D&O for Non-Profits

Are the directors and officers of your not-for-profit organization exposed to claims of mismanaged assets? Could they be accused of failing to provide necessary services? If your non-profit has employees, could issues of discrimination, wrongful termination, harassment and other employment-related situations arise?

The answer to all of the above is yes. “No profit” does not mean “no risk.” Non-profits should be adequately protected with directors and officers liability insurance. This insurance is designed to protect the personal assets of those individuals choosing to serve. It can also protect management-level employees and the organization itself if named as co-defendant in a lawsuit.

Directors and officers liability insurance will not protect your organization against claims of bodily injury or property damage; such claims must be covered by other forms of liability insurance. The growing probability and expense of litigation may necessitate directors and officers liability insurance for your firm to attract the most capable individuals to serve.

For more information on this important coverage for your non-profit, call our service team today.

Your Benefits Managers’ Risk

Employers cutting costs may choose to handle the administration of benefits in-house rather than pay administrative costs to a third party. This arrangement could create liability for individuals acting as a fiduciary under the Employee Retirement Income Security Act (ERISA).

The exposure should not be taken lightly. Officers or fiduciaries charged with the handling of pension funding and other employee benefit plans may be personally liable for financial damage resulting from a breach. Further, the exposure is not covered under standard general liability insurance. A separate insurance policy—often called fiduciary liability—is required to pay the cost of a claim resulting from a breach. Other methods of covering this exposure may also be available.

How does your firm manage your employee benefits? For more information on this exposure and methods to address it, call our service team today.


Age Discrimination Complaints on the Horizon

More than one in four complaints filed with the Equal Employment Opportunity Commission involve age discrimination. The number could escalate further, according to Paul Siegel, a partner with Jackson Lewis LLP in Melville, N.Y. He warns, “The commission has a period to investigate before it issues a right-to-sue letter.” This means that charges filed with the EEOC last year may not yet have become lawsuits.

As sluggish economic conditions continue, Siegel cautions, “Employers are heading into a period when there will be a renaissance of lawsuits.”

The good news for employers is that employment practices liability insurance remains widely available in the commercial insurance marketplace. This policy is designed to assist employers with the financial burden of employment practices-related lawsuits. Call us to see a sampling of what’s out there for you.

Broad Ruling on Sexual Discrimination

A former female employee of a transportation sales company recently won a victory that allowed her hostile work environment claim to proceed. A federal appeals court overturned a previous dismissal by the lower court. The woman claimed that, as the only female sales representative, she was frequently subjected to coarse language and other vulgarities from male workers about women. The lower court dismissed the case on the grounds that the frequent remarks were not directed at her personally.

The higher court disagreed. “Sexual language and discussions that truly are indiscriminate do not themselves establish sexual harassment under Title VII,” the appeals court said. “Nevertheless, a member of a protected group cannot be forced to endure pervasive, derogatory conduct and references that are gender-specific in the workplace, just because the workplace may be otherwise rife with generally indiscriminate vulgar conduct.

“Title VII does not offer boorish employers a free pass to discriminate against their employees specifically on account of gender just because they have tolerated pervasive but indiscriminate profanity as well,” the court said.

Her complaint also stated that she was forced to listen to a morning radio show that regularly discussed explicit and vulgar topics.

Minimize your risk of employment practices complaints by exercising prudence and respect for all your employees all the time. Better yet, make it company policy.

Bankruptcy Can Lead to Accusations
Bankruptcy filings as of September 2009, according to the Administrative Office for the U.S. Courts, were up 52% from 2008, and they keep coming in.

In many cases, bankruptcy trustees or a creditors’ committee want to file a claim against corporate directors and officers on behalf of the corporation for what they allege to be misconduct that led to the financial collapse of the business. Directors and officers liability insurance is likely not the answer in these cases.

Insurance companies frequently point to the “insured vs. insured” exclusion found in most D&O policies to deny coverage for such claims. To avoid this potentially devastating application of the exclusion, policyholders need to review their D&O policy and, if necessary, request that the insurance company add an exception for suits brought by a bankruptcy trustee or creditor. In some cases, the insurer will offer that possibility.

For a review of your firm’s D&O insurance policy, call our service team today.

Establish Solid Employment Practices

A hostile work environment can cripple production, destroy morale, and land unresponsive, unprepared employers in expensive litigation. Manesh Rath, employment lawyer with Keller and Heckman in Washington, D.C., and Fortune Small Business offer some suggestions for maintaining a positive, respectful workplace.

Guidelines Must Be Clear

Each firm should have a clear discrimination policy outlined in a handbook. Further, training sessions should be available for staff to familiarize them with the policy. Potential violations should be handled immediately.


Detailed notes on employee activity, behavior and communications may serve as material evidence in the firm’s favor at a later date.

Legal Counsel

Consult counsel when creating a discrimination policy and before taking action on a violator.

Avoid Retaliation

Employers are forbidden by law from retaliating against an employee who participates in a discrimination investigation or who is adhering to rules governing time off, such as workers compensation or the Family Medical Leave Act.

Cautiously Consistent

There are situations when rules may require exceptions. One example is altering a dress code for religious purposes. It is wise to consult legal counsel before making exceptions to established guidelines.

Businesses adhering to these recommendations are well positioned to avoid claims of discrimination. To further protect your firm from the financial consequences of a claim, call our service team today. We can help you find employment practices liability insurance that will offer important coverage in the event of an employment-related claim.


Retaliation Lawsuits

Employment practices liability insurance (EPLI) claims are at record levels. The reason is not shocking: Unemployment is threatening to eclipse 10% nationwide in 2010. Widespread layoffs are also diminishing worker numbers in smaller firms at a record pace. One in five smaller firms will have an EPLI lawsuit in 2010, say industry experts, yet only 1.2% of businesses carry EPLI.

Retaliation claims are a leading cause of employment practices litigation against employers. A growing number of former employees say their termination was brought on by some unavoidable factor that caused them to miss work. For this reason, employers should consider legal counsel before terminating the employment of someone who recently requested leave under the Family Medical Leave Act or filed a workers compensation claim.

Small businesses have it a little harder than big ones when it comes to layoffs. The environment is more intimate, and—while a large corporation may reduce staff by 100 or more when it cuts back—smaller firms often have to let just one or two employees go, and that can lead to anger, insult and legal action if it isn’t done properly. Adding to the mix is the fact that smaller businesses often can’t afford the staff or time to document employee performance well in order to support termination decisions. That failure adds to a company’s EPL risk.

Retaliation for whistleblowing is also commonly cited as a reason for termination. If you have a conflict between employees or reports from a worker of legal or ethical violations, you may need to engage a professional to protect the company against fallout.

For more information on how an EPLI policy could protect your firm from the devastation of an employment practices lawsuit, call our service team today.


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  What Does D&O Cover?

Directors and officers of an organization who become the target of a liability suit must understand that standard liability insurance will not protect them.

These individuals must look to directors and officers insurance for adequate financial protection. A D&O policy insures against losses caused by “wrongful acts” by a corporation, its directors and officers, and other executive employees. “Wrongful acts” describes a wide range of claims, according to most policies. Many D&O policies define the term as “any act, error, misstatement or omission, neglect or breach of duty.”

Often, the legal costs associated with such claims are crippling without the assistance of insurance coverage. In addition to dollars for judgments and settlements, many D&O policies will advance dollars for legal fees and defense costs, providing essential assistance for the organization and/or those individuals involved in the claim.

COPYRIGHT ©2010. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is understood that the publishers are not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert advice is required, the services of a competent professional should be sought. 06/10