The key distinction with directors and officers liability is that it is intended to cover wrongful acts that are “intentional,” as opposed to “negligent” events or acts covered under General Liability. These actions may be in error and wrong, but they are, nonetheless, “intentional” acts.
A good Directors and Officers policy should include broad coverage for all types of employment related actions, including wrongful termination, harassment, discrimination, failure to hire, etc. It should also pay defense costs as they are incurred, not on a reimbursement basis.
General Liability is the core coverage that all NIA member insureds carry. NIA does not write stand-alone Directors and Officers.
Enhanced Coverage of NONPROFITS OWN® Directors and Officers Coverage
Summaries of key features only. Actual policy language will differ.
- Deductible options available including $0
- Policy limit $1 million: aggregate limits to $2 million
- Umbrella limits up to $10 million available
- Flat rate D&O available for nonprofits with no employees
- Defense costs outside the policy limits
More Directors and Officers Liability details...
- Prior Acts Coverage available for an additional charge
- Broad definition of member-insured including the nonprofit organization as well as directors, trustees, officers, employees, volunteers, committee members, interns, students-in-training, and spouses
- Coverage extends to third-party harassment
- Broad Employment Practices Liability (EPLI) Coverage
- Fiduciary Liability Coverage included at full policy limit
- ERISA sublimit of $250,000 included with $500,000 available for additional charge
- Breach of Contract limit $250,000 for defense
- Wage and hour law violation limit $250,000 for defense
- Punitive damages covered in states where insurable
- FREE unlimited employment risk management consultations (for insureds with D&O Coverage and EPLI)
- Employee Handbook Builder – a highly subsidized subscription to the BLR Handbook Builder annual subscription cost is $99 ($300 savings)
- Individual member vs. individual member coverage included
Flat Rate D&O
NIA’s flat rate D&O product is for 501(c)(3) nonprofit organizations with no employees. Specifically designed for nonprofits with no employees, this low-cost product provides D&O protection for nonprofit board members and the organization, but excludes coverage for any employment-related actions.
The flat rate is $600 for limits of $1,000,000. New and renewal members with no employees are eligible. General Liability is the core coverage that all of NIA’s member insureds carry. NIA does not write stand-alone Directors and Officers.
From the Claim’s Files
Failure to Accommodate:
An employee with ongoing performance problems was eventually terminated, but alleged he was not given an accommodation due to stress in his personal life. Unfortunately, the employee’s personnel file was not well documented on the performance issues, and the nonprofit had not addressed the accommodation request. The employee was highly paid, and the matter was heavily litigated over a four-year period. Because of the potential for an unfavorable jury verdict and the significant exposure to statutory plaintiff attorney fees, the claim was eventually mediated to a settlement of $350,000 after $230,000 in defense legal expenses were incurred.
Four employees claimed they had been wrongfully terminated for complaining about unpaid wages. Legal discovery revealed that the unpaid wage claims had some merit and the terminations based on performance problems would be difficult to establish. While the four claims were eventually settled for $40,000, it took more than $35,000 in defense legal costs to move the litigation to the point where it could be resolved. Retaliation claims are currently the most significant employee practice liability exposure to employers, for both nonprofit and for-profit organizations.
Breach of Contract:
A nonprofit was sued by a builder for breach of a construction project contract, claiming unpaid contract damages. Often, breach of contract claims are not covered in D&O policies, but our forms contain a $250,000 defense cost only enhancement, so we were able to provide the nonprofit with an experienced defense attorney to provide that defense. While it took almost $25,000 in defense fees and costs to get the case into settlement posture, the nonprofit was able to obtain a very favorable compromise on the contract damage issues.
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