Directors and Officers (D&O) Liability insurance is a critical form of liability protection specifically designed for individuals making key decisions in your church or non-profit organization. This coverage plays a pivotal role in safeguarding personal assets of your leadership team when legal challenges arise.
What Does D&O Cover?
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Pays legal costs to defend your ministry and its leaders.
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Covers financial damage claims caused by poor decisions or negligence of your ministry’s governing board or leadership. This would typically not include decisions that are classed as criminal or malicious acts.
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Protects pastors, administrators, elders, trustees, deacons, board members, directors and officers, and their spouses.
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Provides protection for situations not typically covered by volunteer immunity laws or general liability insurance coverage.
What Are Some Possible Claims Examples?
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Allegations of financial mismanagement – improper handling of church donations, not following budgeting guidelines, or making large expenditures without proper approval.
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Misappropriation of funds – like misusing donor funds or where leaders are accused of not acting in the best interest of the church or non-profit organization.
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Misrepresentation of finances – showing financial records that do not reflect actual results.
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Failure to address specific liability exposures – Possible examples might include (a) failure by church leadership to adequately address allegations of sexual abuse within the congregation, (b) failing to implement cybersecurity measures, including insurance, (c) failing to address reasonable premises safety measures – all could be considered negligent management.
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Exceeding the authority granted by your organization’s charter or bylaws.
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Making decisions that could jeopardize a church’s tax-exempt status.
How Much Does Directors & Officers Coverage Cost?
This can vary greatly among carriers but it’s often very affordable. For $1,000,000 coverage limits, costs could be $250 annually or less.
How Are Defense Costs Handled?
Often defense costs are “outside the limit” meaning that when defending a claim under an insurance policy, the costs associated with legal defense (like attorney fees) are paid in addition to your policy’s coverage limits. If it’s “defense inside the limit” coverage, then any defense costs are deducted directly from the policy’s liability limit, reducing the amount available to pay damages if a claim is successful. You want to be aware of which applies to your specific coverage.
Employment Practices Liability
Many D&O policies offer an Add-On coverage against claims related to employment practices, such as wrongful termination, harassment, or discrimination. This is often referred to as a Management Liability package.
If you have any questions about this, please reach out to us or request a quote. Having the right protection in place will allow a nonprofit to continue its mission today and in the future. After all, it’s not about insurance, it’s about protecting your ministry.
