General liability insurance protects your nonprofit organization from legal action involving claims of property damage or personal injury. However, in some cases, a lawsuit personally targets the directors and officers of the organization, and general liability insurance does not protect them. To protect your staff from this scenario, ask your insurance carrier about directors and officers liability insurance, also known as D&O insurance for nonprofits.
What Does D&O Insurance Cover?
Directors and officers may be sued for actions performed as part of their work in the organization. For example, employees may file a lawsuit against a manager for violating employment regulations. If the employees were to win the case, the organization’s D&O insurance would cover the manager’s legal fees, settlements and other costs arising from the lawsuit.
What Doesn’t D&O Insurance Cover?
D&O insurance for nonprofits does not cover intentional criminal activity on the part of the director or officer, such as fraud or theft. Most policies also have an insured versus insured exclusion, which prevents the policy from paying out when the organization sues one of its own directors or officers.
Serving as a director or officer of a nonprofit organization is a privilege involving significant responsibility and some risks. D&O insurance for nonprofits can offer them protection in the event of a lawsuit.