Most charter schools we work with have Directors & Officers Insurance to protect that board of directors from potential litigation and claims.   What we have found, though, is that while we explain what Director’s & Officer’s insurance coverage is, it still helps to have some reference of past claim scenarios that have happened to other charter schools for a point of contact.

With that in mind, we wanted to share a couple of claims that happened to charter schools that fell under the Directors & Officers Insurance policy.

If you have any questions or want to receive a Directors & Officers insurance quote for your charter school, please feel free to contact our office.

Claim Scenario 1:

Description of Event – A charter school filed for bankruptcy. A group of creditors sued each member of the board of directors for breach of fiduciary duty, alleging that improper distributions were made by the board members, which caused the insolvency.   The plaintiffs alleged breaches of fiduciary duty of loyalty and care violations of the state’s non-profit laws and sought more than $2 million in damages.

Resolution – The case was settled for approximately $250,000. In addition, the insurance company incurred an additional $300,000 in defense costs.

Claim Scenario 2:

Description of Event – A charter school experiencing severe financial difficulties entered into a strategic business alliance with a third party. Under the agreement, the third party would manage the hospital’s day-to-day operations and eventually acquire it. The contemplated sales were unsuccessful, and the charter school filed for bankruptcy protection. The creditors sued the charter school’s directors and officers, alleging mismanagement in the period before insolvency and breach of fiduciary duty for not accepting a competing offer to sell.

Resolution – The insurance company paid over $500,000 plus an additional $200,000 in defense costs.