WHAT IS NONPROFIT DIRECTORS & OFFICERS LIABILITY INSURANCE?

Directors & Officers Liability Insurance (also known as D&O insurance) covers liability for economic damages resulting from errors or omissions in the management of an organization.

The first D&O policies were introduced in the 1960’s and marketed to for-profit corporations to cover shareholder lawsuits.  By the 1970’s nonprofits began to purchase D&O coverage.  At first nonprofit and for-profit D&O policies were identical, but over time underwriters improved nonprofit coverage in several stages, expanding the definition of who is insured and deleting policy limitations and exclusions.  The motivation for improving nonprofit coverage wasn’t any special nonprofit liability exposure, but rather just the opposite: there were almost no nonprofit claims, so underwriters saw little risk in broadening coverage in order to sell more policies and increase their ‘market share’.

The scarcity of claims ended in the 1980’s with the emergence of employment practices litigation, which still accounts for more than 80% of all nonprofit D&O claims.

Similar to General Liability, Nonprofit D&O covers all liabilities except those specifically excluded.  The difference is that General Liability covers bodily injury and property damage only, and D&O Liability covers Wrongful Acts (“wrongful management decisions”), always excluding bodily injury and property damage.

NONPROFIT D&O EXCLUSIONS

Each insurance company uses its own unique policy wording, and coverage can vary significantly.  Nonetheless there are exclusions common to all Nonprofit D&O policies:

   EXCLUSIONS COMMON TO ALL NONPROFIT D&O POLICIES

Many other exclusions can be built into, or added by endorsement, to Nonprofit D&O policies.

NONPROFIT D&O CLAIMS EXAMPLES

   EMPLOYMENT PRACTICES CLAIMS

   NON-EMPLOYMENT CLAIMS