Many non-profit directors question whether they need directors & officers insurance. Directors may believe they cannot be sued directly, since a corporation is a legal entity, or they may think legal issues are unlikely since a non-profit does not have shareholders. In reality, though, non-profit directors can be held liable for various issues, from employment practices to mismanagement of funds, which makes having a strong Directors Corporate Liability policy essential.
Several factors may actually put non-profit directors at an even greater liability risk than for-profit directors. These include:
All of these factors can increase the likelihood of non-profit directors facing liability claims.
Insurance coverage is far from optional for non-profit directors. Directors should look for an insurance provider that offers several forms of D&O insurance, including Directors Corporate Liability policies designed for the directors of non-profits. This is the most effective way for non-profit directors to offset the surprising and significant liability risk they may face.