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The Game Has Changed for D&O Coverage

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Bargains available but many still go without directors and officers coverage

Going through some old files a few years ago I came across a letter from a London broker on onion skin paper with a date of 1954.

“Dear Sir: Thank you for your recent enquiry regarding directors insurance. We feel we might be able to place such coverage for XYZ Bank, however, the premium might be a bit steep at around $35 per director and would provide a defense only, no indemnity.”

Although knowing nothing of the risk, I was struck and amused by how far directors and officers liability insurance has come since the middle of the last century. It is amazing to think of the coverage enhancements that have occurred as result of the evolving needs of the insuring public. At the same time, coverage enhancements have provided much better values for the insuring public.

Still, the perception among many people involved with non-profit groups and even some retail agents is that directors and officers liability insurance is too expensive. I think it is a perception held over from the past when directors and officers liability insurance was a fairly high priced item in a group’s budget due to the lack of a broader spread of risk.

Not so long ago, I spoke with a woman who sat on the board of a local arts group.

“We really do need directors and officers coverage,” the woman said. “But it is so expensive.” When I offered pricing between $800 and $900, the woman was floored.

The need for liability insurance for directors, officers, employees and even volunteers has never been greater given society’s mentality about settling things with attorneys.

Unfortunately, lawsuits against non-profit workers and volunteers happen too often. Some might ask, “Who would sue a volunteer?”

Consider all of the unhappy donors, competing groups who feel their work is threatened, beneficiaries who feel discriminated against and even volunteers who have not been treated fairly. The list of parties who might sue could go on forever.

More Non-Profits

The number of non-profit groups has grown by more than 60 percent in 10 years, not including organizations that are not 501(c) 3’s. For producers, such coverage can lead into much larger accounts such as churches, local clinics and condominium associations. It is amazing how many non-profits remain bare of directors and officers liability insurance today.

Rule to Remember

Tell your clients not to agree to sit on a board of any kind until they have confirmed liability insurance protection has been purchased and reviewed the coverage.

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