An underreported fact is that 43% of High Net Worth individuals participate on non-profit boards. One common and volatile exposure from this is being held personally liable for decisions of the board. Generally, we find that individuals do not understand the exposure or the risk. Many individuals assume that their personal umbrella covers their not-for-profit (NFP) board service, but this is not the case. Some policies offer limited coverage, but many do not. If there is any coverage afforded by the policy, it is for bodily injury and property damage – this may sound great but in reality this is not what a typical claim is for. Most Directors and Officers Liability (D&O) claims come from some sort of financial loss; this is not covered by your umbrella.
The first risk management step to protect yourself while serving on a not-for-profit board is to make sure that the non-profit has proper Directors and Officers Liability insurance – this includes proper limits and policy language (We at Deland, Gibson would love to help you with this and review the D&O policy). It is also important to annually make sure that the policy is in force. Often times NFP’s do not carry insurance that is optimal for all board members. For an individual to get complete coverage for D&O risks they had to purchase a monoline, “Side A” insurance policy. Now it is possible for this to be an addition to your Homeowners policy.
To insulate yourself and your family from an unexpected D&O claim can now be easily accomplished as an addition to a Pure Insurance Homeowners policy through Deland, Gibson. Added as an endorsement, coverage is provided for liability arising out of a claim made against a client in his or her capacity as a director or officer of a not-for-profit organization, including claims of breach of duty, negligence, error, omission or misstatement.
- Coverage will respond for all co-op boards and not-for-profit organizations with less than $50M in assets, with the exception of healthcare or secondary education organizations, organizations established in the last 12 months, or organizations whose spend is over 75% on fundraising or expenses.
- No restriction on the number of boards a Member can serve on for the coverage to respond.
- Coverage drops down to dollar one if the underlying carrier does not respond due to bankruptcy or insolvency, or because the not-for-profit organization simply failed to maintain the insurance through unintentional error.
- General coverage provisions include breach of duty, wrong employment act, non-employment discrimination, libel/slander/defamation, wrongful entry/eviction, false arrest, plagiarism, infringement of copyright.
In the litigious society we live in, it is important to take control of your risk and not leave it up to chance. Contact your Advisor at Deland, Gibson for more information.