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Directors and Officers Liability
Not-For-Profit Organizations
What are Insured Events under a typical policy?
Not-For-Profit Organization Liability policies are designed to protect the organizations and personal assets in the event of allegations of wrongdoing against the individual or the organization. The typical policy will include three insuring agreements.
Coverage A – coverage for the individual insured in the event that no indemnification is provided by the Organization.
Indemnification may not be made by the entity in the following circumstances:
- The organization can not pay due to financial insolvency or bankruptcy
- The organization refuses to pay due to ambiguities in the indemnification provisions
- The organization is forbidden to pay due to public policy
Coverage B – reimbursement coverage for the entity in the event that indemnification has been provided to an individual insured
Coverage C – coverage for claims first made against the Organization.
Most Not-For-Profit Liability policies today have been expanded to include, or at least an option to purchase, coverage for Employment Practice Wrongful acts. Policies may provide separate or shared limits for Directors and Officers liability and Employment Practices Liability.
Who is an Insured?
Individual Insured - past, present or future duly elected or appointed directors, officers, trustee, trustee emeritus, executive director, department head, committee member(of a duly constituted committee of the organization), staff or faculty member, employee or volunteer.
The Organization – Named Insured and any qualifying Subsidiary. Each carrier will have a definition of what qualifies as a subsidiary. This can be a primary concern if the Organization has a fro profit subsidiary. Most carriers will exclude this type of subsidiary.
What is a Claim?
A claim is generally defined as a written demand for monetary relief. Also, civil, criminal, administrative, regulatory proceedings commenced by the service of a complaint, return of an indictment or filing of a notice of charges fall under most definitions of Claim.
What is a Wrongful Act?
With respect to Individual Insured’s, any breach of duty, neglect, error, misstatement, misleading statement, omission or act by such Insured in their respective duties.
With respect to the Organization, any breach of duty, neglect, error, misstatement, misleading statement, omission or act by or on behalf of the Organization.
What is an Employment Practices Wrongful Act?
If employment practices liability coverage is included or elected on a Not-For-Profit Organization Liability policy, one should consider the breadth of the definition of employment practices violation or wrongful act when reviewing a form. Standard definitions of EPLI wrongful act will include:
- wrongful dismissal, discharge or termination (either actual or constructive) of employment, including breach of an implied contract;
- harassment (including sexual harassment whether “quid pro quo”, hostile work environment or otherwise);
- discrimination, (including but not limited to discrimination based upon age, gender, race, color, national origin, religion, sexual orientation or preference, pregnancy, or disability);
- Retaliation (including lockouts);
- employment-related misrepresentation(s) to an Employee or applicant for employment with the Company;
- employment-related libel, slander, humiliation, defamation, invasion of privacy;
- wrongful failure to employ or promote;
- wrongful deprivation of career opportunity, wrongful demotion or negligent employee evaluation, including the giving of negative or defamatory statements in connection with an employee reference;
- wrongful discipline;
- failure to grant tenure;
- failure to provide or enforce adequate or consistent corporate policies and procedure relating to any Employment Practices Violation;
- violation of an individual’s civil rights relating to any of the above,
Some policies offer third party employment practices liability which is coverage that responds in the event of a third party claim (ie. Claim of a vendor or customer) that sexual harassment or discrimination has been perpetrated against them while dealing with the named insured. Often time’s carriers will offer full third party coverage inclusive of both elements or they may narrow the coverage to respond to only third party claims of discrimination.
What is considered a Loss?
- Damages (including back pay and front pay)
- Punitive damages (may need to be added by endorsement)
- Judgments
- Settlements
- Pre- and post-judgment interest
- Defense Costs – Some carriers offer this in addition to the limits of liability
What may be excluded form Loss?
- any amount for which the Insureds are not financially liable or which are without legal recourse to the Insureds
- employment-related benefits, stock options, perquisites, deferred compensation
- any liability or costs incurred by any Insured to modify any building ( ADA)
- costs incurred in connection with any educational, sensitivity or other corporate program, policy or seminar relating to an Employment Practices Claim
- matters which may be deemed uninsurable under by law
Contact Us Today For A Blank Application And Specimen Policy So We Can Begin The Application Process On Your Behalf.
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