Non-profit directors and officers (D&O) liability

It’s common for affluent individuals to take on board positions for nonprofit organizations as a way of offering their leadership skills and connections to serve their local communities. These organizations and their directors and officers can be exposed to lawsuits for mismanagement of funds, negligent acts, errors and omissions, breach of duty, misleading statements, or wrongful employment acts such as discrimination, retaliation, failure to employ or promote, or wrongful demotion.

According to the 2021 Bank of America Study of Philanthropy: Charitable Giving by Affluent Households,¹ 27% of survey participants served on a nonprofit board. The Nonprofit Risk Management Center² reports that 85% of all nonprofit insurance claims filed under D&O liability policies are employment-related. Even if the allegations against you are groundless, you will incur costs to hire an attorney, which can add up very quickly when defending a claim. Adding the not-for-profit directors and officers liability coverage to your Nationwide Private Client personal excess liability policy will allow you to focus more time on helping the nonprofit and less time worrying about a claim.

How you may be at risk

As a hypothetical example, let's say you sit on a nonprofit board and cause an actual or alleged negligent act, error or omission, misleading statement or breach of duty, resulting in a lawsuit against you.

A wrongful act could come from:

• Acts such as employment-related discrimination, slander or defamation, wrongful failure to employ or promote, or wrongful demotion
• Conflict of interest, breach of contract or fraudulent financial statements
• Mismanagement of funds, such as assets being sold for unreasonably low prices or wasting assets
• Errors in judgment, such as dissemination of false information, misleading statements or improper guarantees
• Negligence such as breach of duty, failure to review documents before signing, or failure to detect or stop embezzlement

Claims could be filed against you by parties outside of the organization, including donors or beneficiaries, organization members or employees, other directors or officers of the organization, or government officials.

How Nationwide Private Client responds

If you serve as a director or officer of a qualifying nonprofit organization, Nationwide Private Client offers our optional not-for-profit directors and officers liability coverage with limits up to $1 million, which can be added to your personal excess liability policy.³ This coverage includes costs for defense up to the limit.

Why it’s important for you

Personal umbrella or homeowners coverage is not intended to respond to nonprofit board liability. Such policies do not address many types of alleged wrongful acts seen in nonprofit D&O claims. Without nonprofit D&O coverage, you may be covered only up to the limits of your organization’s D&O policy.

Nationwide Private Client offers these added benefits:

• Our not-for-profit directors and officers liability coverage allows up to 5 qualifying organizations to be scheduled for the named insured and spouse to serve on with an annual aggregate limit up to $1 million.⁴
• Specialized claims service: Our team of problem-solvers is available 24 hours a day, 365 days a year.
• At Nationwide, we strongly believe in being good corporate citizens where we work and live. Since 2000, the Nationwide Foundation has committed more than $588 million to charitable organizations across the U.S.

If you serve on multiple nonprofit boards, you might not think to inform your insurance agent right away when you accept a new board position. Verifying this information with your agent can help prevent potential issues if a claim were to arise. Consult with your agent to ensure that the organizations qualify and are listed on your excess policy schedule.

Eligibility guidelines

The not-for-profit directors and officers liability coverage provides excess liability coverage for persons serving as director, officer, trustee, trustee emeritus or governor of a qualifying nonprofit organization. Eligible organizations need to qualify for tax-exempt status under the Internal Revenue Code and may include groups such as charities, homeowner or condo associations, civic leagues, educational or religious organizations, or social recreation clubs. They also need to be in existence for over a year and carry less than $50 million in assets per their most recent financial statement.