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Key Things You Need to Know About Directors and Officers (D&O) Insurance

Posted by Zinner & Co. Non-Profit Team on Apr 4, 2019 7:00:00 AM

If you’re on a Board of Directors, serve as an Officer or are on the executive team of a company or board of directors, there is a type of insurance you need to know about – Directors and Officers Insurance (known as D&O Insurance.)

We usually advise our clients to only agree to serve on a board if they will be covered by the company’s D&O policy, or purchase their own policy.director officers insurance

D&O Insurance provides protection for officers, board members or executives of corporations and not-for-profit organizations. D&O insurance can aid in covering the costs related to defending certain types of lawsuits and can also help protect the organization’s name, reputation and resources.

What Does it Typically Cover?

D&O insurance covers broad areas of liability including claims for financial loss resulting from mismanagement.

  • Mismanagement of funds or investments
  • Self-dealing
  • Failure to fulfill fiduciary duties

What’s NOT Typically Covered?

  • Bodily injury claims
  • Intentionally dishonest acts
  • Matters covered by other standard policies
  • Employment practice liability (this can be added to D&O Liability policies as an Employment Practices Liability Practices Insurance rider – also known as EPLI.)
  • Unfair competition practices
  • Reporting errors
  • Failures to comply with legal or regulatory governances
  • Public and private nuisance claims

Why do I need D&O Liability Insurance?

Without D&O liability coverage, the personal assets of the organization’s Board, executive staff and officers may be at risk if liability claims are made against the organization. Just defending a suit can cause profound financial hardship to these individuals.

If you’re going to serve on a Board of Directors or as an executive for a company or non-profit entity, you should ask if they carry D&O insurance and insist on it being added.

Have question about how you can protect your organization’s board and officers? Contact your Zinner accounting professional.

Internal Controls Newsletter

Topics: non-profits, not-for-profit, Insurance


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