Directors and Officers Coverage (D&O)
If you are currently sitting on a board of directors (BOD) of a not-for profit (NFP) organization, a condominium or homeowners association board, corporate board, or are considering doing so, first confirm that there is a D & O policy in place. Next, ask for a copy of the D&O policy for your review. Remember: ALL D&O POLICIES ARE NOT CREATED EQUALLY!
As a member of a NFP board, you are volunteering your time, usually with no compensation. Most people are unaware that in doing so, they are subject to lawsuits brought against them as individual board members or as a member of the board as a whole. Without the proper D&O coverage, there can be substantial personal financial hardships if a legal judgment is made against either you or the board, not to mention possible future costs passed on to the association members should assessments be necessary as a result of such a judgment.
Some D&O policies, especially those provided to Condominium and Homeowner Associations, are basic low cost policies. Such policies are sometimes very limited in the scope of protection that they provide. Since many BOD’s are overly conscious of their budgets for this area, they often opt for the lowest priced D&O policy, not really knowing what it covers but more importantly, what IT DOES NOT COVER! To us as insurance professionals who work in this area, we ask this question: “ Why is the proper protection of the board of directors and its members not the foremost priority of the members who have volunteered?” Remember, you are the ones in control of the insurance purchase…protect yourselves!
As board members you have a fiduciary responsibility to the organization that you represent. However, that does not mean that you need to buy the lowest priced D&O policy. In many instances such thinking can end up costing an association much more than the cost of buying a superior coverage policy. To upgrade from a basic policy to one that actually provides the coverage that you need is usually less than a few hours of attorney fees…a cost you could incur if your policy is inadequate.
If you have questions or would like us to compare your current D&O policy with others available, please contact us at your convenience. In addition, if you need information on Umbrella policies, Surety Bonds for maintenance funds and reserves, or direction on establishing or reviewing a reserve fund, we would be glad to assist you.