Commercial Insurance

Serving on a Board of Directors is one way people choose to give back to their community. Whether it’s for a charity, religious organization, or children’s sports program, it’s a great way to make an impact on an organization and its members.

However, while directors, officers, and other leaders are focused on furthering an organization’s mission, their responsibilities could put them at risk.

What Is At Risk For Directors & Officers?

Their personal assets. Being a board member is a serious commitment that could potentially come with consequences. Unfortunately, we live in an increasingly litigious world, and no type of organization is immune to a lawsuit. Believe it or not, people sue corporations, foundations, non-profits, community recreational leagues, and even churches.

The personal assets of board members should be protected by Directors & Officers (D&O) liability insurance. This type of insurance protects board members from personal liability if a customer, investor, employee, competitor, or other stakeholder brings a lawsuit alleging liability or harm. D&O insurance covers lawyer costs, settlements, judgments, and additional liability costs related to a claim.

To understand the importance of D&O liability insurance, let’s take a look at Homeowners Associations (HOA). The HOA is operated by a board of directors typically made up of a small group of volunteer homeowners. The board has responsibilities including setting an annual budget, collecting dues and fees, maintaining common areas, adopting and enforcing rules and regulations. An HOA cannot please everyone all of the time, and sometimes disagreements turn into lawsuits that also name board members. If the HOA does not obtain D&O insurance, the board member can pay legal costs, expenses, and damages.

Board members are also liable for personal injuries on the property and association debts. What if a homeowner trips over an area of uneven and cracked cement that surrounds the common pool facilities and breaks his leg? The homeowner, your neighbor, files a claim against the HOA and its members, claiming his injuries were due to their failure to maintain the swimming pool deck. Are the individual board members liable?

Before saying yes to serving on any board of directors, make sure the organization has Directors & Officers Liability Insurance. Also, verify the amount of protection you have from personal liability.

It is a misnomer to believe that only large conglomerates need D&O insurance. Directors and officers of any sized organization have exposure to personal liability. Boards that fail to protect their organization with a D&O insurance policy may find that the cost of just one claim is far higher than the cost of the insurance premium. Contact the insurance experts at Charles Leach to ensure your organization and volunteers are appropriately protected from personal liability. If your organization doesn’t offer D&O insurance, we can help you obtain a policy for yourself. We can be reached at 814-275-3224.