Board approval dates:

• Created on: 03/05/2024
• Most recent update: 06/07/2024

Under the oversight of the board’s Finance Committee, the Academy’s Executive Director shall be authorized to purchase and maintain a Directors and Officers insurance policy designed to protect board members and other senior staff at the college against potential legal claims. The Finance Committee of the board shall review the specifics of the Directors and Officers policy at least once per year with the Executive Director, in order to ensure that adequate insurance coverage is maintained at all times.

Among the purposes of Directors and Officers Insurance policies are the following:

Protection for Community Board Members and Officers: A D&O policy provides financial protection for Community Board members and other key individuals at the college against claims alleging wrongful acts in the performance of their duties.

Attract and Retain Community Board Members: Because it provides a level of protection and reassurance against personal liability, having D&O insurance in place can help to attract qualified individuals who may be considering serving on the Community Board.

Coverage for Legal Costs: Legal expenses can be substantial, even if a claim is ultimately unsuccessful. A D&O policy can help cover these costs, including attorney fees, court costs, and settlement payments.

Peace of Mind: Knowing that there is insurance coverage provides peace of mind and allows board members to focus on their roles without undue worry about personal financial liability.

RECOMMENDATIONS

Policy Limits: A policy limit of $1 million per claim and $2 million aggregate limit per policy period is often recommended. This means the policy would cover up to $1 million for each individual claim and up to $2 million in total for all claims during the policy period.

“Side A” Coverage: “Side A” coverage provides protection for individual directors and officers when the organization cannot indemnify them. Side A coverage limit of at least $1 million is often recommended.

Defense Costs: The policy should ideally include coverage for defense costs outside the policy limit.

Entity Coverage: Entity coverage protects the organization itself from certain types of claims. A coverage limit of at least $1 million is often recommended.

Additional Coverage: Additional coverage options such as employment practices liability insurance (EPLI) or fiduciary liability insurance should be considered.

Consultation with an experience insurance broker familiar with nonprofit D&O insurance should occur periodically to ensure adequate protection is maintained.