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Jan 14, 2015 (0) comment

Non-Profits may not be aware that their board members can be held personally liable for the actions of the organization. Non Profit Directors and Officers Insurance provide protection for defense costs, settlements and judgments proceeding a lawsuit or wrongful act allegation made against a non-profit organization. Generally, there are two types of lawsuits in which a claim might be brought against a board member: derivative lawsuits and direct or third-party lawsuits.

Derivative lawsuits are claims made against a board member on behalf of the organization. Direct or third-party lawsuits are made by an employee or person not connected with the organization who asserts a claim against it or its board on account of some non-bodily injury.

Non Profit Directors and Officers Insurance claims usually relate to:

  • Failure to provide services
  • Improper management of Assets
  • Employment related issues including discrimination, harassment and wrongful termination

According to Insurance Journal, it is estimated that approximately 20% of all U.S corporations are nonprofit. Directors and Officers serving for a non-profit organization share certain responsibilities that could rise personal liability claims against them.

Non Profit Directors and Officers Insurance compensates directors and officers of non profit organizations for legal claims made against them. Individuals may be hesitant to serve as a director or officer of a non profit if the organization doesn’t maintain Non Profit D&O Insurance because it raises the risk of them personally having to pay for damages. The famous case Smith v. Van Gorkom, which debated whether ‘The Business Judgment Rule’ by the Board to approve a merger was an informed decision. Ultimately the Court found the Directors to be grossly negligent and they had to pay $23.5 million in damages. This case prompted many board members in a variety of organizations to ensure Directors and Officers Insurance was provided if serving for a non profit.

McLean Insurance puts considerate thought into each Non Profit D & O Insurance policy they create for a non profit organization. McLean Insurance will gladly review your current Directors & Officers Insurance Policy to protect your assets with a tailored approach and affordable price. Contact Us today to learn more!

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