Not-for-Profit Director & Officers Liability

Directors, Officers and Trustees of not for profit organizations can be targets of legal action due to the decisions they make and also simply because of their status.

Not only do public and private company Directors and Officers have this exposure, but directors, officers, trustees and governors of not-for-profit organizations also face personal liability for their actions
Directors and Officers of not-for-profits owe the same common law duties of care, loyalty, and obedience to the organization that for-profit D’s and O’s owe to their respective companies
Not-for-profit organizations can be sued not only by employees and volunteers, but also by members, customers, competitors, creditors, suppliers, donors, intended beneficiaries, and state and federal regulators.
According to a Tillinghast-Towers Perrin D&O Survey, not-for-profit organizations have a claims frequency that is four times higher than for-profit companies. 1
Most state statutes provide only minimal protection for individuals who voluntarily serve on not-for-profit boards. In addition, there is no immunity for the not-for-profit entity itself.
The costs to defend claims could cause a financial burden by diverting money away from the intended mission of the organization. And, in some cases, without the proper D&O insurance, individual Directors and Officers could be required to pay for defense costs out of their own personal assets.

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Directors and Officers Liability Coverage can help protect the personal assets of the not-for-profit’s directors and officers and help preserve the assets of the organization.

PRF through CNA provides:

Side A Coverage for directors and officers for non-indemnifiable loss resulting from a claim for a wrongful act.
Side B Coverage reimburses the entity for indemnified loss resulting from a claim against directors and officers for a wrongful act.
Side C Coverage provides coverage to the entity

Common D&O allegations include:

Failure to perform appropriate due diligence when making business decisions
Breach of fiduciary duties of care, loyalty and obedience
Mismanagement of the organization or its assets to the detriment of the intended beneficiaries
Misappropriation of funds
Wrongful acts in violation of the charter or bylaws
Misrepresentations or errors regarding the financial health of the organization
Conflicts of interest when considering personal motives vs. interests of the organization
Restraint of trade
Complaints from members for mismanagement or violation of corporate bylaws
Defamation, libel and slander

Not for Profit Liability Highlights

PRF through CNA can provide a package policy that provides flexibility and key benefits.

The following coverages can be combined on one policy form:

Management Liability
- Not for Profit Directors and Officers Liability
- Employment Practices Liability
- Fiduciary Liability
Professional Liability
- Miscellaneous Professional Liability
- Media Liability
- Technology & Telecommunications Liability
- Network Security and Privacy Liability
Crime (Employee Theft)

Policy limits can be shared among coverages or provided on a scheduled limit basis

PRF through CNA provides a:

Duty to Defend policy
Claims made form with a 90 day post-policy reporting window
Mediation Provision, which could reduce the policy retention by 50% or $10,000, whichever is less
Worldwide Coverage – claims can be brought anywhere in the world
Spousal Coverage including Domestic Partner
No threshold for coverage for newly acquired/created entities or plans
Pre-Claim Assistance for investigation costs related to reported circumstances
Punitive Damages coverage (most favorable venue)
Predetermined Extended Reporting Period percentages for 1, 2 & 3 years
Supplemental Payments: $250 per day per person up to $2,500 per claim per policy year for attending trials, hearings, arbitrations, or mediation at the Insurer’s request
Consent to Settle provision set at 80/20
Policy is non-rescindable with respect to insured persons for non-indemnified loss
Capped defense outside the limit of liability
$0 D&O retention for indemnified loss
A Multi-Coverage Discount is available when more than one coverage is purchased within a coverage group (e.g. D&O and EPL)
Side A Coverage for directors and officers for non-indemnifiable loss resulting from a claim for a wrongful act.
Side B Coverage reimburses the entity for indemnified loss resulting from a claim against directors and officers for a wrongful act.
Side C Coverage provides coverage to the entity.

Coverage highlights specific to individual coverages:

Not-for-Profit Directors & Officers

Additional $1 million Limit for Non-Indemnified Loss (Side A)
Order of payments provision
Waiver of retention for Insured Persons for a finding of No Liability
Coverage for Outside Entity Executive extended to non-profits beyond 501c3 entities to include 501c(3)(4)(6)(7) and (10)
Carve back to Insured v. Insured exclusion for whistleblower activity
Final Adjudication” language in the fraud and illegal profit exclusions
HIPAA fines and penalties sublimit of $100,000
Definition of Insured Person includes a trustee, governor, and “Manager” of an LLC
Severability of the personal conduct exclusions
Side A carve back to the Pollutants exclusion

Employment Practices

Risk Mitigation Credit which can reduce the retention by 50% up to $10,000, whichever is less
Definition of claim includes non-monetary relief
Coverage for wrongful demotion; negligent hiring, supervision and training
Coverage for employment-related libel, slander or humiliation
Definition of Employee includes volunteers and independent contractors
Retaliation carve back to the ERISA, COBRA, Workers’ Compensation, OSHA, WARN, NLRA exclusion
No personal conduct exclusions for fraud or illegal profit
Defense costs for breach of employment contract

Fiduciary Liability

Sublimit of $150,000 for fines and penalties imposed by the IRS’ Voluntary Compliance Program
Coverage for Plans under development
Waiver of retention for Insured Persons for a finding of No Liability
HIPAA fines and penalties sublimit of $100,000
Benefits Due exclusion amended to provide investment loss carve back
Coverage for failure to provide COBRA notices
“Final Adjudication” language in the fraud and illegal profit exclusions
Severability of the personal conduct exclusions

Qualifying Risks may also add coverage for Network Security & Privacy Injury Liability to an Epack Extra Management Liability policy.

Coverage Highlights of Network Security & Privacy Injury Liability:

Network Security Liability

Suspension or interruption of the insured’s network
Destruction or alteration of any third party’s information residing on the insured’s network
The inability of an authorized user to gain access to the insured’s network

Basic Privacy Injury

Failure to comply with any privacy law as well as the Insured’s own privacy policy
Claims from customers, employees or other 3rd parties alleging the violation of privacy rights

Since Epack Extra is a package policy, in addition to the above coverages, our Not for Profit insureds may also have access to Media, Crime and Miscellaneous Professional Liability coverage.