One of the required but most misunderstood coverages for charter schools is Directors and Officers Liability Insurance.   Often called D&O, this insurance protects the directors and officers of the school (or, in some cases, the school itself) from claims alleging their wrongful acts in their capacity as directors and officers.

D&O policies will provide a limit of insurance to pay claims, but they also offer defense costs arising out of criminal and regulatory investigations and trials.   Depending upon the policy, defense costs will either be unlimited or will erode the insurance limit associated with the policy.

Coverage for a directors and officers’ liability policy is usually triggered by beaches of duty, mixing business and personal assets, incorrect decisions, and errors in judgment made by the board of directors that lead to a lawsuit.  (Keep in mind that most policies exclude coverage and defense costs for intentional or illegal acts.)

This coverage is written in a “claims-made” form.  This means the policy in place at the time of the alleged claim will be the one to respond, even if the act itself may have taken place years earlier.  This is why it is so important that a charter school continually maintain its D&O policy in effect at all times.   If a policy is canceled for non-payment of premium or other reasons, it’s common for the following policy to exclude all acts before the new policy’s inception.

What does a policy cost?

A D&O policy’s premium is affected by various factors, including the board’s experience, number of board members, and prior claims experience.  A basic policy with $1,000,000 limit will typically start around $1,000 to $2,000 in premium.

If you have any questions about putting a D&O policy in place for your school, please feel free to call us at (702) 507-6999.