Directors & Officers Coverage

What is Directors & Officers Insurance?

Those who volunteer on your board strive to put the ministry’s interests first and manage the organization well. But they’re human. They can make mistakes, use poor judgment, or fail to act. This can lead to lawsuits alleging wrongful acts by your ministry and its leaders. Without the proper insurance, your ministry and its leaders could find their bank accounts drained by legal defense costs, even if you ultimately win.

Directors & Officers (D&O) or Leadership Liability Coverage pays for financial damage claims caused by the negligence of your ministry’s governing board or leadership and for decisions made in connection with ministry operations. 

Your Role as a Board Member

Do you serve on the board of your ministry, or expect to serve in the near future? If so, congratulations. Serving on the board of your local church or ministry is a great honor, and a wonderful way to contribute your character and counsel to the advancement of the kingdom.

As a board member, you take on responsibility above and beyond that of a regular attendee. You and your fellow board members must make some of the most important decisions impacting the organization including approving budgets, buying and selling property, and borrowing money.

Risks to Board Members

As you can imagine, these types of decisions can invite a wide variety of lawsuits questioning the board’s decisions and allocation of resources. Claims of fraud, breach of fiduciary duty, misuse of funds, and waste of an organization’s assets are among the most common complaints boards face.

Allegations of mismanagement place the ministry at risk, but can place you personally at risk as well. As an individual, your personal assets may be exposed if the ministry has not incorporated and taken the necessary steps to protect individual members from personal liability.

Considerations for Insurance

Incorporating your ministry can be a good first step to protecting individual members of your organization. However, this is not a replacement for the right insurance coverage. Even if your board were to win a case and prove immunity in court, you must still consider the thousands of dollars in legal defense costs it may require to fight even a fraudulent claim.

When evaluating coverage, look closely at how the policy defines an “insured.” Standard D&O policies for companies cover only the directors and officers. Look for coverage that also will protect employees or volunteers who make decisions on your ministry’s behalf. ChurchWest can broker D&O coverage that defines the term ‘insured’ broadly to protect your ministry, its leaders, and their spouses, in relation to any leadership activity they undertake on your ministry’s behalf.

What are examples of Directors & Officers claims?

These are a few Directors & Officers claims that we’ve seen ministries like yours face. While every situation is unique, these scenarios help illustrate the types of risks that this coverage can protect against.

• A longtime attendee decides to run for public office. Your church helps the candidate recruit volunteers and endorses the candidate from the pulpit. You also encourage the congregation to give generously to the candidate’s campaign and even loan money to cover the cost of campaign expenses. The candidate’s opponent reports the church to the IRS which revokes the church’s tax-exempt status. When several large donors discover that their contributions to the church will not be tax deductible, they sue the church and its governing board for financial damage.
• Your church places a notice in its bulletin that all attendees should boycott a particular business in town due to its “anti-Christian” activity. Several terminate their relationship with the business. The business sues the church and its leaders for financial damage resulting from the boycott.
• Your denominational office receives a contribution from a donor for the specific purpose of purchasing and developing a denominational campground. After considering the matter for some time, the board decides not to develop a campground but instead sends the money to missionaries around the world. The donor demands the denomination return the money, and files a suit when the office claims it no longer has the funds.
• Your outreach ministry hires a contractor to widen a drainage ditch running across your property. The board selects an individual from a local church to serve as the contractor but fails to investigate his qualifications. Board members do not discover that he has no prior experience with this type of project and carries inadequate insurance. During construction, the contractor strikes a support beam on a bridge running next to the ministry’s property, rendering the bridge unusable and causing substantial traffic issues. Nearby businesses sue the ministry for financial damage resulting from decreased sales and negligence in its selection of the contractor.

Next Steps

In conclusion, Directors & Officers coverage is an essential protection for your ministry to defend your leadership’s decisions and reduce personal liability for the leaders of your ministry.

Worried about the cost? A ChurchWest Ministry Insurance Advisor can bundle your D&O coverage with other ministry-specific coverages as part of a comprehensive insurance package. By bundling your coverage with ChurchWest, you can get the best protection at the most affordable price.

Click the “Get a Quote” button at the top of this screen to contact your local advisor, or explore our other coverage pages to learn more about guarding your ministry’s finances and reputation.