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Directors and Officers Insurance for Nonprofits Why do directors and officers (D&O) of nonprofits need insurance?
What is a nonprofit? • A nonprofit is a tax-exempt organization that exists to provide social services. Nonprofits often run on donations or are self-funded, and the funds are intended to be used to further a specific social cause. • Not all not-for-profit organizations are technically nonprofits.
Examples of nonprofits • Amnesty International • Better Business Bureau • Boy Scouts of America • Cato Institute • GlobalGiving • GGIP • The Nature Conservancy • PBS • Red Cross • The Rotary Foundation • Special Olympics
Who are the Directors and Officers for Nonprofits? • The actions taken by nonprofits are often decided by a board of directors and officers. • The board can consist of a small group of founders, or it can be hired directors and officers, or a mix. • Regardless, these people are liable whenever things go wrong.
The Most Important Policies for Directors and Officers Insurance for Nonprofits • There are multiple areas to cover in D&O insurance, but the most important policies are the following:
Employment Practices Liability • This is arguably the most important area of coverage. • According to Nonprofit Quarterly, 94% of the claims dollars under a D&O policy come from employment practices allegations.
The most common types of employment practices claims are the following: • Sexual harassment • Racial and gender discrimination • Retaliation, including against whistleblowers • Defamation • Failure to accommodate as per Americans with Disabilities Act • Improper employee classification
Governance Liability • This covers the types of allegations made against the board of directors and officers of nonprofits which a basic D&O insurance policy couldn’t cover. • More specifically, it would be required in various conditions of alleged organizational malpractice or internal or external legal mishaps, accidental or otherwise.
Governance claims include the following: • Breach of contract • Improper board elections.
Fiduciary Liability • Similar to governance liability, but more pertaining to misuse of funds or financial data. • This is an important type of coverage to keep in place, as fiduciary allegations are serious and could jeopardize the longevity of your nonprofit.
Fiduciary claims include the following: • Attorney general investigations • Improper fundraising allegations • Improper reporting of revenue • Mishandling of donations • Failure to report payroll taxes
More Policies for Directors and Officers Insurance for Nonprofits • General Liability Insurance • Business Owner's Policy • Professional Liability Insurance • Workers’ Compensation Insurance
The Best Companies for D&O Insurance include: • Best overall: Travelers • Best for small businesses: Hub International • Best for nonprofits: Affinity Nonprofits • Best for high policy limits: The Hartford • Best Startup D&O: TechInsurance
