Directors and Officers (D&O) Liability Coverage for Nonprofits

In today’s litigious society, the savvy non-profit entity recognizes the need for D&O liability coverage. These are the facts:

  • Nonprofit organizations are not immune from costly litigation.
  • Nonprofit organizations are being sued more often and from more sources, despite laws in most states that limit the liability of nonprofit directors and officers.
  • Employment related suits for such things as harrassment and wrongful termination are at an all-time high, especially since enactment of the Civil Rights Act of 1991 and the Americans With Disabilities Act of 1992.
  • Directors and officers are subject to the duties of diligence, obedience, and loyalty and can be sued for negligence in the performance of those duties.
  • A claim could threaten the personal assets of directors, officers, and trustees.
  • The financial burden of defending a D&O suit can drain a nonprofit organization’s badly needed resources.

Who Sues Nonprofit Organizations?

Almost any day-to-day decision or action by anyone in an organization can trigger a lawsuit. Of all the lawsuits brought against nonprofit organizations, more than 50% involve employees. Even with the most diligent efforts to prevent employment disputes, the following claims can and are often alleged against nonprofit organizations:

  • Discrimination due to race, sex, age, national origin, religion, disability, or sexual orientation
  • Wrongful termination
  • Sexual harassment
  • Promotions and compensation
  • Interference with employment contract
  • Hiring decisions
  • Conflicts of interest
  • Libel, slander, and defamation of character
  • Failure to supervise employees
  • Invasion of privacy
  • Copyright infringement, misrepresentation of ideas, and unauthorized use of logos

Coverage is available that defends against all of those allegations and more, including claims brought by:

  • Donors who feel that their contributions have not been used to further the expressed aim of the organization.
  • Board members who disagree with a majority decision on the use of funds.
  • Beneficiaries who feel they are entitled to more than they receive.
  • State attorney generals who institute legal proceedings against the board for issues such as mismanagement of funds and antitrust violations.