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D&O Insurance to Protect ​​​​​​​Your Board Members

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Though you may not realize it, board members can be held liable for the actions of the nonprofit organizations they serve. In order for a nonprofit board to protect its organization mission and its board members' personal assets, directors and officer (D&O) insurance is crucial. In the event of a claim, nonprofit leaders could suffer severe damage to their reputation and personal finances simply based on their decisions.

To protect themselves, D&O insurance for nonprofit leaders is crucial and can provide the following benefits:

  1. Legal Cost Reimbursement - In the event of a claim, D&O policies can provide defense cost coverage for a variety of claims. Specifically, D&O insurance can provide legal cost reimbursement to nonprofit leaders following allegations of wrongful acts, financial mismanagement, errors in judgment and negligence. D&O lawsuits can occur without warning and easily reach six figures.
  2. Peace of Mind - D&O claims can come from a variety of sources, including employees, recipients of services, government bodies and donors. D&O insurance ensures that nonprofit leaders are protected regardless of where claims originate, providing timely and effective coverage.
  3. Entity Coverage - A number of D&O policies go beyond protecting directors and officers and extend to the organization itself. This is particularly advantageous as this type of coverage kicks in even if a director or officer isn't directly involved in a claim.
  4. Flexible Limits - Most insurance companies offer a variety of coverage limits for D&O policies. In some cases, these limits can go as high as $10 million, depending on the size of the nonprofit.
  5. Protection Beyond Indemnification - While the bylaws of many nonprofits require the company to indemnify and defend directors and officers who are sued, leaders wouldn't expect this protection to be sufficient. That is because a nonprofit's duty to indemnify is only as good as its ability to pay. This means that, if the nonprofit is insolvent or not financially stable enough to cover the legal fees, directors and officers would have to cover these fees themselves.

If you would like to learn more about D&O insurance, contact your Cobbs Allen risk consultant.

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