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Risk Management

Directors & Officers Liability Insurance Non-Profit Organization

A nonprofit organization in operated for the benefit of some group of persons. Those individuals, together with employees, creditors, customers, members, state regulators, etc, are all potential plaintiffs against directors & officers of nonprofit organizations due to mismanagement. The fundamental responsibility of directors & officers is to judiciously represent the interests of the organization's members and other constituencies in directing the business and affairs of the organization with in the law.

D&O insurance responds to protect an organization for the insured perils surrounding an allegation of a wrongful act. An important feature of a D&O insurance policy is defense costs coverage. The costs associated with defending an allegation of a wrongful act can easily and quickly exceed $50,000.

EXAMPLE CLAIM EXPOSURES FOR DIRECTORS, OFFICERS, OR TRUSTEES

Allegation of Wrongful Acts

  • Conflict of interests
  • Fraudulent conduct, reports, financial statements or certificates
  • Breach of contract
  • Torts
  • Violation of statute
  • Violation of provisions of articles or by-laws
  • Improper self-dealing
  • Acquiescence in conduct of fellow directors engaged in improper self-dealing
  • Transactions with companies in which officers or directors are personally interested
  • Allegation of Financial Mismanagement
Inefficient administration resulting in losses
  • Sale of assets for unreasonably low prices
  • Wasting of assets
  • Extension of credit where not warranted
  • Failure to ascertain whether extension of credit is warranted
  • Allegation of Mistakes or Errors in Judgement
Disclosure of material facts
  • False or misleading reports
  • Dissemination of false or misleading information
  • Permitting organization to make improper guarantees
  • Allegation of Negligence
Continual absence from meetings
  • Failure to examine reports and documents before sighing
  • Failure to detect and stop embezzlement of organizational funds
  • Failure to file annual report
  • Failure to require withholding tax
  • Failure to inspect organization books and records to keep abreast of its activities
  • Failure to supervise the activities of others in a proper manner
  • Failure to verify facts in official documents before sighing them and filing them
  • Shirking responsibility

If your organization has exposure to any of the items as identified, it is strongly recommended that Directors' & Officers' insurance coverage be secured.

Aon Association Services, a division of Affinity Insurance Services, Inc.

 

 

 

 

 

 

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