D&O coverage is typically sold in a bundled package with Employment Practices Liability insurance. Limits, which can be shared or segregated, vary by size of the nonprofit, but are usually $1 million, $3 million or $5 million, says Sal Pollaro, managing director for Markel Corp. Limits can reach into the tens of millions of dollars for the larger nonprofits.
Coverage is on a claims-made basis. A departed board member remains covered so long as the nonprofit’s D&O coverage stays active.
Deductibles begin at $500, says William R. Henry Jr., executive director of Volunteers Insurance Service Association Inc. The number of people associated with the organization drives the premium.
Recently, the D&O line has seen “many more market entrants,” says Tom Marchetti, vice president at specialty-insurance broker and management-consulting firm Ames & Gough. A decade ago there might have been just four or five main specialty insurers in the space.
“This increase in competition is driving price and coverage terms,” says Marchetti. Self-insurance is also an option for the larger nonprofits, he adds.
Henry says nonprofit D&O is less expensive than D&O insurance for a for-profit organization and is worth getting, since coverage for wrongful acts is not provided by a Commercial General Liability policy—which only covers bodily injury and property damage.
Henry says nonprofit D&O is less expensive than what for-profit organizations pay. But “expensive” is relative. Scott Simmonds, a business-insurance consultant, tells clients the “price of admission is at least $750”—a nominal amount for a for-profit concern. “But that can be the annual budget of a small nonprofit,” he adds.