Saturday, 12 November 2011

Non Profit Insurance

Allegations of inappropriate business practices are common as are Employment associated issues such as Wrongful Termination, favoritism and Harassment to name a few. The price of an award can be disastrous, much less the always current Defense costs.

Some non-profit organizations have believed that it is not essential to buy Directors and Officers Liability exposure since Board members are volunteers and therefore not subject to being sued. This could not be additional from the truth.

Most By-Laws include indemnification clauses that state the non-profit organization will cover the Officer or Director for costs associated to a claim. Such indemnification is done using insurance. Without exposure, the organization would have to utilize its own cash funds to cover the price of a claim. This could be overwhelming to the organization's financial health.

In addition, it would be very difficult to draw and keep qualified persons on your Board without this coverage.
While the regularity of true non-profit Directors and Officers Liability claims is small, there are considerable numbers of Employment-related claims as mentioned before.

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