Some (maybe many) Nonprofit organizations do not feel that they really need Directors and Officers coverage. Many only purchase the coverage to appease particular board members. These organizations can't imagine anyone ever pursuing a management claim against their Nonprofit. Unfortunately, claims against Nonprofit boards, officers, and professional staff. Here are just a few examples of what can and does happen.
- A Volunteer claimed the denial of a full-time position was due to her sex race and pregnant condition. She file a lawsuit claiming discrimination. The claim was settled, and the organization incurred defense costs of over $10,00 and a settlement of $65,000.
- A member and former director of a racquet club purportedly convinced a club employee to invest in property in England. The employee committed substantially to the investment, after which the investment lost all of its value. The plaintiff employee maintained that the soliciting member was acting in his capacity as a Board Member, and the other Board Members knew or should have known that inappropriate and fraudulent solicitations were taking place. The matter settled for $15,000, with an additional $22,000 in defense costs.
- A fraternal organization was sued by a pro se plaintiff who was investigating conspiracy of corruption involving prominent politicians and supporters. Along with many other prominent individuals and entities in the area, the board of the organization was sued for conspiracy and deprivation of civil rights. The case settled early for $9,345, with an additional $21,800 in defense costs.
- A third party filed suit against a cultural club for alleged fraud, breach of contract, and quantum merit that involved an alleged failure to pay a commission. After extensive discovery, the matter settled for $32,500, with an additional $139,400 in defense costs.
- A former Executive Director of a social service organization brought an action for wrongful termination claiming he was fired for raising questions about the immigration status of various Board Members, in violation of public policy. The immigration issues and their related criminal implications, combined with the plaintiff's counsel's aggressive nature, made the case extremely expensive to defend. The case ultimately settled at mediation for $475,000, with defense costs totaling an additional $655,000.
- A claimant filed suit alleging the insured's Executive Director forced her to falsify documents. She also alleged sexual harassment. The insured insisted on an early settlement to preserve the public image. The matter settled for $250,000, with an additional $25,000 in defense costs.
- A membership organization terminated its Executive Director for ineffective leadership and bullying of staff. The Executive Director maintained the termination was in retaliation for reporting false charges being made against federal funds by the insured. The Executive Director also sued the organization for defamation. The matter settled for $750,000 on the eve of trial, with defense costs totaling more than $500,000.
- A former elected official filed a libel and slander lawsuit after losing a subsequent election for Mayor, blaming his loss on attack ads sponsored by a nonprofit association. The suit was covered by the policy's Personal Injury Wrongful Acts coverage. The case ultimately settled in exchange for a public apology and $125,000 in charitable donations. Defense costs were approximately $190,000.
These are just a few of the thousands of examples of real-life claims brought against Nonprofit organizations daily. Sadly, in some of these cases, there was no Directors and Officers coverage in place. These Nonprofits failed in their duty to protect the mission of their organization and its volunteers, board members, and employees. Failure to procure Directors & Officers Liability insurance and understand how the coverage functions as a risk management tool for your organization is often directly related to the organization not seeking professional consultation.