Directors and Officers Liability Insurance: Why Nonprofits Need It

Nonprofits are often extremely limited on resources, but that doesn’t mean they should skip out on the necessary directors and officers liability insurance.

Does a nonprofit organization need directors and officers (D&O) liability insurance? The short answer has to be “yes.” D&O insurance covers the organization and its directors, officers, and trustees against alleged or actual wrongful acts in three major areas of the nonprofit organization:

1) Governance Liability: Claims that result from general governance decisions. If the leaders of the organization either purposefully or accidentally make decisions that put their volunteers, employees, or other third-partiers in danger, they are at risk from facing a lawsuit. Governance liability protects the leaders of the organization. It covers things like breach of contract, housing access discrimination, and corrupt board elections.

2) Fiduciary Liability: Claims that result from alleged fraud and improper oversight, including supervision of the employee benefit plans and use of donor contributions and grant funds. It protects those people that were hired by these organizations to model and administer the previously named financial plans. Even if the people you hired were third parties, your organization could still be held liable. It covers things like improper allegations of fundraising and revenue reporting, failure to report the payroll tax, and attorney general investigations.

3) Employment practices liability: This policy covers claims that result from employment-related practices. If your employees/volunteers believe that you have violated their rights as human beings, this coverage will protect you and your organization. It covers things like sexual harassment, racial and gender discrimination, defamation, failure to accommodate employees with disabilities, and improper employee classification.

At PMC Insurance Group, we’re experts on D&O liability insurance and can help you put the proper policies in place for companies like cleaning services. To learn more about getting competitive coverage for your nonprofit clients, contact us today.

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