Directors and Officers (D&O) Insurance provides financial protection for the directors and officers of your society in the event they are sued in conjunction with the performance of their duties as they relate to the organization. D&O insurance protects volunteer members in the event the board is legally obligated to pay as a result of damages to another party.
Despite their experience with other organizations, many board members may be unaware of the legal ramifications of their volunteer work and the possibility that they may be held personally liable. Since a director can be held personally responsible for acts of the society, most directors and officers will demand to be protected rather than put their personal assets at stake.
D&O insurance is needed when a board of directors is assembled. D&O insurance protects against liability claims from people who allege that in conducting the business of the corporation, the directors and officers breached a legal duty to them. Essentially, D&O insurance can provide protection for claims that result from errors in judgment. Directors have potential liability for not adequately performing their obligations or failing to exercise reasonable business judgment.
D&O insurance can sometimes include Employment Practices Liability and sometimes Fiduciary Liability. The former involves harassment and discrimination suits and is where the majority of your exposure will be, if you maintain full-time staff. Unlike a general liability insurance policy that covers losses arising from physical injury or property damage, D&O covers only those losses arising from a director's or the board's own ‘wrongful acts.'
Directors and Officers Insurance is often confused with Errors & Omissions Liability. The two are not synonymous. Errors & Omissions is concerned with performance failures and negligence with respect to your products and services, not the performance and duties of management.
Organizations that obtain D&O insurance typically conduct regular reviews of board practices in light of the coverage provided by their policy to ensure that no society work will result in individual exposure to liability. The best D&O coverage available comes through individual policies. However, these can be very expensive, making group policies a more financially attractive – if less expansive in terms of coverage – option. If you need help finding a D&O policy or would like to explore what options you have for joining a group policy, an insurance broker can guide you through the process of finding and selecting a policy that fits your organization’s needs.