From community associations and sports clubs to environmental groups and religious congregations, British Columbia is home to over 25,000 non-profit organizations. They deliver $1.6 billion in programs, services, and support and play an indispensable role in strengthening our communities, environment, and economy.
Most non-profit organizations carry out big change on a small budget, which is why it’s so important to fully protect a non-profit and its leaders. A single claim can bring cash flow to a halt, disrupt operations, undermine donor confidence, and even put the personal assets of directors or board members at risk.
The good news is that these risks can be offset by the right liability insurance. Here are a few key things every non-profit needs to know about Directors & Officers (D&O) coverage:
Even do-good organizations can get hit with a D&O lawsuit
Non-profit organizations are just as vulnerable to lawsuits as private companies. The only difference is that non-profits rarely have the financial resources to deal with costly claims.
Directors and Officers coverage extends well beyond standard liability coverage to provide financial protection for a non-profit and its leaders. This type of policy protects against financial losses resulting from an error, omission, or negligent act committed by a board member and covers those crippling legal defense costs.
The risks are real
The liabilities associated with sitting on the board of a non-profit are diverse and can arise from everyday situations. If a board member invests the non-profit’s assets unwisely and loses everything, they’ll be hit with third-party claims. Creditors will attempt to recapture their losses by suing not only the non-profit, but also its directors and officers.
Board members may also be liable for an offence under a statute, such as improperly maintaining records. They could also be sued for mismanagement, wrongful dismissal, or employee discrimination.
These are just a few of the many liability risks non-profits face. It’s also important to note that the liabilities aren’t only attributable to current board members. Employees, customers, members, donors and other claimants can take legal action against former directors and officers, and non-profits need retroactive protection against these past wrongful acts.
Directors and officers may be exposed to personal liability
Members of a non-profit can be held personally responsible for its acts or omissions. That means a claim will not only hurt the non-profit financially, but can also threaten the personal finances of its leaders.
D&O coverage protects the assets of individual directors and officers from the allegations of a covered wrongful act. It provides much-needed peace of mind to current members, and is also an attractive incentive for future members.
You don’t have to be in the wrong to be exposed
Even if the non-profit has an outstanding director and is impeccably run, it still has a liability exposure. Lawsuits can happen at any time and even a frivolous claim can completely destroy a non-profit organization. Warranted or not, the defense costs can be massive.
Not all insurance coverage is created equal
Non-profits are diverse in terms of both size and mission and have a wide range of exposures. Our brokers will design an insurance package tailored to your organization’s unique risks, with competitive terms that fit within your tight budget. And with quick turnaround times and exceptional communication along the way, we’ll help ensure the long-term sustainability and success of your non-profit organization.