Why law firms need D&O insurance
More and more lawsuits are being brought against directors and officers, which is why they need D&O insurance. Typical areas of dispute include hiring and firing decisions, employee supervision, the application of assets, and the interpretation of nonprofit charters.
One of the biggest misconceptions is that general liability insurance will protect the directors and officers. However, a general liability policy usually only covers an entity for bodily injury or property damage for which they are responsible. Losses arising from suits alleging discrimination and wrongful termination are often excluded.
D&O insurance protects the directors and officers of nonprofit organizations from damages and defense costs for “wrongful acts.” Many people will not even serve on boards without the entity providing the proper insurance to ensure they are personally protected.
In addition, premiums for this policy have decreased significantly, especially for firms, while still providing the much-needed coverage form.
Key features of D&O liability policies may include:
- Broad definition of insured: D&O liability policies cover all directors, officers, and employees, including staff, volunteers, and committee members. Coverage limits typical for nonprofit organizations range depending on the organization’s asset size. They generally range from $1,000,000 to as high as $25,000,000.
- Full entity coverage: Most policies now include coverage for claims made against the organization itself, even if no directors or officers are named in the claim.
- Employment practices coverage: Directors’ and Officers’ Liability policies help protect all insured persons of the organization against damages from claims for wrongful termination, sexual harassment, discrimination, and unfair hiring/firing practices.
- Duty to defend: Current policies are committed to a fair resolution of claims.
- Defense Expenses outside the limits of liability: Most policies now provide for unlimited defense expenses incurred, and these expenses will not diminish the overall limit of liability under the policy.
- Prior acts coverage: Policies now have no “retro dates” that would limit coverage for prior wrongful acts.
- Zero deductibles available: Almost all nonprofit D&O liability policies provide no deductible for directors’ and officers’ claims.
It should be noted that these policies are not standard in form, and consequently, coverage does vary from one carrier to the next. The market for D&O liability coverage for nonprofits is quite competitive. If you would like to know more about providing directors and officers insurance for your firm, please let us know.