If you volunteer on the board of a charitable or non-profit organization or advise charities, you should check that directors’ and officers’ liability insurance is in place.

A key part of being on the board of a charitable or non-profit organization is to assess the risks the organization and board face. That means getting proper insurance coverage, says Terry Carter, a partner with Carter & Associates, an Orangeville, Ont.-based law firm that specializes in advising charities.

A D&O policy will provide you and fellow board members, or a client who is a board member, with protection against civil claims brought by the organization’s employees, members, volunteers and donors, or by regulatory bodies, contractors, creditors or other third parties, says Ken Hall, president of Robertson Hall Insurance Inc. in London, Ont.

Many charities have a general liability policy, which provides protection against liability for bodily injury, third-party property damage and claims for personal injury such as slander or defamation, says Hall.

D&O insurance, however, provides much needed coverage for other types of claims that are not usually covered under general liability policies, including wrongful dismissal, mismanagement, discrimination, misuse of designated funds and breach of fiduciary duty.

Obtaining a D&O policy will provide personal protection for directors and officers, and it is especially useful if the organization’s bylaws require that the directors indemnify the organization against possible loss caused by their actions.

Further, it will provide access to legal advice and court costs that might be required to defend against a claim.

When obtaining D&O insurance, Hall suggests the coverage include the following features:

> Unlimited retroactive coverage for unknown prior acts on a “claims made” basis. (“Claims made” coverage deals with legal claims that occur and are made during the coverage period. With the retroactive feature, it will apply to claims that occurred before coverage began.)

> Coverage should be provided so that payments are made “on behalf of” the organization and/or people covered rather than on a “reimbursement” basis.

> There should be no exclusion for coverage against wrongful dismissal/employment practices claims.

In addition to a D&O policy, Hall says, an individual director may want to have personal protection available under the “personal liability” section of his or her homeowners’ insurance.

“Some insurers provide coverage to policyholders while serving as volunteers on non-profit boards, and an inquiry should be made with the individual’s broker or agent to determine the scope and extent of coverage available under his or her policy,” Hall says.

Obtaining viable insurance coverage for sexual abuse claims can be a challenge. For example, says Carter, an abuse claim based on an incident that occurred in a charity’s summer camp when you were a director may not come out for several years.

The organization, the board and perpetrator will be sued, he says, but because the perpetrator is the least likely to be in a position to compensate the victim, the board will be targeted for negligence.

However, says Hall, coverage for sexual abuse is excluded under D&O policies. It is available under separate claims-based policies, but not on a retroactive basis. Therefore, he says, it is recommended that organizations maintain coverage for abuse claims under a general liability policy that is “occurrence-based.” These policies provide protection against claims that occurred during the period of coverage, even after the policy is cancelled or not renewed.

The board should make sure its general liability policy doesn’t contain an exclusion for physical or sexual abuse, he says. The general policy should also cover trustees, employees, committees, members and volunteers while acting under the direction of the board.

Hall’s company provides D&O coverage to approximately 5,500 registered charities. He says someone who wants a D&O policy should look for an insurance broker or agent who regularly sells D&O policies. Many insurance advisors who sell D&O policies also sell errors and omissions policies, so watch for this combination of expertise.

One source of D&O insurance for non-profit organizations is Ottawa-based Volunteer Canada, a national organization that supports volunteerism through research, training and other national initiatives. It has almost 90 centres across the country. Members of the organization can get D&O insurance at discounted rates.

The Volunteer Canada insurance program was established with the help of broker Aon Reed Stenhouse, says Marlene Deboisbriand, president of Volunteer Canada. It makes insurance available to all organizations in Canada with few exceptions, regardless of budget size. For more details, go to www.volunteer.ca/insurance. IE

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