D&O litigation has become more and more common for nonprofit organizations in recent years. In part, this is probably due to the proliferation of new nonprofits, since inexperienced directors and officers are more likely to make good-faith mistakes that still lead to claims for damages. Paying out settlements for valid claims can be relatively inexpensive, though, especially if your organization is diligent in its selection of insurance coverage. What’s a lot more expensive is the litigation associated with contested claims. So how do you manage D&O litigation costs? It starts with your insurance coverage.
Policy Protections Against Litigation
Purchasing a D&O insurance package with litigation insurance means getting assistance with the cost of litigation when settlements are rejected or when you’re contesting the claims made. This financial protection can mean the difference between budgeting for settlement losses to avoid litigation and fighting to preserve the reputation of your nonprofit. Like regular policy provisions, D&O litigation insurance has limitations and coverage maximums, so it’s essential you work with a provider who understands the ins and outs of your nonprofit’s risk profile. That way, you’ll be able to get advice about how to effectively manage the risks that can inflate the costs of insurance and make litigation more likely. That kind of advice can be more valuable than the coverage, if it helps you steer clear of litigation entirely.