Table of Contents
Introduction: The Phone Call I’ll Never Forget
The letter arrived on a Tuesday.
It was thick, cream-colored, and bore the stiff formality of a certified mail sticker.
Inside, dense paragraphs of legalese swam before my eyes, but a few phrases leaped out with chilling clarity: “wrongful termination,” “breach of duty,” and a list of names—my name, and the names of every other person on the board of our small environmental nonprofit.
We were a classic passion project.
A handful of us, driven by a shared mission to protect local wetlands, had poured our evenings and weekends into this organization.
We ran on a shoestring budget, fueled by small grants, local donations, and an abundance of good intentions.
We were volunteers, after all.1
We were the good guys.
The phone call from our pro-bono legal counsel came an hour later.
His voice was grim.
A disgruntled former employee, someone we had let go due to persistent performance issues, was suing the organization.
And he wasn’t just suing the organization.
He was suing each of us, personally.
The lawsuit alleged not only wrongful termination but also discrimination, and it sought damages that would not only wipe out our nonprofit’s modest bank account but also threaten our personal assets—our homes, our savings, our families’ futures.2
In that moment, a cold wave of shock and disbelief washed over me.
How could this happen? We had a General Liability policy; I remembered signing the check for it myself.
I thought that covered us for…
well, for liability.
I had a vague recollection of someone mentioning Directors & Officers insurance—D&O, they called it—at a conference once.
But I’d dismissed it.
That was for big, faceless corporations with shareholder lawsuits, not for a five-person volunteer board trying to save a marsh.
It felt like an extravagant, unnecessary expense.4
And hadn’t someone said the Volunteer Protection Act was supposed to be our magic shield against this sort of thing?.6
That phone call shattered every one of those naive assumptions.
The weeks and months that followed were a blur of legal fees, depositions, and sleepless nights.
The experience was terrifying, expensive, and deeply disillusioning.
It nearly destroyed our organization and took a significant toll on my personal finances.
But that painful journey forced me to confront a hard truth: I had been looking at risk all wrong.
It wasn’t an external threat to be deflected; it was an integral part of the very structure of leadership.
And understanding that difference, I would come to learn, was the key to building an organization that could not only survive but truly thrive.
Part I: The Flawed Blueprint – Why We Get Nonprofit Risk So Dangerously Wrong
My initial mindset—that our noble mission and small size somehow protected us—wasn’t unique.
It’s a dangerously common way of thinking in the nonprofit world, a flawed blueprint that leaves thousands of well-meaning organizations exposed.
Before we can build a stronger structure, we have to understand why the old one is so prone to collapse.
It rests on three pervasive and powerful fallacies.
Misconception 1: The “Good Intentions” Fallacy
At the heart of the nonprofit sector is a powerful, driving force: passion.
People serve on boards and dedicate their careers to these organizations because they care deeply about the mission, the people, and the community.1
This passion is a tremendous asset, but it also creates a subtle and dangerous cognitive bias.
When your entire focus is on “doing good,” it becomes incredibly difficult to imagine being accused of “doing wrong.”
This is the “Good Intentions” Fallacy.
We believe our noble purpose should somehow shield us from the messy realities of litigation.
But the legal system doesn’t operate on intent; it operates on actions and their consequences.
A lawsuit isn’t filed because a board member is a bad person; it’s filed because someone—an employee, a donor, a beneficiary—alleges that a “wrongful act” occurred.7
When a claim is filed, the accuser isn’t weighing the purity of your mission or the size of your budget; they are seeking redress for a perceived harm.5
This mission-driven mindset can create a significant blind spot.
It makes us resistant to viewing our nonprofit for what it legally is: a business.
A nonprofit may not have shareholders, but it has stakeholders.
It may not generate profits, but it manages funds, employs people, enters into contracts, and provides services.
Each of these functions carries inherent legal risks.
The failure to adopt the operational and legal controls that for-profit entities take for granted—like robust insurance—is a cultural vulnerability that stems directly from this belief that our good intentions are defense enough.
They are not.
Misconception 2: The “Too Small to Be Sued” Myth
The second pillar of our flawed blueprint is the pervasive myth that risk is proportional to size.
We look at our modest budgets and small staff and conclude that we are too insignificant to attract the attention of plaintiffs’ attorneys.
This could not be more wrong.
Nonprofits of all sizes are under constant threat of litigation.1
The risk of a lawsuit is not a function of your annual revenue, but of your human interactions.
Every employee you hire, every volunteer you manage, every donor you solicit, every client you serve, and every vendor you contract with represents a relationship.
And every one of those relationships is a potential source of dispute.
As a nonprofit’s programs and community reach expand, its risk exposure grows geometrically, often far outpacing its budget.
A small, high-activity nonprofit running multiple community programs can easily have a risk profile similar to that of a much larger, less active organization.
The financial consequences are stark.
The average cost to settle a claim against a nonprofit’s board is around $35,000, and one in ten claims reaches $100,000 before a settlement is even reached.5
These are figures that can cripple or bankrupt a small organization.
Even if a claim is entirely baseless and ultimately dismissed, the organization must still pay for a legal defense, a process that can easily cost tens of thousands of dollars.4
In many ways, smaller nonprofits are
more vulnerable.
Lacking dedicated human resources or in-house legal departments, they are more likely to make unintentional errors in areas like employment law or contract management, creating the very conditions that lead to lawsuits.9
The belief that being small makes you safe is not just a misconception; it’s an invitation to financial disaster.
Misconception 3: The “Paper Shield” of the Volunteer Protection Act
Perhaps the most insidious misconception is the one that feels most like a safety net: the Volunteer Protection Act of 1997 (VPA).
Many nonprofit leaders have heard of the VPA and believe it provides a comprehensive shield against personal liability for their volunteer board members.
This false sense of security is one of the biggest obstacles to adopting proper protection.
The VPA was enacted with good intentions, aiming to encourage volunteerism by offering some immunity from civil liability for harm caused by a volunteer’s negligence.6
However, this protection is riddled with critical exceptions.
It does not apply in cases of gross negligence, reckless misconduct, or intentional harm.
It may not cover directors and officers for all of their governance-related decisions.
And states can pass their own legislation that effectively opts out of the Act’s provisions.6
But the most crucial gap, the one that shocked me to my core during my own legal battle, is this: the Volunteer Protection Act does not cover the cost of legal defense.5
Even if you are ultimately found to be protected by the VPA and win the case, you are still personally responsible for the astronomical legal fees required to get to that point.
The VPA might protect you from an adverse judgment, but it won’t protect you from the financial ruin of defending yourself.1
In this way, the VPA acts as a “paper shield.” It looks and feels like protection, but it crumbles under the first real assault.
It creates a dangerous complacency, leading boards to believe they are covered when they are, in fact, dangerously exposed.
It’s a classic case of a “good enough” solution preventing leaders from seeking the truly necessary one.
Part II: The Epiphany – Reimagining Insurance as Architectural Design
During the darkest days of our lawsuit, I felt utterly lost.
The mission I had poured my heart into now felt like a liability.
The trust I had in my own judgment was shattered.
I felt foolish, naive, and completely overwhelmed.
In a moment of desperation, I called a mentor, a woman I respected immensely who had spent her career not in the nonprofit world, but as a structural engineer.
I vented my frustration, my fear, my sense of injustice.
I told her I felt like we needed a stronger “shield” to protect us from these kinds of attacks.
She listened patiently, and when I was done, she said something that changed my entire perspective.
“You’re thinking about it all wrong,” she said gently.
“When we design a public library, we don’t just throw up four walls and a roof and then hand out hard hats and steel shields to everyone inside in case of a collapse.
That would be absurd.
The safety of the building isn’t an afterthought.
It’s in the design itself.”
She went on to explain.
“We start with a solid foundation, engineered to handle the specific soil conditions.
We design load-bearing walls and support columns that are integrated into the very fabric of the structure, distributing weight and stress.
We build in complex, interconnected systems—HVAC for air quality, electrical for power, plumbing for sanitation.
The building is safe and functional not because of the emergency measures, but because it was designed to be resilient from the ground up.
The architecture is the protection.”
A profound clarity washed over me.
For months, I had been viewing insurance as a shield—a reactive, defensive tool you buy to fend off trouble.
My mentor’s analogy gave me a completely new paradigm.
Directors & Officers insurance isn’t a shield.
It is the foundational governance architecture of a nonprofit.
It’s not an expense you tack on at the end; it’s the blueprint you start with.
It’s the integrated system that ensures your organization is built to withstand pressure, to protect its occupants—the leaders, staff, and volunteers—and to fulfill its purpose for years to come.
It’s not about deflecting risk; it’s about building a structure so sound that it can manage risk as an integral part of its existence.
This single shift in thinking changed everything.
It transformed my view of D&O insurance from a grudging necessity into a strategic imperative.
It was no longer about fear; it was about intelligent design.
The rest of this report is dedicated to exploring this new blueprint—to deconstructing the pillars of this resilient architecture so you can build it for your own organization, before the storm ever hits.
Part III: The Pillars of a Resilient Nonprofit – Deconstructing Your Governance Architecture
Viewing D&O insurance as architecture allows us to move beyond a simple definition and understand its components as functional, strategic pillars.
A resilient nonprofit structure, just like a well-designed building, is supported by four essential pillars: a strong foundation to protect the people, load-bearing walls to defend the mission, integrated systems to create a complete risk ecosystem, and a public façade that builds unshakable trust.
Pillar 1: The Foundation – Protecting the People Who Build the Dream
The foundation of any structure is its most critical element.
It bears the weight of everything built upon it and provides the stability needed to endure.
In a nonprofit, the foundation is the mechanism that protects the people who build and sustain the dream: the directors, officers, employees, and volunteers.
This protection is not a perk; it is the bedrock of good governance.
At the core of this foundation is a specific component of D&O insurance known as Side A coverage.
Side A is arguably the most important part of a D&O policy for the individuals serving the organization.
It is designed to protect the personal assets of directors and officers by paying for their defense costs, settlements, and judgments directly when the nonprofit cannot or, in some cases, will not indemnify them.7
This can happen for several reasons: the organization may be financially insolvent and simply lack the funds, or its own bylaws or state law may prohibit indemnification for certain types of claims, such as those arising from shareholder derivative suits or regulatory actions.10
Side A coverage is the ultimate personal safety Net.
The strategic value of this foundation extends far beyond simple protection.
It is one of the most powerful tools a nonprofit has for attracting and retaining top-tier leadership talent.
In today’s world, experienced professionals—executives, attorneys, accountants, and community leaders—are increasingly aware of the personal liabilities associated with board service.1
These are individuals who have valuable skills to offer but also have significant personal assets to protect.
They assess risk professionally and will not expose their family’s financial security to an unmitigated threat.
When a skilled professional is considering joining a board, one of their first questions, either asked aloud or to themselves, will be about D&O insurance.
A nonprofit that cannot offer the assurance of robust Side A coverage is signaling that it does not take governance or the protection of its leaders seriously.
From a risk-management perspective, joining that board is an unacceptably risky proposition.11
Therefore, a direct causal chain exists: a strong D&O policy with robust Side A coverage allows a nonprofit to compete for high-caliber leaders.
The quality of that leadership directly dictates the organization’s strategic capacity, its operational excellence, its fundraising ability, and ultimately, its ability to achieve its mission.
The investment in a solid foundation is an investment in the quality of the architects who will design the organization’s future.
Pillar 2: The Load-Bearing Walls – Defending the Mission from External Shocks
If the foundation protects the people, the load-bearing walls protect the organization itself.
They are designed to absorb and distribute external pressures, ensuring that a shock in one area doesn’t lead to a catastrophic failure of the entire structure.
For a nonprofit, this means protecting the organization’s own assets—its bank accounts, its property, its endowment—from being depleted by the financial shock of a lawsuit.
This is the role of Side B and Side C coverage.
Side B is known as “Corporate Reimbursement.” In many cases, a nonprofit’s bylaws will require it to indemnify its directors, meaning it uses its own funds to pay for their legal defense.
Side B coverage then reimburses the organization for these costs, preventing the lawsuit from draining the mission’s financial resources.7
Side C, or “Entity Coverage,” goes a step further.
It protects the nonprofit organization itself when it is named as a defendant in a lawsuit alongside its directors.11
Together, these coverages form the structural walls that shield the organization’s balance sheet, preserving precious funds that are meant for programs and services, not legal battles.11
To appreciate the importance of these walls, one must understand the sheer variety of forces that can exert pressure on them.
The threat landscape for nonprofits is vast and varied.
Lawsuits can originate from virtually any stakeholder group.14
- Employees and Volunteers: As the most common source of claims, this group can sue for a host of employment-related issues. Wrongful termination, discrimination based on age, race, or disability, sexual harassment, retaliation for whistleblowing, and wage-and-hour disputes are all frequent allegations.15 Real-world examples are sobering: a Virginia nonprofit surgery center settled an age and disability discrimination case for $50,000 after firing an employee who requested extended medical leave.18 Another nonprofit, Didlake, Inc., was sued by the EEOC for failing to provide American Sign Language interpreters for its deaf employees during safety meetings, a violation of the Americans with Disabilities Act.19 These claims represent the single largest area of risk for most nonprofits.5
- Donors and Grantors: This group can sue for mismanagement or misuse of funds, particularly when a restricted gift is allegedly used for a purpose other than what the donor intended.14
- Beneficiaries and Clients: The very people the nonprofit exists to serve can bring claims alleging that they were harmed by the organization’s services, that services were provided in a discriminatory manner, or that the organization was negligent.14
- Government Regulators: The IRS, a state’s Attorney General, or the Department of Labor can launch investigations and bring actions against a nonprofit for a range of issues, including failure to pay payroll taxes, violations of tax-exempt status, or breaches of state or federal laws.14 Personal liability for unpaid payroll taxes is a particularly severe risk for board members.20
- Third Parties: This category includes vendors, contractors, and even competing organizations who may allege breach of contract, intellectual property infringement (like copyright or trademark), or anticompetitive behavior.3
This complex web of potential threats can be difficult to grasp.
The following matrix provides a visual summary, connecting the “who” of potential claimants with the “why” of their allegations.
Table 1: The Nonprofit Litigation Risk Matrix
| Potential Claimant | Wrongful Termination / Employment Practices | Misuse of Funds / Breach of Fiduciary Duty | Negligence / Service-Related Harm | Regulatory Non-Compliance / Other |
| Employees / Volunteers | The most common claim. An ex-employee sues for discrimination after being laid off, alleging it was due to their age.18 | A whistleblower reports that the executive director is using company funds for personal expenses.8 | An employee is injured due to unsafe working conditions that were ignored by management.9 | A claim is filed for failure to pay proper overtime wages in violation of the Fair Labor Standards Act.16 |
| Donors / Grantors | N/A | A major donor sues, alleging their restricted gift for a new building was used to cover operating deficits.14 | N/A | A group of donors sues after the organization makes false or misleading statements in its fundraising materials.1 |
| Beneficiaries / Clients | N/A | A group of scholarship recipients sues, claiming the selection process was biased and violated the organization’s bylaws.17 | A client at a social service agency sues for emotional distress, alleging negligent counseling services.22 | A community group sues for discrimination, alleging that services are not being provided equitably to all populations.3 |
| Government Bodies | N/A | The State Attorney General investigates claims of self-dealing and excessive compensation for executives.8 | N/A | The IRS seeks to hold board members personally liable for unpaid payroll taxes.20 |
| Third Parties (Vendors, etc.) | N/A | N/A | N/A | A competitor sues for copyright infringement after the nonprofit uses their marketing materials without permission.21 |
By mapping out these pressure points, a board can move from a vague sense of anxiety to a structured analysis of its specific vulnerabilities, allowing it to ensure its “walls” are built to withstand the most likely shocks.
Pillar 3: The Integrated Systems – Creating a Complete Risk Ecosystem
A modern building is far more than its foundation and walls.
It is a complex network of integrated systems—plumbing, electrical, HVAC, and data lines—that must work together seamlessly for the building to be habitable and functional.
Similarly, a nonprofit’s risk management strategy cannot rely on a single policy.
It requires a complete ecosystem of insurance coverages, where each policy plays a distinct but complementary role.
Understanding how these systems connect is essential to avoiding dangerous gaps.
The failure to see insurance as an ecosystem is a primary source of confusion and vulnerability for nonprofit leaders.
They often assume one policy covers risks that are actually handled by another, leaving them exposed.
D&O insurance, while foundational, is not a catch-all solution.
It must be integrated with several other key policies.
- D&O vs. Employment Practices Liability Insurance (EPLI): This is the most critical and often most confusing intersection. D&O insurance covers claims arising from governance decisions, while EPLI specifically covers claims arising from employment practices. Because employment-related claims are the number one source of litigation against nonprofits 5, this distinction is paramount. Many modern D&O policies now bundle EPLI coverage, which is a significant benefit.2 However, it is crucial for leaders to verify this. Does our D&O policy explicitly include EPLI? If so, what are the coverage limits and sub-limits? Is a standalone EPLI policy, which might offer broader coverage, a better fit for our organization’s specific risks?.15
- D&O vs. Errors & Omissions (E&O) Insurance: This is another major point of confusion that can lead to catastrophic coverage gaps. E&O insurance, also known as Professional Liability, covers claims of negligence, errors, or omissions in the professional services an organization provides. D&O policies almost universally exclude claims arising from professional services.21 If your nonprofit provides counseling, medical care, financial advice, consulting, or any other professional service, you need a separate E&O policy. A board that believes its D&O policy will cover a malpractice claim against one of its counselors is making a grave and costly mistake.24
- D&O vs. General Liability (GL) Insurance: The distinction here is more straightforward but equally important. GL insurance covers claims of bodily injury and property damage—the classic “slip and fall” on a wet floor or damage caused by a volunteer during an event.25 D&O policies explicitly exclude these types of claims.21 The two policies cover fundamentally different types of risk and are not interchangeable.
- D&O vs. Cyber Liability Insurance: In our digital world, this has become a critical part of the ecosystem. D&O insurance does not cover the costs associated with a data breach. Nonprofits routinely handle highly sensitive information, including donor financial data, employee records, and confidential client details. A separate Cyber Liability policy is essential to cover the immense costs of a breach, such as forensic investigations, client notification, credit monitoring services, and public relations efforts.2 While some D&O policies may offer a very small sub-limit for cyber-related expenses, it is rarely sufficient to cover the fallout from a significant incident.15
Thinking of these policies as an integrated ecosystem shifts the board’s conversation from “Do we have D&O?” to a more sophisticated set of questions: “Have we mapped our organization’s unique operational risks—from governance and employment to service delivery and data security—to the correct coverage solutions? Where are the gaps in our ecosystem? How do our policies work together to provide comprehensive protection?” The following table provides a clear, comparative overview to aid in this systemic analysis.
Table 2: Your Nonprofit’s Insurance Ecosystem – A Comparative Overview
| Insurance Type | Primary Purpose | Typical Claim Example | Key Exclusions |
| Directors & Officers (D&O) | Protects leaders and the entity from claims of “wrongful acts” in governance and management. | A donor sues the board for mismanagement of funds and breach of fiduciary duty.1 | Bodily injury, property damage, professional services, intentional criminal acts, most data breaches.21 |
| Employment Practices (EPLI) | Protects against claims arising from employment-related issues. | A former employee sues for wrongful termination, alleging racial discrimination.15 | Wage-and-hour violations (often limited coverage), claims covered by Workers’ Comp.15 |
| Errors & Omissions (E&O) | Protects against claims of negligence or failure in the delivery of professional services. | A client sues a nonprofit counseling center, alleging that negligent advice led to financial harm.24 | Fraudulent acts, claims covered by General Liability (bodily injury/property damage).24 |
| General Liability (GL) | Protects against claims of third-party bodily injury or property damage. | A visitor slips on a wet floor in your office, breaks their leg, and sues for medical expenses.16 | Governance decisions (D&O), professional services (E&O), employee injuries (Workers’ Comp).21 |
| Cyber Liability | Protects against losses resulting from a data breach or other cyber event. | Your donor database is hacked, and you must pay for credit monitoring for all affected individuals.2 | Property damage, reputational harm not tied to breach costs, cost to improve internal tech systems.15 |
Pillar 4: The Public Façade – How Strong Architecture Builds Unshakable Trust
The final pillar of our structure is its public façade.
In architecture, the façade is more than just decoration; it’s the building’s face to the world.
It communicates purpose, stability, and integrity.
For a nonprofit, a strong governance architecture, visibly demonstrated by robust D&O coverage, serves the same function.
It builds external trust and credibility, which are the ultimate currency of the nonprofit sector.
This is where D&O insurance transcends mere risk management and becomes a powerful strategic asset.
Its value extends far beyond the financial protection it provides in a crisis.
- Enhancing Credibility with Funders and Partners: In an increasingly sophisticated philanthropic landscape, donors, foundations, and government agencies are looking for more than just a compelling mission. They are looking for signs of professionalism, accountability, and good governance.4 A comprehensive D&O policy is a tangible signal that an organization takes its fiduciary duties seriously. It tells potential funders that their investment is protected from being diverted to legal battles, making the nonprofit a more stable and attractive partner. When competing for major grants or soliciting large donations, being able to demonstrate this level of operational maturity can be a significant competitive advantage.11
- Empowering Bolder and More Innovative Leadership: Fear is a powerful inhibitor of progress. When board members and executives are constantly worried about their personal liability, they naturally become more risk-averse. They may shy away from bold new initiatives, hesitate to make difficult but necessary decisions, and focus more on preserving the status quo than on driving the mission forward. D&O insurance provides the peace of mind that allows leaders to lead.9 By removing the threat of personal financial ruin, it frees them to focus on innovation, to take calculated strategic risks, and to make the bold decisions that are often required to solve complex social problems and achieve meaningful impact.
In essence, D&O insurance functions as a form of “governance credential.” It is verifiable proof to the outside world—to funders, partners, and potential board recruits—that the organization is built on a solid foundation.
This signal of maturity and professionalism builds the trust that is essential for unlocking resources, forging powerful partnerships, and ultimately, fulfilling the organization’s mission.
The premium is not merely an operating expense; it is a strategic investment in the organization’s brand, reputation, and future growth.
Conclusion: Your Blueprint for Action – Building an Unshakeable Future
The lawsuit against our small nonprofit was the most difficult professional experience of my life.
But in the end, it was also the most transformative.
By forcing me to abandon the flawed blueprint of “good intentions,” it led me to a new way of thinking.
It taught me that risk management isn’t about buying a shield; it’s about being a better architect.
Armed with this new perspective, we went back to the drawing board.
We worked with a specialist broker to design a truly integrated insurance ecosystem that addressed our specific risks.
We secured a comprehensive D&O policy that made our board members feel safe and valued.
The change was immediate and profound.
The cloud of fear lifted.
Within a year, we had recruited two highly experienced new board members—a lawyer and a CFO—who told us explicitly that our commitment to protecting our leaders was a key factor in their decision to join.
Shortly after, we secured a major foundation grant that we had been denied in the past; the funder’s program officer noted our improved governance structures as a sign of organizational maturity.
We didn’t just survive the crisis; we emerged stronger, more resilient, and more effective.
You don’t have to wait for the devastating phone call to begin this work.
You can start building your organization’s resilient architecture today.
Here is a practical blueprint to guide you.
Step 1: Conduct a Risk Self-Assessment
Before you can design the right structure, you must understand the terrain.
Use the tables from this report as your diagnostic tools.
Gather your leadership team and ask the hard questions:
- Review the Litigation Risk Matrix (Table 1): Looking at the grid of claimants and allegations, where are our biggest vulnerabilities? Are our employment practices airtight? How do we handle restricted donations? What are our conflict-of-interest policies?
- Review the Insurance Ecosystem (Table 2): What are our core activities? Do we provide professional services that could create E&O exposure? How much sensitive data do we store, and how is it protected? Do our volunteers drive vehicles on behalf of the organization?.28
- Assess Your Governance Practices: Does legal counsel review our publications? Do we have clear, written policies for hiring, firing, and handling complaints? Do we provide training for board members on their fiduciary duties?.30
Step 2: Engage a Specialist Broker
Not all insurance brokers are created equal.
Do not simply go with the broker who handles your personal home and auto insurance.
You need a specialist who understands the unique risk landscape of the nonprofit sector.31
A great broker acts as a true advisor, not just a salesperson.
They will take the time to understand your mission and operations, help you navigate the complexities of different policies, and advocate on your behalf with insurance carriers.33
Step 3: Ask the Right Questions (The Ultimate D&O Checklist)
When you and your broker are evaluating D&O policies, you need to be an informed consumer.
Use this checklist to dig deep into the details of any proposed policy.
Policy Structure & Limits:
- What are the policy limits per occurrence and in the aggregate? A base limit of $1 million is a common starting point for most nonprofits.21
- What is the deductible or Self-Insured Retention (SIR)? How much will the organization have to pay out-of-pocket before coverage kicks in?.10
- Is this a “claims-made” policy? If so, what is the retroactive date? (This is crucial to ensure acts that occurred in the past are covered).11
Coverage Details:
- Who, exactly, is defined as an “Insured”? Does the definition automatically include directors, officers, employees, volunteers, and committee members? Most importantly, does it include the nonprofit entity itself?.25
- Does the policy include Employment Practices Liability (EPLI)? If so, what are the specific sub-limits for this coverage?.15
- What are the key exclusions? Ask to review the specific language for exclusions related to criminal/fraudulent acts, bodily injury/property damage, and professional services.6
Claims Process:
- How are defense costs handled? Are they advanced by the insurer as they are incurred, or are they only reimbursed after the case is resolved? (Advancement of costs is far superior).34
- Does the policy offer “tail coverage” in the event of a merger or acquisition, providing protection for a period after the policy ends?.34
- Can the definition of a “claim” be broadened through an endorsement to include things like formal investigations, subpoenas, or arbitration proceedings?.34
Your mission is too important to be built on a flawed foundation.
By proactively designing your organization’s governance architecture, you are doing more than just managing risk.
You are protecting your leaders, preserving your resources, and building the unshakable trust that will allow your nonprofit to endure and thrive for years to come.
This is not an expense.
It is the most fundamental investment you can make in the future of your cause.
Works cited
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