I am amazed how many organizations do not have directors and officers liability insurance in place. Both for profit and non profit. There are many things that can be done to prevent claims in this area and I will cover that in future posts. But dollar for dollar this is a very good way to transfer this risk to an insurance company. Below are 9 reasons why you should buy D&O insurance.
- Non Profit Director and Officer boards can be sued by donors, employees (prospective, current or former), the general public, third parties, clients, and/or government agencies.
- The personal assets of the individual board members are at stake! Directors & Officers (D&O) insurance can help protect a board member’s home, investments, or other personal assets.
- The bylaws of the Non Profit may indemnify the Board but does not guarantee the entity has the resources to fund the cost of a claim. The financial backing of a Directors & Officers policy will ensure financial solvency to the organization.
- Directors and Officers lawsuits can have a devastating impact on the operating budget of the Non Profit organization, and can even put the entity out of business.
- The average cost of a Directors and Officers policy is often under $1,000 with a zero retention yet the average cost of a claim is over $100,000.
- Directors and Officers claims are not covered under General Liability or any other policy form.
- Corporate scandals have heightened regulation of accounting practices. The Sarbanes-Oxley Act has also impacted Non Profits.
- The Internal Revenue Service has increased their scrutiny of Non Profits. Over 400 private foundations have been audited in the past year.
- Directors of Non Profit boards have the same fiduciary duties as corporate board members. Non Profit Directors and Officers lawsuits may involve a variety of issues related to the daily operations of the board including:
- Duty of Care – requires Directors and Officers to act prudently and reasonably in regard to the management of the organization’s affairs
- Duty of Loyalty – prohibits Directors and Officers from using their position in the organization to further their own personal interest
- Duty of Obedience – requires Directors and Officers to ensure that the organization is run in accordance with it’s charter and bylaws, and that the organization complies with applicable laws
I know that special events can be the life blood of many non profit organizations. Whether it is a spring gala, golf outing or sporting event, they must go on and hopefully without an incident.
Outlined below are 6 risk management techniques to think about when planning your next event.
- Focus on safety – Have a plan and a safety committee. Something as small as a first aid kit can be helpful in the event of an injury.
- Sharing Risk. Transfer as much as you can and take on as little as you must. Working with an event management organization can help with this or contact your insurance broker for help.
- Contracts and Insurance – All contracts should be reviewed and not signed until you negotiate the best term and conditions. Getting legal advice here is imperative. Also make sure you require certificates of insurance from any vendors or suppliers naming your organization as an additional insured. Check with your insurance broker for help here as well.
- Emergency Planning – Things can go wrong. Be prepared. Proper pre planning is so important. Work with the facility manager where the event is being held and see if they have a plan in place. For outside events it is not a bad idea to contact the local police and/or volunteer ambulance corp. Many times they would be more then happy to have their ambulance sit on site.
- Cancellation contingencies – Bad weather, natural disasters or a fire at the event location can cause a cancellation. Many times the event needs to go on to raise money, so cancellation will have a financial impact. Have a plan to deal with that. Schedule a rain date with ahead of time or look into event cancellation insurance.
- Participant waivers and releases. If the even has any hazardous elements such as go cart racing, rock climbing or outdoor sports, make sure you get releases from all the participants.
We moved our corporate office last week in another northeast snow storm. On Friday morning, the day of the move, we were welcomed by 12 inches of fresh heavy snow. Fortunately for us we were able to make it happen, but certainly we were a bit anxious.
It made me think of the risks involved with the weight of snow on commercial buildings and well as making sure all snow is removed from walkways where employees and the public have access. There was a recent news story about a hockey rink that had snow and ice on the roof and it collapsed. http://www.wicu12.com/news/index.vnss?newsid=9019 Steps need to be taken to deal with this and prevent this kind of tragedy.
Ice Dams are another issue for residential buildings that you may own.
I have attached a couple of documents to help you with both of these issues.
Ice and Snow Removal