In today's litigious society, the savvy nonprofit entity recognizes the need for D&O liability coverage. These are the facts:
Nonprofit organizations are not immune from costly litigation.
Nonprofit organizations are being sued more often and from more sources, despite laws in most states that limit the liability of nonprofit directors and officers.
Employment related suits for such things as harassment and wrongful termination are at an all-time high, especially since enactment of the Civil Rights Act of 1991 and the Americans With Disabilities Act of 1992.
Directors and officers are subject to the duties of diligence, obedience, and loyalty and can be sued for negligence in the performance of those duties.
A claim could threaten the personal assets of directors, officers, and trustees.
The financial burden of defending a D&O suit can drain a nonprofit organization's badly needed resources.
Who Sues Nonprofit Organizations?
Almost any day to day decision or action by anyone in the organization can trigger a lawsuit. Of all the lawsuits brought against nonprofit organizations, more than 50% involve employees. Even with the most diligent efforts to prevent employment disputes, the following claims can and are often alleged against nonprofit organizations:
Discrimination due to race, sex, age, national origin, religion, disability, or sexual orientation
Wrongful termination
Sexual harassment
Promotions and compensation
Interference with employment contract
Hiring decisions
Conflicts of interest
Libel, slander, and defamation of character
Failure to supervise employees
Invasion of privacy
Copyright infringement, misrepresentation of ideas, and unauthorized use of logos
Coverage is available that defends against all of those allegations and more, including claims brought by:
Donors who feel that their contributions have not been used to further the expressed aim of the organization.
Board members who disagree with a majority decision on the use of funds.
Beneficiaries who feel they are entitled to more than they received.
State attorney generals who institute legal proceedings against the board for issues such as mismanagement of funds and antitrust violations.
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