ALP: You serve on the Board of Directors of a private company and as a trustee for a community non-profit. Is it necessary for those organizations to have directors and officers liability insurance in place to protect you?

January 2004
Business Courier

Absolutely. It has always been a good idea, but in today’s world it is critical. The recent corporate scandals have put the spotlight not only on directors of public companies, but also on those who serve private and non-profit corporations. And if things go wrong, there will always be somebody looking for someone to blame. Any organization that asks you to serve on its Board owes you the protection that D&O insurance can provide.

But a good D&O policy is not the only thing—or even the most important thing—that you need if you serve on a Board. You also need to understand what your legal duties are to that Board and to the organization. The law provides protection for Board members who are conscientious in trying to fulfill their obligations, but it is up to you to know what those obligations are. If your organization does not provide an orientation for Board members that includes information on legal duties and responsibilities, ask for one. Or consult with your own attorney. Service on Boards can be a good and valuable experience, but it can also be very unpleasant if the worst happens and you were not properly prepared for the job.