As a type of nonprofit organization founded and funded by the businesses operating in a certain industry, a trade association may participate in a range of public relations activities that can expose them to certain risks. For example, activities such as lobbying, advertising, hosting charitable or networking events, offering classes, publishing newsletters and making political donations can make your association vulnerable.
If your trade association is the subject of a lawsuit, the expenses involved in defending your association could lead to serious financial loss as well as potentially irreparable harm to your association’s reputation. Getting the proper protection can give your association valuable peace of mind. Many different types of insurance are suitable for trade associations, but one of the most important policies for Northern Virginia trade associations is Directors and Officers coverage. This is considered the minimum insurance coverage a trade association should have.
What Is Directors & Officers Liability Insurance?
Also known as a D&O policy, this type of insurance can protect the personal assets of your association’s directors and officers, as well as their spouses, if they are personally sued your association’s employees, investors, competitors, vendors or other parties for alleged or actual wrongful acts in carrying out their roles for the association.
Such individuals may not be business people with experience as directors or officers and may lack knowledge of their legally recognized duties and responsibilities, making mistakes more likely.
Why Northern VA Trade Associations Should Acquire D&O Insurance
Many trade association boards are run by member volunteers, and without this type of insurance, their personal assets are at risk in claims against them related to their duties with the association. This type of policy also protects the association itself.
Unfortunately, the damages that are recoverable from the directors and officers of even small nonprofit organizations can exceed many individuals’ net worth. This insurance covers legal fees and settlements, along with other costs. Many officers and directors will only consider serving your association if you have this type of insurance in place to protect them.
Although many people think of D&O claims as being something that mainly affects public companies, no organization is immune to these types of lawsuits. Public, private and non-profit companies alike are vulnerable to D&O litigation risks. Trade association directors and officers can be thought of as having an even more demanding job than their counterparts in for-profit organizations because the trade association’s affairs may be less familiar to them and could be carried out under less efficient conditions than those seen in business corporations.
Moreover, because trade association directors and officers are not always subjected to the same level of external scrutiny faced by their for-profit counterparts, there can sometimes be a greater tendency to become complacent or even careless when it comes to their fiduciary role. In addition, because some trade associations must operate with a lack of resources, even the best-intentioned directors and officers might not have the support they need, which makes it more difficult for them to carry out their roles.
What Does Directors & Officers Liability Insurance Cover?
Here is a look at some of the potential claims that a Directors & Officers Liability policy might cover:
- Conflicts of interest
- Unfair employment practices
- Improper self-dealing
- Misleading or false reports
- Violating bylaws
- Breach of contract
- Fraudulent conduct
- Mismanagement of assets
There are also specific risks that trade associations in Northern Virginia might face. Consider having the following types of coverage included with your D&O insurance policy:
Antitrust Allegation Protection
One of the costliest claims that a trade association can face is a standard setting or price-fixing lawsuit.
If your trade association has a headquarters and chapters, you might consider getting each chapter its policy with comprehensive Directors & Officers protection.
Employment Practices Coverage
D&O Liability policies can protect all insured parties of an organization against damages from claims related to sexual harassment, unfair hiring and firing practices, discrimination and wrongful termination.
The Cost Of Directors & Officers Insurance For Trade Associations In Northern Virginia
This coverage is typically placed at a standard minimum of $1 million per occurrence/aggregate with a retention of anywhere from $0 to $15,000, but this varies depending on the association. Other factors that can impact the cost of a D&O policy include:
- The trade association’s assets
- The number of directors and officers
- The nature of the trade association
Reach Out To The Trade Association Insurance Professionals
Directors & Officers Insurance is only one type of policy that trade associations need. For maximum protection, trade associations should consider property insurance, employment practices liability insurance, property insurance, workers’ compensation insurance, and general and professional liability policies.
To find out more about how Directors & Officers Insurance can protect your trade association, reach out to the Northern Virginia insurance professionals at CI Solutions by calling 703.988.3665 or by applying for trade association insurance online.