Insurance: The Basics for Directors and Officers of Non-Profit Organizations  

January, 2003 - Ernest Martin Jr

Today – more than ever – corporate management is under attack. In the wake of the Enron debacle, corporate decisions are more carefully scrutinized, and the conduct of the company’s directors and officers are now constantly under the watchful eyes of investors, creditors, and government regulators. However, will that same scrutiny compel changes in the conduct of directors and officers of non-profit organizations? How far will Enron’s wake extend into the non-profit arena? With these questions dangling in a sea of uncertainty, it has become increasingly important for directors and officers of non-profit organizations to appreciate the duties and responsibilities they owe to the organization. This potential for heightened scrutiny compels directors and officers to better understand D&O insurance, the one product specifically aimed at protecting important assets of those officers and directors. Of course, with the potential for exposure to liability, a basic understanding of D&O policies is not enough. One must stay abreast of emerging issues under the D&O policy. The purpose of this paper is not to provide an exhaustive or technical treatment of D&O insurance. Instead, the objective here is twofold. First, this paper will hopefully equip counsel with a basic understanding of D&O insurance. Second, it serves to introduce to counsel some key emerging issues under the D&O policy.



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