Serving on the board of a non-profit entity brings exposures, and as a Director of a non-profit you should ensure that the non-profit you are associated with has Directors and Officers (D&O) insurance for protection (see prior posts here, here & here).
Directors and Officers (D&O) insurance protects against legal judgments and related expenses resulting from allegations of wrongful acts committed by individuals in their capacity as directors and officers. Most D&O insurance policies for non-profits include a coverage called employment practices liability insurance, which protects the non-profit and its employees from legal judgments and related expenses resulting from allegations of wrongful acts committed in the employment realm.
A recent article (see here) describes the importance of D&O insurance, including EPL, for individuals associated with a non-profit entity. The article in the Stillwater Gazette (here) also points out that individuals should not rely on their homeowners insurance for protection.
The best method for insuring the actions of board members is for the organization to purchase a directors and officers (D&O) liability policy. These policies are relatively inexpensive for most nonprofits. Before volunteering, request information on the organization’s D&O policy. The absence of this insurance leaves you at risk of having no personal insurance to defend a suit brought against you by the organization and should influence your decision to serve.
Keep in mind that directors of non-profits have personal exposure: Directors can be held personally liable if their negligence, as determined by the court, results in a loss. And the legal fees from a claim can be significant even if there is no negligence.
Some states have provisions protecting directors of non-profit entities from losses called safe harbor statutes. Unfortunately, safe harbor statutes do not eliminate the need for insurance because these statutes do not protect the non-profit from a lawsuit being filed. (more information on this is available at our website here.)
Tennant Risk Services is a specialty wholesale broker and underwriting manager, and delivers expertise, markets and exemplary services to our retail insurance agent clients in the placement of professional liability insurance (E&O, D&O, EPL, Cyber). We excel at hard to place accounts. Review our expectations here.