Eric Johnson of Aon Affinity, a provider of insurance solutions for nonprofits, outlines the latest developments in directors and officers insurance.
What does nonprofit D&O insurance cover? Generally speaking, this coverage protects the board of directors against allegations of mismanagement. However, not all D&O policies are created equal—coverage will differ greatly among insurance carriers. For example, the definition of “insured” may be limited to the board of directors, or it may be expanded to specifically include the association’s general counsel.
Are there risks that are unique to association boards? Associations are a unique class of nonprofits. It’s not unusual for associations to be involved in certifying professionals and setting standards for an entire industry. Additionally, the very nature of an association’s operations could lead to allegations of antitrust violations. Forgoing coverage for these association-specific exposures could unnecessarily jeopardize the organization’s financial health.
What trends do you see in the nonprofit D&O insurance marketplace? Most insurance carriers have broadened the scope of coverage on their nonprofit D&O policies. In some cases, coverage has been extended to include a modicum of cyber liability, as well as expansions on the more traditional D&O coverage offerings. Closely reviewing your policy has become more important than ever.
Has the broadening of D&O coverage led to higher premiums? We’re actually expecting premiums to remain relatively flat through 2017, even with the expansion in coverage. It’s important to keep in mind that D&O insurance is not a commodity. The onus is on the association to do their due diligence in comparing coverage forms and not just comparing premiums.