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Sports Charity Investigation Highlights Massive D&O Exposure

3. April 2013 17:25

sports charity

A recent report conducted by Outside the Lines, an ESPN investigative body, found that an alarming number of nonprofit charities run by sports celebrities score poorly on measures of acceptable spending and disclosure, as outlined by Charity Navigator.

Specifically, the study found that many athletes’ charities…

Naturally, this is upsetting news for anyone who donates to these charities and thought their money was going to a noble cause. But it also raises some important questions about the insurance implications for nonprofits that handle their funds improperly.

Insurance Implications of Mishandled Funds

One of the most important kinds of insurance for nonprofits is Directors & Officers, or D&O Insurance. This coverage protects the board and directors who advise and guide the nonprofit in an executive capacity. 

Typically, the board of directors has the last word on making decisions about how to allocate the organization’s funds. If one of those decisions is challenged (e.g., if a donor believes that funds were used improperly), the nonprofit could face a lengthy legal process, which means hefty lawyer’s bills and court costs.

In addition, if the nonprofit is found legally liable for wrongdoing, it could be hit with a fine or damages. D&O Insurance covers both the court costs associated with defending a nonprofit against claims of negligence and any settlement fees in the event of a finding of liability.

Protecting Your Nonprofit against D&O Liability

As of now, it’s unclear whether any of the sports charities named in the Outside the Lines report will face repercussions from their supporters. But it’s certainly conceivable that the findings could trigger lawsuits from disillusioned donors. To make sure your nonprofit doesn’t face a similar fate, be sure to…

know your business risks

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Nonprofits | Small Business Risk Management

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