The Case for D & O Insurance


Insurance is expensive and it's one of the few things that businesses buy and hope they don’t need.  This is especially true for non-profit corporations and charities.  Dollars can sometimes be hard to come by.  Having them go out the door for insurance just doesn’t seem right.

So, when the chance comes to cut expenses, many non-profit companies will cut insurance coverages to a bare minimum.

Directors' and Officers' Liability Insurance (D & O) sounds like an exotic insurance coverage for most non-profits and many don’t buy it.  But D & O might deserve a second look in your non-profit, whether it is a charity, or a trade association, or even a homeowners’ association. 

For those unaware, D & O is personal liability insurance that provides general coverage to a firm's directors and senior executives. Typically paid by the firm, it reimburses (in part or in full) the costs resulting from law suits and judgments arising out of poor management decisions, employee dismissals, shareholder grievances and other such acts committed in good faith.

Recent statistics from the Insurance Information Institute and Towers Perrin show that 15.5% of the claims covered by a D & O policy were made against non-profit companies, so it’s not just the “big boys” that need the coverage.  Non-profit organizations looking for members to serve on their board may also be unwilling to serve without D & O insurance. 

Many insurance companies offering D&O insurance will combine it with coverage for employment-related claims, making it a more cost-effective than it might seem at first glance. 

mACCOUNTING can review your company’s financial position with your insurance professional or risk manager and help you select the right coverage for your organization.