Strong, Responsible Organizations Protect Their Leaders With D&O Coverage
BY: Client Advisor Megan Muller, CIC
When you volunteer on a board, you’re donating your time, experience, and energy to an organization you care about, and you’re focused on how you can contribute to the group. But before you jump ‘on board,’ there are important liability considerations—and protections that should be in place. As an insurance advisor to several Community Association Boards of Directors and as an active member on the board of the Lower Shore Clinic, I have a unique understanding of the responsibilities and risks that come with the job.
Today’s dynamic social, political, and economic environment creates a perfect cocktail for litigious activity. What would happen if well-meaning board members were accused of mismanagement?
Here are three reasons why you need Directors and Officers (D&O) Liability as a part of your risk management strategy.
MANAGING AMID COVID-19
As organizations were forced to make operational changes on the fly, this increased their exposure to accusations that situations were mismanaged. Some businesses faced claims that they “failed to respond” appropriately.
SOCIAL AND ECONOMIC PRESSURES
Directors and officers make tough decisions during challenging times. Especially during the last year, with many groups experiencing economic uncertainty or feeling pressure from cultural movements, there has been an increased risk of stakeholders alleging financial mismanagement or failure to promote equality and inclusion.
MISINTERPRETING BYLAWS
In my experience serving on boards, the most common type of claim is when directors and officers do not follow the bylaws or misinterpret them. The oversight can be minor like the number of parking spaces a unit is allotted or more heated claims like the validity of a board member who’s up for election.
COVER YOURSELF: D&O AS AN ESSENTIAL POLICY
A Directors and Officers policy is different from general liability insurance because it provides specific coverage for a “wrongful act” including actual or alleged errors, omissions, misleading statements, neglect, or breach of duty. General liability is limited to claims related to property damage and bodily injury.
Any size business or organization can face accusations that impact the company, its officers, and the board. D&O insurance provides the following benefits:
- Legal cost reimbursement to defray potential legal fees
- An ability to attract board members and talent because it shows the business is invested in protecting its people
- Reassurance that an organization supports its leadership
THE BOTTOM LINE
Organizations that protect themselves and their leaders with a strong D&O policy can mitigate excessive legal expenses while sending a message to directors and officers that they are valuable and deserve protection. If a board member oversteps decision-making rules or bylaws, there could be exposure. Serving on a board with a solid D&O policy gives you the security of knowing your personal assets are protected from decisions the board makes. Be Sure you’re protected. Contact us today.
