Executives of non-profit health care organizations, including home health care and hospice providers, are increasingly being held personally legally liable for wrong business decisions by employees, patients, competitors and regulators. No matter what the size of the organization, there is a surge in claims from internal and external stakeholders, including, for example, allegations of discrimination.
It’s important, therefore, to make sure that your insureds understand the need for Directors & Officers (D&O) Liability insurance to protect executives and their organizations in the event of personal liability lawsuits. This is particularly relevant as the home health care industry continues to see expansion and growth: It’s expected that by 2027, about 67.5 million seniors will live in the United States, and the country will need about 6.1 million long-term care workers, which is nearly 2.3 million more than we have today. This demand for additional staffing to meet the needs of seniors will greatly contribute to the growth of the industry but also increase the liability exposures that non-profits and their board of directors and executive management face as they oversee and/or implement massive hiring and training programs as well as the vetting of freelance contractors who supplement services the firms themselves either don’t provide or don’t have enough staff to handle.
Some of the claims management faces – and will continue to face – as the industry sector grows include allegations of abuse of patients as well as mismanagement of funds or of the organization itself. Claims of mishandling finances—investments, donations, employee retirement funds, etc.—can put directors and officers of non-profit organizations in a position that requires costly defense and settlements and judgments.
Securing D&O Coverage
D&O insurance is designed to protect insureds against costs associated with allegations of wrongful acts associated with governance decisions and fiduciary failures. It should be made clear to the insured that there are three types of coverages available in a D&O policy:
- Side A: Pays directors and officers directly for defense costs and liability assessments if they are not going to be indemnified by the organization.
- Side B: Covers reimbursement of the organization when it indemnifies its directors’ and officers’ costs that are allowable under the organization’s corporate documents or by law in a liability action.
- Side C: Insures the organization itself for claims it engaged in wrongful acts.
All three coverages may be provided to an organization and its board and management leadership.
In addition, non-profit organizations face allegations of employment practices violations where a leader of the organization is accused of mistreating an employee or prospective employee. Ensure that your insureds not only carry D&O insurance but also have separate Employment Practices Liability (EPL) insurance policy to protect against allegations of discrimination, harassment, wrongful termination and other employment-related issues.
When going over D&O coverage with home health care and hospice providers, be sure they understand what is and isn’t covered. Policies are worded differently and it’s important to be very specific and detailed with an insured as to what is covered, how a claim is triggered, and any exclusions that exist.
Manchester Specialty Programs specializes in designing a comprehensive Management Liability program that not only covers the needs of directors and officers, but also home care employment practices liability risks. For more information about our products and services, please contact us at (802)-472-1500.