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DIRECTORS AND OFFICERS (D&O) LIABILITY COVERAGE FOR NONPROFITS
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 harrassment 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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