Why arts organizations need Directors & Officers Liability Insurance
Board members of arts organizations are held, at an unprecedented level, to be personally responsible for the actions and decisions they take on behalf of the organization – putting their personal assets at risk if these decisions are tested in court. Mark Boon, CEO at specialist insurance broker La Playa highlights the importance of Directors and Officers Liability insurance.

“Trustees of arts organizations are putting their necks on the line if the management team makes a bad decision. And with financial pressures causing challenging debates with the unions, every move is a potential lawsuit. It’s crucial that arts organizations put the right Directors & Officers Liability Insurance in place” says Mark Boon, CEO, La Playa.

Independent directors contribute enormously to arts organizations – bigger picture visioning, connections, funding resource and so on, so it’s critical that you don’t leave them high and dry when the worst happens. What if…

  • a key staff member made abad decision – and your Board members were sued personally?
  • your arts organization ran out of money and your creditors went after your Board personally?
  • your trustees were caught up in an employee dispute (discrimination, harassment, unfair dismissal)?

Legally, the directors of a company and the company itself are separate entities – and each entity may end up being defendants, separately or jointly, in any legal action or prosecution. They need proper protection – and the liability coverage that comes with their homeowners insurance will not respond to these types of lawsuits.

Board members’ legal liabilities include:

* Company and trust law: trustees are liable to their charity for any breach of trust or fiduciary obligations.

* Civil law: trustees are liable to third parties either for breaches of contract or for infringement of another’s rights. Copyright issues and privacy breaches are white-hot issues at the moment.

* Criminal law: trustees have different liabilities depending on the state.

In some cases, they may even be liable for actions they have omitted to take. And actions can come from many different sources such as creditors, customers, suppliers, employees (tribunals), shareholders, fellow directors, liquidators and receivers, and regulators.

What is Directors & Officers Liability Insurance? Directors & Officers Liability Insurance (D&O) is now considered a crucial form of protection for all companies, and is often a requirement before board members even risk their personal assets to serve your organization.

It provides protection for directors and senior managers against risk exposures by covering the legal costs to defend the individuals and to pay the settlement or judgment ultimately awarded to the plaintiff. It can also cover expenses incurred by aninsured person who faces formal investigation by a government body into their affairs or the affairs of their organization.

Who’s covered?
Trustees of the board, directors, corporate officers, and the entity and employees defined within the bylaws as having control of operations.

What’s covered?

  • Breach of trust
  • Breach of fiduciary duty
  • Negligence or maladministration
  • Negligent misrepresentation or misstatement
  • Infringement of intellectual property rights
  • Breach of confidence or misuse of confidential information
  • Defamation

The risks are real and tangible. Look after your board – because they’re worth it.