Directors & Officers Insurance
Protect your board of directors from liability lawsuits
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Directors & Officers Insurance

Directors & Officers Insurance (D&O) is a business liability policy that protects board members who are sued over decisions they make while serving on your board. The policy usually covers legal expenses for accusations of discrimination, defamation, and mismanagement of funds. Most board members expect this protection, so having D&O Insurance can help you recruit and keep top talent.

What Is Directors & Officers Insurance?

When your directors and executives accept their positions, they also accept the possibility that customers, employees, or regulatory bodies might scrutinize their actions and sue. Unfortunately, they usually aren't covered by your General Liability Insurance or Professional Liability Insurance. That's why a business without D&O coverage has a hard time holding on to its board. After all, no one wants to risk their personal finances for a job.

Your directors and officers might face…

  • Fiduciary duty claims. These include claims that the board misused or mismanaged company funds.
  • Claims by employees. Disgruntled team members can claim discrimination, wrongful termination, breach of contract, invasion of privacy, and even infliction of emotional distress if they're not happy with leadership.
  • Claims by competitors or similar organizations. Unfair competition, claims of defamation or libel, and trademark issues can plague your organization and its officers.

When these claims pop up, board of directors liability insurance can help pay for legal expenses like board members' attorney fees, court costs, and settlements or judgments.

Who Needs D&O Insurance?

You may consider Directors and Officers Insurance if you…

  • Run a nonprofit organization.
  • Have a board of directors.

In other words: whether you're a nonprofit or not, board member insurance is smart any time you have a board. Without D&O Insurance, members of your board have to pay out of pocket if they're named in a lawsuit over their performance in their capacity as a board member. Obviously, that's not a prospect most people like.

How D&O Insurance Helps You Get and Keep Board Members

Insurance for board members attracts talented individuals to your organization. Look at it this way: If your directors and officers are sued over the decisions they make, they might face tens of thousands of dollars in legal costs and the hassle of defending themselves. The possibility might prevent them from wanting to help your nonprofit grow.

Before you assume no one would want to sue your small business, look at the data. According to the risk management society RIMS, there have been more than 1,500 D&O claims every year since 2010. And organizations dedicated to the greater good aren't immune. The same data shows that in the last 10 years, nonprofits faced 60 percent of the D&O claims.

Even if you want to roll the dice on your organization, you can't be sure that the people you want on your board are willing to take the same risk. Directors and Officers Insurance reassures them that working for you won't hurt them financially.

60% of D&O claims target nonprofits.

Directors and Officers Claim Examples

A board of directors usually takes part in the big-picture planning for your organization. Depending on how you've set it up, the board may determine strategy, hire C-suite executives, and approve annual budgets.

Unfortunately, these activities carry some risk of a D&O claim. For example, a board member might be accused of:

  • Discrimination during the hiring process.
  • Failure to follow the organization's by-laws.
  • Misrepresentation in their annual report.
  • Misuse of funds.
  • Failure to comply with regulations.

Board of directors liability insurance can address many of the perceived mistakes a member might make while carrying out their duties. One note, though: a fiduciary liability insurance policy like D&O usually doesn't cover fraud or other illegal acts.

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