First of all, what IS DnO insurance? It is an insurance policy for the Directors and Officers of an organization. This insurance policy protects the Directors and Officers, whomever they may be, from liability in the case of a lawsuit. There are several reasons why an organization, such as a non-profit society or association, should have a DnO insurance policy and we will outline a few of those reasons below:
1) The most concerning reason to carry DnO coverage is that the leaders of an organization, including the directors, officers, board members, committee members, managers, employees and even volunteers, can be held liable in the case of a lawsuit for errors and/or omissions in the management of the organization
2) Even though the United States of America has a Volunteer Protection Act in place, it does not cover all of the circumstances surrounding a lawsuit, including the cost of a defense, harm caused by gross negligence or reckless misconduct.
3) Lawsuits for issues such as breaches of fiduciary duty, failure to fulfill the mission of the organization, misuse of funds, or improper conduct can be brought against the directors and officers and can lead to financial hardship, as well as loss of reputation for the organization.
4) 63% of non-profit organizations report a claim in their DnO coverage in the previous 10 years, whereas only 27% of private companies have had a DnO claim. This shows that non-profit organizations are at greater risk of lawsuit than those in the private sector.
5) Many associations are small non-profit societies, who do not have the excess funds to fight a legal battle and, in many cases, a lawsuit can mean the dissolution of an organization who no longer has the means to continue operations.
Society Offices AMC recommends Directors and Officers insurance coverage for all of our clients. For more information on the specific insurance companies and policies that we recommend, please contact us.