Leaders make daily decisions that impact the success of their organization. As a leader, these Post members are expected to accept the same guidelines and duties that the heads of major corporations follow: the duties of diligence, loyalty and care.
Despite leaders having the best interests of the organization at heart, they can make mistakes and their choices can be questioned. Costly claims can ensue, especially if the leader’s decision forced a financial burden on the organization. These claims of mismanagement, or breach of fiduciary duties, can threaten your Post’s funds and the personal assets of your directors, officers and trustees.
Examples of Claims Against Leadership
Consider these real claim scenarios: Despite your non-profit status, your leadership can be sued for actual or alleged wrongful acts in managing the organization and without the right coverage, your organization and its leadership could be personally on the line.
Consider these real claim scenarios:
- Post leadership voted unanimously to expel a member after several incidents of disruptive behavior. The member commenced legal action against leadership, alleging they had acted in breach of the organization’s bylaws.
The insurer incurred approximately $15,000 in defense costs.
- A Post received a loan from another organization, which was inadvertently deposited into the organization’s general account by an officer and used to pay general expenses. The Post subsequently filed for bankruptcy and was unable to return the loan. A lawsuit was filed against the Post and allegations were made against the directors, including negligence for failing to properly supervise the officer and breach of trust.
The settlement amounted to $15,000 and the costs incurred to defend the claim were $5,000.
What Directors and Officers Insurance Covers
To protect against similar claims, many organizations turn to Directors and Officers (D&O) Liability insurance, which can defend against the following allegations:
- Members who feel that their contributions have not been used to further the aim of the organization.
- Members who disagree with a majority decision on the use of funds.
- Beneficiaries who feel they are entitled to more than they receive.
- State Attorney Generals who institute legal proceedings against the board for issues such as mismanagement of funds.
- Ex-club members who claim they were discriminated against and more.
To protect your Post, Lockton Affinity offers Directors and Officers insurance to protect your organization and officers from potential work-related allegations, such as errors and omissions and breach of duty. This coverage even extends to past, current and future board members.