Board of Directors Membership and Personal Liability: Am I At Risk?

board of members in a meeting

Are board members vulnerable to personal liability?

Members of boards of directors, even of nonprofits, often make important strategic and financial decisions for the organizations they manage. These decisions could result in a liability, with a single, unfortunate incident jeopardizing an individual’s livelihood or even career.

With such a high potential risk for personal liability, it’s important that board members protect their personal assets and careers if charges are ever brought against the organizations they serve. Board members of international organizations could face increased risks if they have significant assets.

If a nonprofit is sued, board members can be held personally liable for the actions of the organization as they have fiduciary duties to the nonprofit as well as its beneficiaries and donors. In essence, this means that the personal assets of the nonprofit’s directors and officers are at risk.

Unfortunately, any liability incident can be extremely time-consuming and costly. There is, however, a way to manage risk posed both to an organization and its board members – securing directors and officers liability insurance, otherwise known as D&O coverage. This coverage is designed to cover costs of mounting a defense or paying a settlement if the worst does happen.

It is also important to tell your agent, while you are renewing or obtaining a personal liability umbrella, that you are a board member to an organization.  Additional coverage may be included to cover you for claims against you as a board member.

Keep in mind that unforeseen disasters can happen to any organization – even startups should consider securing D&O insurance crucial.

The team at Lou Aggetta Insurance Services can help you to secure reliable commercial insurance to safeguard your organization. Contact us today in Pleasant Hill, California to get started.