Charity Governance

WHY D & O INSURANCE IS IMPORTANT: RAISING A CONFLICT OF INTEREST TRIGGERS LAWSUIT

DATELINE: April 18, 2008, Chicago

Nonprofit officers and directors should take a look at a recent case coming out of the United States Court of Appeals for the 11^th Circuit. In M.S. Koly v. Elizabeth Enney, 2008 U.S. App. LEXIS 5171 (2008), the court was faced with an appeal from a lower court decision involving allegations...

WHOEVER IS RIGHT, LITGATION OVER PRINCETON UNIVERSITY’S WOODROW WILSON SCHOOL’S ENDOWMENT IS COSTLY

DATELINE: June 5, 2007, Chicago

We don't know exactly how much Princeton University has already spent or will ultimately spend in its ongoing battle with the heirs of Charles and Marie Robertson, but the litigation is costing everyone more than a few pennies. An April 23, 2007 decision coming out of the Supreme Court of the State of New York, County of New York, reports that Princeton has already incurred more than...

CALIFORNIA ATTORNEY GENERAL ENTERS INTO A SETTLEMENT AGREEMENT WITH THE AMERICAN RED CROSS: PUZZLING, BUT VERY INTERESTING

Dateline: January 22, 2007, Chicago--GO BEARS

Now-former California Attorney General Bill Lockyer announced late last year (December 27, 2006) that he had entered into an agreement with the American Red Cross (ARC) over its Donor Direct program and the way the ARC determines executive compensation.  In the past we have defended the ARC against certain attacks made by the media and elected officials, but even we are beginning to wonder:  This is a major charitable organization with hundreds of millions of dollars flowing through its coffers.  Why...

THE MILWAUKEE PUBLIC MUSEUM: D & O INSURANCE PAYS OFF FOR INDICTED FORMER CFO

Dateline: December 21, 2006, Chicago

Dave Umhoefer of the Milwaukee Journal-Sentinel reported in a December 7, 2006 article that Terry Gaouette is using a $5 million directors’ and officers’ liability insurance policy to finance his defense against criminal charges that are rooted in the 2005 collapse of the Milwaukee Public Museum.  See Dave Umhoefer, Museum Insurer Covering Ex-CFO: Gaouette's Already Been Repaid $77,760 For Legal Bills in Criminal Case, Milwaukee Journal-Sentinel, December 7, 2006.  Every director and officer of a nonprofit should take a close look at Umhoefer’s story.  The lesson is clear... 

D & O INSURANCE: YOU MUST READ THE FINE PRINT OR SUFFER THE CONSEQUENCES

We highly recommend that directors and officers, particularly volunteers, demand that their organizations purchase directors’ and officers’ liability insurance to protect them in the event they are sued in their capacity as officers and directors.  We have previously noted that as a practical matter, the likelihood that a monetary judgment will be rendered against a volunteer director or officer is fairly remote, particularly if the volunteer is in the slightest bit attentive. This is particularly true given many state liability shield statutes and the federal Volunteer Protection Act (which will not limit direct actions by the nonprofit or the state’s attorney general).  However, there is still the cost of defending a lawsuit.  This is where D & O insurance is worthwhile, particularly when combined with employment practices coverage.

When reviewing a D & O policy, we have always believed...