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Serving on a Non-profit Board can be Risky Business: Non-profit directors and officers (D&O) liability

It’s common for affluent individuals to take on board positions for non-profit organizations as a way of offering their leadership skills and connections to serve their local communities. These organizations and their directors and officers can be exposed to lawsuits for mismanagement of funds, negligent acts, errors and omissions, breach of duty, misleading statements, or wrongful employment acts such as discrimination, retaliation, failure to employ or promote, or wrongful demotion.

According to the 2014 U.S. Trust Study of High Net Worth Philanthropy, nearly half of all survey participants served on a non-profit board. According to a Towers Watson 2013 D&O survey, 63% of its non-profit respondents had been subject to a D&O claim in the past 10 years. The Nonprofit Risk Management Center reports that 85% of all non-profit insurance claims filed under D&O liability policies are employment related. Even if allegations against you are groundless, you will incur costs to hire an attorney, which can add up very quickly when defending a claim. Adding the non-profit director and officer endorsement to your Nationwide Private Client personal excess liability policy will allow you to focus more time on helping the non-profit and less time worrying about a claim.

How you may be at risk

You sit on a non-profit board and cause an actual or alleged negligent act, error or omission, misleading statement, or breach of duty resulting in a lawsuit against you.
A wrongful act could come from:
• Acts such as employment-related discrimination, slander or defamation, wrongful failure to employ or promote, or wrongful demotion
• Conflict of interest, breach of contract, or fraudulent financial statements
• Mismanagement of funds such as assets being sold for unreasonably low prices or wasting assets
• Errors in judgment such as dissemination of false information, misleading statements or improper guarantees
• Negligence such as breach of duty, failure to review documents before signing, or failure to detect or
stop embezzlement

Claims could be filed against you by parties outside of the organization including donors or beneficiaries, organization members or employees, other directors or officers of the organization, or government officials.

How Nationwide Private Client responds

If you serve as a director or officer of a qualifying not for profit organization, Nationwide Private Client offers our optional non-profit director and officer coverage, with limits up to $1 million, that can be added to your personal excess liability policy. This coverage includes costs for defense up to the limit.

If you have questions or are interested in this coverage, contact us at 916-380-5300.

Filed under: Personal Insurance — Jillian Bender-Cormier @ 7:03 pm October 25, 2017