D&O Liability Insurance For Nonprofit Organizations

D&O liability for nonprofits

Many of those serving nonprofits overlook the necessity of Directors’ and Officers’ Liability Insurance (D&O) despite the very real exposure to personal liability.

Often, directors and officers of nonprofit organizations can experience demanding and stressful decision-making situations since participation in the organization may be a part-time, voluntary commitment performed in less favorable conditions than a for-profit business. Moreover, contrary to what many may believe, the legal standards of care are equal to or perhaps even higher than those of for-profit companies.

There are two basic types of nonprofit organizations:

1)       Public benefit nonprofit organizations serve the community based on criteria such as need, religious affiliation, and academics. Public benefit nonprofit organizations typically include churches, museums, libraries, schools, hospitals, civic groups, and other community involvement organizations.

2)      Mutual benefit nonprofit organizations serve the members of the organization. They include trade associations, social organizations, athletic clubs, credit unions, homeowners associations, and cooperatives.

Even if you have experience and knowledge, it is important that you formulate an efficient risk management program to identify any potential exposures and risks and plan accordingly. With nonprofit organizations, many abandon their business approach roots and follow through with decisions differently than they would with a for-profit business.

Despite popular belief, general liability insurance and umbrella policies do not take care of D&O liability lawsuits. D&O liability insurance protects directors and officers of nonprofit organizations from damages and defense costs coming from lawsuits alleging wrongful acts.

In order to ensure that your nonprofit organization is protected, it is important that you adopt a D&O liability insurance policy. It is better to be safe than sorry in the future. Contact the insurance experts at Central Insurance Agency for all of your Texas insurance needs.

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