Non-Profit Directors' And Officers' Insurance

Abstract

As a person considering an offer to take up office with a non profit organisation or as a person already holding such a position, one way of dealing with the increased exposure to liability may be to refuse the offer or resign from your position. Although this is a legitimate risk management tool (and appropriate in some circumstances), it is essential to the community support provided by non-profit organisations that the "close up shop mentality" does not prevail. Although regulation of the business community and the community in general and enforcement of those regulations has increased, the legal framework in which directors, officers and committee members of non profit organisations operate has not substantially changed in recent times. It is necessary to face up to liability exposures (many of which have existed for centuries) and take steps to manage those exposures in order to carry out the objects of the organisation you serve and which in turn serves the community.

Although insurance forms only part of a risk management program and is only one form of risk financing, in most cases it has historically been the cheapest and most effective aid to risk management. However, with the impact of September 11, many organisations are seeing substantial premium increases and, in some cases, are finding it difficult to obtain insurance. Against this background, it has never been more important for officers of non-profit organisations to understand the role of insurance as a part of the a risk management strategy.