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The special insurance coverage small businesses may need, and you may need even if you don’t own a business!

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Author: Insider94 Staff 

Are You Covered?

If you own a business, it’s likely you have ongoing conversations with an insurance expert to ensure the business is covered to protect its assets and operations. Part of a comprehensive business policy will likely include insurance for its leaders – coverage for Directors and Officers of the organization that protects their personal assets and their spouses in the event they are personally sued by employees, vendors, competitors – or anyone. 

Less commonly known, is that even if you do not own a company, but you serve on a Board or leadership position for a non-for-profit — say a church…or Soccer League….or a cause related organization….you could be at risk too if the organization does not carry Directors and Officers (D&O) Insurance. 

We contacted Joe Emerich, Founding Partner of Xartis Group for insight and answers. 

Insider 94 – It’s often said that no good deed goes unpunished.I bet a lot of people out there, passionate about volunteering and donating their time in a leadership position to good causes, don’t realize they may be at risk if their organization does not have coverage for them? 

Joe Emerich – Many nonprofit organizations have inspiring stories behind their creation. It’s not uncommon for passionate founders and directors to devote years of hard work and their own funds to move the conception of an idea into the birth of an organization dedicated to their cause. Often with little or no monetary compensation, nonprofit directors and officers rely on intangible rewards—the stories of the difference they’ve made in the community and peoples’ lives. 

But a costly lawsuit could quickly put an end to that story. 

Insider 94 – Do people really sue nonprofit organizations? 

Joe Emerich – Yes! As society becomes more litigious, nonprofits are increasingly vulnerable to lawsuits that threaten their operations and, in some instances, drain their limited funds to the point where they have to close their doors. At the point where a nonprofit reaches insolvency, directors’ and officers’ personal assets are at risk. 

Although armed with energy for their cause, nonprofit officers and directors are sometimes ill-equipped with the business acumen or financial resources to manage the liabilities of their nonprofit in the same way as a for-profit corporation. Some simply don’t understand or are not cognizant of their legal liabilities. 

Insider 94 – This sounds like something everyone serving in leadership positions for companies and nonprofit organizations should check to see if they have coverage.What is the coverage and what does it cover? 

Joe Emerich – Directors and officers (D&O) liability insurance protects the company as well, covers legal fees, settlements, and other costs. D&O insurance is the financial backing for a standard indemnification provision, which holds officers harmless for losses due to their role in the company. Many officers and directors will want a company to provide both indemnification and D&O insurance. 

Directors and officers are sued for a variety of reasons related to their company roles, including: 

  • Breach of fiduciary duty resulting in financial losses or bankruptcy 
  • Misrepresentation of company assets
  • Misuse of company funds
  • Fraud
  • Failure to comply with workplace laws
  • Theft of intellectual property and poaching of competitor’s customers
  • Lack of corporate governance
  • Illegal acts or illegal profits are generally not covered under D&O insurance.

Insider 94 – So how should a business decide if they need this coverage? 

Joe Emerich – Any business with a corporate board or advisory committee should consider investing in D&O insurance, including non-profit organizations. Your organization does not have to post revenues in the tens of millions of dollars for your directors and officers to be personally sued over their management of company affairs. In fact, smaller businesses with fewer assets may need the protection just as much as large, deep-pocketed organizations. 

Insider 94 – If someone is donating their time to an organization in a leadership position how do they find out if they have D&O insurance? 

Joe Emerich – You have to ask. Ask the organization about the policy and have a copy of it. It’s a reasonable request. If you run an organization where you are looking for Board members and leaders in operations then you should proactively share that the organization does cover their participation. It will help with recruiting and also send a signal to participants that you are a well run and thoughtful organization. 

Insider 94 – That is a lot to think about! Any other advice you have? 

Joe Emerich – Yes. There are so many ways to protect risk. Work with a knowledgeable broker and allow them to understand your organization holistically. Insurance should not be viewed as only an expense, but an investment in your business and future. 

Joe Emerich can be reached at  We want to add on behalf of Xartis Group that the information provided here is not investment, tax or financial advice. You should always consult with a licensed professional for advice concerning your specific situation.

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