Non-profit Boards Are At Risk of Director Lawsuits Too

Non-profit boards are at risk of director lawsuits too. Non-profit organizations face similar risk of D&O lawsuits as private or public companies. A single claim can have a devastating impact—disrupting operations and putting the personal assets of the directors or board at risk.

Here’s Why Non-profit Boards Are At Risk of Director Lawsuits Too – A Real Canadian Claims Example

For example, a non-profit organization held a fundraising event. The organization received a temporary operating fund or “float” from another organization which was to be repaid from the proceeds of the event. Unfortunately, the funds were inadvertently deposited into the insured organization’s general account by an employee and used to pay general expenses. The organization subsequently filed for bankruptcy and was unable to return the float to the lending company. A lawsuit was commenced against the insured organization and the allegations made against the directors included negligence for failing to properly supervise the employee and breach of trust. The claim was ultimately resolved by way of a negotiated settlement in the amount of $75,000. The costs incurred to defend the claim were approximately $30,000. There was no deductible applicable to the damages or defence costs.

ALIGNED Insurance works with a number of Canada’s leading insurers like Encon and others who provide leading Directors & Officers aka management liability insurance products for a wide range of non-profit organizations and charities:

Examples of organizations that know non-profit boards are at risk of director lawsuits that are currently purchasing Directors & Officers are: 

• Professional associations
• Homes for the disabled
• Mental and physical rehab centres
• Shelters
• Community organizations
• Employment agencies
• Medical clinics
• Business development centres
• Sports organizations
• Churches
• Religious organizations
• Co-operatives
• Domestic & international aid organizations