Directors and Officers Liability is a key coverage when sitting on a board. Being a board member can lead to some unique experiences. Before you decide to serve, consider some of these examples:
You can easily be accused of mishandling funds for example. Alternatively, you could be accused of favoring a specific third-party vendor because of a pre-existing relationship. You might even find yourself accidentally violating someone’s privacy by mistakenly reading something aloud at a meeting (of a personal nature) that was supposed to be kept private.
The most common misconceptions about incidents like these are that your homeowners or personal umbrella, or even the business’ General Liability itself will extend coverage. Your homeowners and personal umbrella are only written to protect you from personal liability exposures, as an individual.  Conversely, General Liability is written to protect the business from things like slip-and-fall accidents.
So how do we protect ourselves against incidents like the ones I just described? With Directors and Officers Liability.
Directors and Officers Liability (or D&O for short) is written to cover the members of a board as individuals, operating in their official capacity, as well as to cover the board as a whole while protecting the assets of the company, organization, or association. It protects against alleged mishandling of funds, as well as decisions that don’t quite turn out as planned, subjecting your organization to a large overrun cost that gets challenged by other members – or by the public.
While these policies are usually written going forward from an effective date (and only in effect while the policy is being paid) they can also be written to cover full prior acts (or can cover a specific period of time).
Remember that Directors and Officers Liability doesn’t just cover you as an individual member of the board, it covers all members and the organization itself. So, if you’re a new member of your board, it’s possible that your organization already has this coverage. There’s no time like now to ask to review that policy. What limits do you have? Are they high enough to protect both personal and company assets?  Also, what’s your retention limit – don’t wait until a claim occurs before finding out how much your organization is responsible for before coverage responds.   Is the cost of legal defense included within your policy limits? If it is, you might want to consider higher limits, as a lengthy lawsuit could deplete your limits via legal fees to the point where there isn’t enough left on the policy to pay a large settlement.
Depending on the size of your board and the amount of funds you handle, this coverage might cost less than you expected, so talk with the other members about getting on board with Directors and Officers coverage and give us a call (or send an email) so that we can review your situation and find a solution that works best.
