Do you serve on a board of directors? As a way to “give back”, many people serve on a board of directors, and perhaps more than one. While this is a wonderful way to serve your community, it’s important to know if there is insurance coverage to protect and defend you for the decisions you’re making as a board member.
Often, the organization will purchase a Directors and Officers policy for this very reason. So it’s always a good idea to ask if the organization has a Directors and Officers policy in place (called D & O for short).
However I also know that most people won’t even think of asking about a D & O policy (because they don’t know to ask) or mistakenly assume they have coverage under one of their personal policies, namely a personal umbrella policy.
The point of this post is to discuss whether or not your personal insurance policies (namely the personal umbrella insurance) provides any coverage if you’re serving on a board of directors. Time to get rid of dangerous assumptions and prompt you to think of questions to ask your own insurance agent.
You MAY have some coverage as a member of a Board of Directors, but check the exclusions
As a general rule, you MAY have coverage for your time spent on the Board of Directors, but it often relies on what type of organization it is (for-profit vs. non-profit for example) and whether or not you’re paid for your time. Following are three real-life personal umbrella exclusions lifted directly from our companies policies. This gives you several good examples of what real-life personal umbrella insurance policies offer in terms of coverage.
Board of directors Exclusion #1
Any act or omission of anyone we protect as an officer or member of the board of directors of any corporation or other organization, except non-profit corporations or organizations.
So in this example, it appears if the organization is non-profit, you would have some coverage. You ALWAYS want to consult your insurance agent as it relates to YOUR policy. But, this shows you real language that is being used and will hopefully be the spark for you to have that conversation.
Board of directors Exclusion #2
Personal injury or property damage arising from any act or omission of the insured as an officer or member of the board of directors of any corporation or other organization. This exclusion does not apply to a non-profit corporation or organization for which such officer or member does not receive a salary.
Here it looks like the non-profit organization is also a requirement, BUT you can’t receive money for your time. Many organizations pay their board members, typically per meeting.
Board of directors Exclusion #3
“Bodily injury”, “property damage”, or personal injury” resulting from an “insured’s” service as an officer or member of a board of directors. However, this exclusion does not apply to “bodily injury”, “property damage”, or “personal injury” resulting from an “insured’s” service as an officer or member of a board of directors for a not for profit organization for which the “insured” is not compensated.
Similar to Exclusion #2, non-profit is a requirement for coverage to apply AND also the board member must not receive any compensation.
Yes, personal umbrella insurance MAY provide coverage for you as a board member
Judging by these examples, chances are good if the organization is a) non-profit and b) you are not paid for being a board member. Any combination of these could make you ineligible for coverage.
Here’s some additional resources about umbrella insurance.
The point here is to eliminate dangerous assumptions, and prompt a conversation with your insurance agent or company. We don’t like nasty surprises and I’m sure you don’t either!