In most cases, companies are in business to make money. However, there are plenty of organizations-charitable foundations, research centers, educational institutions, and other types of 501 (c) (3) companies so designated under the federal tax code – that are established as not-for-profit ventures. Both types of companies would recognize the need for property and general liability insurance as part of their basic business needs. But because they're not thought of as deep pockets pockets, when it comes to other types of insurance, those companies may wonder whether directors and officers for nonprofit organizations is really necessary. The short answer is quite possibly, if there's any likelihood that the company's board members could be the target of a lawsuit.
Men and women who are elected or appointed to the board of not-for-profit organizations take on a level of responsibility for the company they represent, called a duty of care; in the process of providing that care, they are subject to risk from legal claims alleging they have not managed or directed the company's affairs in the proper manner. Claims can also arrise for allegations of mismanagement of funds or bad advice. D & O insurance offers protection for the board members for these risks. Coverage includes directors and officers of the firm, of course, and frequently includes the executive director and possibly some staffers who have been identified as key employees. Policy amounts generally start at $ 1 million but can be increased substantially.
Who and what is not covered under the policy?
In most cases, the policy does not extend coverage to regular staff members, people who provide their services on a volunteer basis, or the company itself. Many policies also do not cover employment-related claims, which tend to make up a large number of lawsuits filed against a board of directors, or claims that are non-monetary in nature-meaning lawsuits that seek some other type of restitution (for example , replanting a forest full of trees that a board's company was responsible for decimating).
A professional insurance agent can set up a comprehensive insurance package to assess and address liability from many angles. Furthermore, the agent will have established relationships with top-rated insurers that have a strong record of financial stability and a longstanding claims-paying history. Thus, in the event of a claim, the insurer will be there to stand behind the policy. Contact an agent today to learn more about directors and officers for nonprofit organizations.