business, do you need to buy D&O policy?

How SecureNow can help

If you run a non-profit or work for one and want to invest in a D&O liability insurance plan but are stymied by the options available, contact us.