Why should a nonprofit board carry D&O (Directors and Officers) Insurance and should every board carry D&O?
The simple answer to why: protection for the board members IN THESE TIMES. Should EVERY board carry D&O? I believe the answer to be unequivocally "YES!"
But wait, what does D&O insurance cover? According to the on-line magazine Blue Avocado,
D&O insurance provides coverage for "intentional" actions taken by an organization's board of directors or management that someone else thinks is wrong. So since the board approved all your personnel policies (intentional act), if your nonprofit fires someone and that individual disputes whether you followed your policies . . . well, you get the picture. Or perhaps you followed all your policies but the employee still believes they have been discriminated against or wronged. Note though: D&O legally can't cover you for tax liabilities the organization incurs, or for any deliberate acts, such as criminal acts.
It is my understanding that one of the most important reasons for carrying D&O insurance is this very law-suit laden society is the cost of legal defense. Who wouldn't want that?
Bottom line, if you currently serve on a board, don't go to sleep tonight without knowing that your nonprofit has you covered. It's both in yours and your nonprofit's best interest.