Once in a while, association board members may be accused of fraud, financial mismanagement, or negligence in carrying out their duties. Directors and officers (D&O) insurance protects volunteer leaders against such allegations, says Carolynn Smith, management liability underwriter at AonAffinity Nonprofits.
Which associations need D&O?
I would say all associations need it. If you have a board of directors, they are personally exposed. This really protects their personal assets. If they are sued, this policy is going to respond. One of the benefits of having the policy is the directors have the reassurance they’re going to be covered. Some associations may have a new board member who says, “I’m not going to join [your board] unless you have it.”
How often do D&O policies need review?
Associations should do a thorough review of their insurance at least every couple of years, when something on a renewal feels “off”—like an increase in pricing when you’ve had no claims—or when new leadership comes into the organization. Keeping a pulse on your D&O insurance can keep the association’s coverage up to date with marketplace trends and pricing.
Are there any aspects of D&O insurance that people overlook?
Antitrust coverage. Associations set standards and certifications, which increases their exposure to claims that they violated antitrust law. Associations are trying to promote a specific industry, but if they’re not as open as they can be, they could be subject to accusations that they are trying to create monopolies.