{"id":741,"date":"2020-12-11T11:53:27","date_gmt":"2020-12-11T06:23:27","guid":{"rendered":"https:\/\/www.plancover.com\/insurance\/?p=741"},"modified":"2021-07-31T16:19:51","modified_gmt":"2021-07-31T10:49:51","slug":"directors-and-officers-liability-for-non-profit-organizations","status":"publish","type":"post","link":"https:\/\/www.plancover.com\/insurance\/directors-and-officers-liability-for-non-profit-organizations\/","title":{"rendered":"Directors &#038; Officers Insurance for Non-Profit Organizations"},"content":{"rendered":"<p><strong><span style=\"font-size: 14pt;\">Director\u2019s liability can be categorized under two broad areas:<\/span><\/strong><\/p>\n<ol>\n<li><span style=\"font-size: 14pt;\">Liability under the Companies Act of 1956 (The new Companies Act of 2013).<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Liability under other Indian statutes.<\/span><\/li>\n<\/ol>\n<p><strong><span style=\"font-size: 18pt;\">2. Other Statutes:<\/span><\/strong><\/p>\n<p><span style=\"font-size: 14pt;\">Directors may also face liability under other Indian laws such as :<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 14pt;\">Offenses under the Income Tax Act of 1961.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Unpaid sales tax under the Central sales tax act, 1956, may be amended considering the impact of GST.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Under negotiable instruments act, 1881<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Violation of foreign exchange regulations,<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Breach of securities regulations<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 18pt;\"><strong>How to Protect this Liability?<\/strong><\/span><\/p>\n<p><span style=\"font-size: 14pt;\">Directors are liable personally to pay losses suffered by the Company following an act which is wrong, negligent, outside the Company\u2019s authority, beyond their power, or which evidences insufficient skill and care in managing the Company\u2019s affairs.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">It is, therefore, imperative for the directors\/officers of a company to be aware of such risks and exposures and to protect the interests of the company in the best way possible.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">The most ideal way to protect is to purchase a <a href=\"https:\/\/www.plancover.com\/business\/directors-officers-insurance\">Directors and Officers Liability Insurance<\/a>.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">D&amp;O liability insurance affords protection to directors and officers from liability arising from actions connected to their corporate responsibilities. The policy provides indemnity to the directors and officers in respect of:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 14pt;\">Legal costs in defending proceedings brought against them alleging wrongful acts.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Any damages awarded to the claimants against the Directors and Officers, including out of court settlements.<\/span><\/li>\n<\/ul>\n<p><strong><span style=\"font-size: 18pt;\">Relevance For Non-Profit Organisations:<\/span><\/strong><\/p>\n<p><span style=\"font-size: 14pt;\">Although <strong>Directors\u2019 and Officers\u2019 liability insurance (D&amp;O)<\/strong> often is associated with large for-profit companies, they are not the only ones that need it. Many people hold the common misperception that directors (including trustees) and officers of a nonprofit organization do not have a meaningful exposure to personal liability. The reality of today\u2019s tenuous legal environment is quite the opposite.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">Regardless of organizational structure, directors and officers of all nonprofit organizations share certain common responsibilities which, if not properly discharged, may give rise to personal liability.<\/span><\/p>\n<p><strong><span style=\"font-size: 18pt;\">Function of nonprofit directors<\/span><\/strong><\/p>\n<p><span style=\"font-size: 14pt;\">The primary role of nonprofit directors and officers is to maintain financial stability and provide the necessary resources and environment to accomplish the goals and purposes of the organization. The unique nature of nonprofit organizations presents directors and officers with difficult challenges in performing this role.<\/span><\/p>\n<p><strong><span style=\"font-size: 18pt;\">Need for D&amp;O insurance:<\/span><\/strong><\/p>\n<p><span style=\"font-size: 14pt;\">Non-profit directors and officers may have an even more demanding job than their for-profit counterparts, because of the following:<\/span><\/p>\n<ul>\n<li><span style=\"font-size: 14pt;\">Affairs of the organization may be less familiar to the individual and may be conducted under less efficient conditions than in business corporations.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">The applicable legal standards of conduct for nonprofit directors and officers are at least as high, and perhaps higher, than the standards applicable to their for-profit counterparts.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Damages recoverable from directors and officers of even a relatively small nonprofit organization can easily exceed the net worth of many individuals.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Many for-profit corporations are subject to external forces, which tend to monitor corporate performance and dictate standards of behaviour. Reporting requirements and oversight by regulatory agencies also serve to identify and guide for-profit corporate performance and behaviour. These external forces are largely absent for nonprofit organizations. Accordingly, nonprofit directors and officers must implement their own internal information system and performance criteria in order to timely and effectively evaluate the progress of the organisation and the abilities of its management.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">Because nonprofit directors and officers are frequently subjected to less external scrutiny than their for-profit counterparts, a greater tendency may exist to become complacent, reactive and perhaps careless in the fulfilment of their fiduciary role.<\/span><\/li>\n<li><span style=\"font-size: 14pt;\">In addition, the resources of many nonprofit organizations are insufficient to provide directors and officers with the most desirable support. As a result, decision-making may be hindered by incomplete information, insufficient time and inability to carefully investigate and document relevant factors.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-size: 14pt;\">In today\u2019s litigious society, nonprofit organizations and their board members commonly face lawsuits for an extended list of alleged wrongdoings: Discrimination (age, race, sex, employment, membership), Harassment, Wrongful termination of employees, Inefficient administration or supervision, Waste of assets, Misleading reports or other misrepresentations, Libel and slander, Failure to deliver services, Acts beyond the granted authority.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\"><strong>D&amp;O liability insurance<\/strong> has become a much more common item on the nonprofit agenda for the simple reason that more nonprofits are getting sued.<\/span><\/p>\n<p><strong><span style=\"font-size: 18pt;\">Some Common Types of Claims payable under D&amp;O insurance<\/span><\/strong><\/p>\n<table style=\"border-collapse: collapse; width: 98.0605%; height: 420px;\">\n<tbody>\n<tr style=\"height: 58px;\">\n<td style=\"width: 28.9079%; height: 58px;\"><strong><span style=\"font-size: 14pt;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 CLAIM FROM<\/span><\/strong><\/td>\n<td style=\"width: 70.941%; height: 58px;\"><strong><span style=\"font-size: 14pt;\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 WRONGFUL ACT<\/span><\/strong><\/td>\n<\/tr>\n<tr style=\"height: 66px;\">\n<td style=\"width: 28.9079%; height: 66px;\"><span style=\"font-size: 14pt;\">Investors<\/span><\/td>\n<td style=\"width: 70.941%; height: 66px;\"><span style=\"font-size: 14pt;\">Misrepresentation of facts, misleading information.<\/span><\/td>\n<\/tr>\n<tr style=\"height: 100px;\">\n<td style=\"width: 28.9079%; height: 94px;\"><span style=\"font-size: 14pt;\">Shareholders<\/span><\/td>\n<td style=\"width: 70.941%; height: 94px;\"><span style=\"font-size: 14pt;\">Mismanagement of company resulting in decline in profits, performance of the company, investments decline,investment decisions,misrepresentations in offer<\/span><\/td>\n<\/tr>\n<tr style=\"height: 78px;\">\n<td style=\"width: 28.9079%; height: 78px;\"><span style=\"font-size: 14pt;\">Documents Employees<\/span><\/td>\n<td style=\"width: 70.941%; height: 78px;\"><span style=\"font-size: 14pt;\">Employment practices acts &#8211; sexual harassment, discrimination, defamation,wrongful termination, missed<\/span><\/td>\n<\/tr>\n<tr style=\"height: 57px;\">\n<td style=\"width: 28.9079%; height: 57px;\"><span style=\"font-size: 14pt;\">Promotions Competition<\/span><\/td>\n<td style=\"width: 70.941%; height: 57px;\"><span style=\"font-size: 14pt;\">Unfair business practices, defamation (libel &amp; Slander)<\/span><\/td>\n<\/tr>\n<tr style=\"height: 67px;\">\n<td style=\"width: 28.9079%; height: 67px;\"><span style=\"font-size: 14pt;\">Regulatory authorities<\/span><\/td>\n<td style=\"width: 70.941%; height: 67px;\"><span style=\"font-size: 14pt;\">Market misconduct (insider trading, price rigging etc), breach of statutory provisions<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><strong><span style=\"font-size: 18pt;\">How to Buy Directors and Officers Insurance for Nonprofit Organizations?<\/span><\/strong><\/p>\n<p><span style=\"font-size: 14pt;\">Just knowing <strong>what is directors and officers insurance for non profit<\/strong> isn&#8217;t sufficient. The process of buying <strong>D&amp;O liability insurance<\/strong> for nonprofits can be complex, requiring thorough research, assessment and informed decision-making. Unless you have extensive experience dealing with insurance, things can take a wrong turn pretty quickly. This is why it&#8217;s always recommended to seek assistance from experts.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">Licensed insurance brokers can help you discover better plans of <strong>non profit D&amp;O insurance<\/strong> from top insurers. Furthermore, they can assist you in determining your needs and requirements, and thereon choosing the best plan that fits those needs and requirements. Figuring how much <strong>D&amp;O coverage for nonprofit organizations<\/strong> do you need requires first identifying your risk exposures and thereon considering various other factors, including your financial condition as well as past track record. An insurance broker can guide you throughout. In addition, they can even help customize the <strong>d and o insurance non profit plan<\/strong> to perfectly match your coverage and budget requirement.<\/span><\/p>\n<p><span style=\"font-size: 14pt;\">At PlanCover, we have helped many not-for-profit organizations buy the best insurance plan. We have a team that commits to deliver every business owner an exceptional experience through end-to-end support. So, if you&#8217;re looking to <strong>buy directors and officers insurance for nonprofit organizations<\/strong>, connect with us today and talk to one of our licensed insurance brokers.<\/span><\/p>\n<p style=\"text-align: center;\"><iframe loading=\"lazy\" style=\"border: 0;\" src=\"https:\/\/www.google.com\/maps\/embed?pb=!1m18!1m12!1m3!1d3504.681535671373!2d77.21253971508075!3d28.549290482450626!2m3!1f0!2f0!3f0!3m2!1i1024!2i768!4f13.1!3m3!1m2!1s0x390ce21425118e25%3A0x8d4ed9481e374523!2sPlanCover%20%3A%20Group%20Health%20Insurance%20%7C%20Professional%20Indemnity%20%7C%20CGL%20Policy!5e0!3m2!1sen!2sin!4v1626848974975!5m2!1sen!2sin\" width=\"600\" height=\"450\" allowfullscreen=\"allowfullscreen\"><\/iframe><\/p>\n<p><script type=\"application\/ld+json\">\n{\n  \"@context\": \"https:\/\/schema.org\",\n  \"@type\": \"FAQPage\",\n  \"mainEntity\": {\n    \"@type\": \"Question\",\n    \"name\": \"How to Buy Directors and Officers Insurance for Nonprofit Organizations?\",\n    \"acceptedAnswer\": {\n      \"@type\": \"Answer\",\n      \"text\": \"Just knowing what is directors and officers insurance for non profit isn't sufficient. The process of buying D&O liability insurance for nonprofits can be complex, requiring thorough research, assessment and informed decision-making. Unless you have extensive experience dealing with insurance, things can take a wrong turn pretty quickly. This is why it's always recommended to seek assistance from experts.<\/p>\n<p>Licensed insurance brokers can help you discover better plans of non profit D&O insurance from top insurers. Furthermore, they can assist you in determining your needs and requirements, and thereon choosing the best plan that fits those needs and requirements. Figuring how much D&O coverage for nonprofit organizations do you need requires first identifying your risk exposures and thereon considering various other factors, including your financial condition as well as past track record. An insurance broker can guide you throughout. In addition, they can even help customize the d and o insurance non profit plan to perfectly match your coverage and budget requirement. <\/p>\n<p>At PlanCover, we have helped many not-for-profit organizations buy the best insurance plan. We have a team that commits to deliver every business owner an exceptional experience through end-to-end support. So, if you're looking to buy directors and officers insurance for nonprofit organizations, connect with us today and talk to one of our licensed insurance brokers.\"\n    }\n  }\n}\n<\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Director\u2019s liability can be categorized under two broad areas: Liability under the Companies Act of 1956 (The new Companies Act of 2013). Liability under other Indian statutes. 2. Other Statutes:&#8230;<\/p>\n","protected":false},"author":2,"featured_media":1001,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":"","footnotes":""},"categories":[37],"tags":[118,105,93,89,92],"_links":{"self":[{"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/posts\/741"}],"collection":[{"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/comments?post=741"}],"version-history":[{"count":7,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/posts\/741\/revisions"}],"predecessor-version":[{"id":954,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/posts\/741\/revisions\/954"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/media\/1001"}],"wp:attachment":[{"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/media?parent=741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/categories?post=741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.plancover.com\/insurance\/wp-json\/wp\/v2\/tags?post=741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}