1. Directors and officers are not protected by corporate status.
The members, volunteers, directors, and officers may still be liable even if the organization is legally incorporated. Directors and officers of a corporation are responsible for their own actions as well as those of the corporation. In some instances they are even responsible for the actions of other directors. The courts have assessed damages against directors of corporations for their wrongful actions and in some cases the laws impose specific legal responsibilities on these directors.
It's a hard truth. One that is best understood before a claim occurs.
2. Even organizations that try to do good can get hit with a D&O law-suit.
Charities and non-profit organizations may not have shareholders, but they do have other stakeholders. Potential plaintiffs include representatives of government agencies, donors, vendors, service recipients alleging injury from the non-profit's actions or failure to act, or employees and volunteers.
3. Resigning from the board doesn't protect you.
When directors or officers resign from a company when they find out there is a problem, they can still be sued. They have a duty to be diligent and oversee the operation of the organization. If they failed this duty, even by omission, they can still be held liable even after they have resigned.
4. Not all policies or insurers are equal.
At the time of a D&O claim, the last thing you want to learn is that your coverage isn't as good as you thought it was. While coverage itself is important, and must cover all the exposures that are unique to your organization, don't underestimate the amount of expertise required to properly identify your areas of exposure. Similarly, you want a company that can step up and guide your organization through the claims process, and always ensure that your insurer is financially stable and able to pay claims on your behalf.
5. Defending you is often the most difficult and expensive part of a D&O suit.
Your D&O policy typically includes the requirement to defend your organization against lawsuits. Your insurer steps in with their years of D&O experience and works on your behalf to settle, defend or dismiss the claim.
For many organizations without proper D&O coverage, the cost to defend yourself against a suit can be permanently damaging — even if the suit against you settles in your favour.