Nonprofit Insurance Program

# Common Directors & Officers Insurance Exclusions

By Alexa Connelly
November 04, 2016

Shopping for insurance policies is a daunting and lengthy process for nonprofits. It requires time to review and understand insurance proposals and terminology. Directors and Officers insurance is an important policy for Nonprofits to consider during an insurance review. Nonprofits need to understand what they are covered for, not covered for, and how they can fill coverage gaps. The biggest mistake a Nonprofit can make is to assume they are covered for every potential lawsuit.

Important Details to Review

There are many sections of an insurance policy. It is nearly impossible to understand all of them initially. Ask your insurance agent for clarity on these important details:

  • What are limits? What do they mean?
  • What is the policy term?
  • Are there any conditions of binding?
  • What is covered?
  • What is excluded?
  • s there a way to add insurance to cover the exclusions?

Insurance agents specializing in nonprofits can answer these questions with ease while identifying the impact on your nonprofit.

Common Exclusions

A critical section of any policy is the exclusions. Here are five common exclusions you need to understand before purchasing a DO insurance policy for your nonprofit.

  1. Known Circumstances. Directors and Officers insurance policies do not provide coverage for any incidents the insured knows about. This includes incidents in the past or potential lawsuits they can forecast.
  2. Prior Acts. Most insurance policies specifically exclude any claim or incident that occurred prior to the effective date of the policy.
  3. Illegal Acts. No insurance policy is intended to cover an illegal act. Directors and officers insurance does not provide coverage for board members who knowingly embezzle money, make an illegal profit from decisions, or any other illegal act.
  4. Contractual Liability. A common D & O insurance policy exclusion applies to contracts. Some insurance policies exclude written and/or verbal contracts because they are not liabilities obligatory by law.
  5. Insured vs. Insured. Some insurance companies don’t provide coverage when a board member files a lawsuit against another board member.

These five exclusions leave room for potential uncovered claims. Some insurance policies offer policies specifically tailored to Nonprofits without these exclusions. Contact your insurance agent today to make sure you are properly covered for potential claims.

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