Director’s and Officer’s Liability (D&O)

What is it?  D&O insurance indemnifies an organization (sometimes referred to as the entity) and its officers for allegations for wrongful acts resulting from the management, governance and employment practices of an organization. Some types of claims that would fall under this coverage would be operating outside of the organization bylaws, misappropriated funds and conflict of interest allegations. In addition, most nonprofit D&O polices also provide Employment Practices Liability (EPLI) coverage that indemnifies the insured(s) against such claims as unfair hiring/firing practices, wrongful termination,  harassment and discrimination.

Why is it important?  Directors, officers and employees, including staff, volunteers and committee members working for a nonprofit, are vulnerable to claims.  Without insurance, there would not be any protection from defense costs and years of disposing of such claims and lawsuits even if the claim is groundless.  It is known that most of the cost of a D&O claims are associated with legal defense costs.

What are the benefits?  Many nonprofits do not have discretionary funds to spare for the defense of a claim and possibly years of litigation.  D&O insurance would benefit the nonprofit as a source of funding in defense of a claim filed against it, its directors, officers and employees including staff, volunteers and committee members. Some insurers, such as the endorsed provider of the New York Council of Nonprofits D&O program, offers defense costs outside the limit of liability, meaning legal costs incurred by the insurer would not affect the limit of your policy.

Employment Practices Liability

What is it?  Employment Practices Liability Insurance (EPLI) covers an insured person or organization against allegations in the course of employment. Wrongful termination, unfair hiring/firing practices, hostile work environment are some examples of claims that fall under the scope of this coverage. This insurance can be written as a stand-alone policy or included in the Directors & Officers Liability policy to provide a more comprehensive and affordable policy.