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Directors and Officers InsuranceDate: June 3, 2012 by Maria Foley  Views: 2193
Our community chorus is governed by up to 10 board members, some chorale members, some not. We were advised to purchase D&O (Directors & Officers) insurance (in addition to Liability Ins) but there are differing opinions as to whether that expense is necessary. What does your group do?
Replies (6): Threaded | Chronological
John Howell on June 3, 2012 11:21am
Maria: Interesting question, since I've never heard of that kind of insurance. Who "advised" you, an insurance salesman?
If you're incorporated the board is automatically protected from liability for the organization's problems, if I understand it correctly. But what that might be is insurance to cover "indispensible" and very highly paid Board members of a financial institution or business, not something most community choirs will ever have to worry about!
But check with insurance professionals, and get several opinions.
All the best,
John
on June 3, 2012 6:39pm
Julia,
As Allen notes, the earlier thread gave the right advice. It is a good sign in your chorus's evolution that this issue is coming up. You really should have D & O insurance. It costs us less than a thousand dollars a year. The biggest benefit is that having D&O coverage can help you recruit sophisticated, well-helled board members who know enough about these things to care. They will be more invested in your chorus is they know you've got their back. Remember that the board members you want are people in the community who are competent and valuable enough to be looking at several boards to serve on, and D&O helps you play in bigger leagues.
On another topic, I would strongly recommend that over time you wean your board of people who sing in the chorus. That is unsolicited and perhaps controversial advice for a community chorus, but it is the best direction for the long term in my view. Contact Chorus America (www.chorusamerica.org), the experts in the field, for more on this crucial topic.
--Jonathan Miller
Founder and Artistic Director
Chicago a cappella
on June 4, 2012 5:20pm
Jonathan: There is, unfortunately, a question of scale here. You wrote, "it costs us less than a thousand dollars a year."
There have been many years when our community orchestra's entire annual budget has been less than a thousand dollars. Our community band does better, because it does a better job of fund-raising. Our community musical theater organization has throughput considerably larger (theater is EXPENSIVE!), but is lucky to break even. For those in this situation D&O insurance isn't just a luxury, it's an impossibility!
As to recruiting "sophisticated, well-healed board members who know enough about these things to care," or whether, in Tom's words, "I would never consider serving on a board without a strong and broad indemnity clause in its by-laws and a D&O policy to back that up," I'm afraid you're both simply playing in a different league from many of us. In fact I would go just a bit further. Any executive type who would worry his pretty little haircut over whether or not to support a community organization based on their insurance covereage probably doesn't belong in that position in the first place.
As to whether it's really advisable to phase out active members serving on boards, most of our boards around here have nothing BUT active members on them. There are certainly perfectly good arguments on either side of the question, and I've heard plenty of anecdotal evidence to support both sides, but it is not necessarily and inevitably the best thing to do. Who else really CARES about their own organization but those who are already part of it?
All the best,
John
on June 4, 2012 4:58am
Yes, it is best to get the policy. Unfortunately we live in a
litigious society that makes it necessary. I'd also encourage them
to sign a conflict of interest statement, especially since some are
members/singers. I can send you ours if you'd like. Message me
through this site if you'd like it.
on June 4, 2012 6:07am
I've said this before, whenever this topic has come up on
ChoralNet. I'll say it again, though, since I'm likely the only
person on this site who was also a D&O underwriter for a few
years....
Whether I'm serving on the board of a billion dollar, publicly traded company, a multi-million dollar non-profit foundation, or a community chorus scraping by on every nickel, I would never consider serving on a board without a strong and broad indemnity clause in its by-laws and a D&O policy to back that up. Non-profit D&O is very inexpensive for the reason JH identified: directors and officers of a 501c3 receive a considerable amount more personal protection than those in the for-profit sector. However, there are quite a few types of suits that can pierce this liability shield. I took part in defending several of my clients during my time in the business. I can think of a couple of cases in particular where the cases brought were frivolous, groundless, and stupid. Naturally, we won them; and the defense costs were ONLY around $30 to 50 thousand in each. Good thing the policy was paying that.... Note that there is no standard form for D&O. It's not like
an auto policy, where each company's form is basically identical.
There are a handful of "trigger" coverages you want to look for in
the policy that you purchase:
Also ask your agent what carrier he/she is quoting. Best bets (in terms of coverage form AND customer service) out there at this time are Chubb and a company called First Nonprofit, who obviously specialities in this. If you're affiliated with a church yu might be able to tap the two big church insurance carriers: Church Mutual and Brotherhood Mutual. Even for these great products, the premium for a $1M policy shouldn't exceed $1,000 to $1,500 per year. Send me a message if you have any questions. I'm out of the business and not trying (or even able) to sell you anything.
 Community tags: ACDA of Minnesota
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