The Importance of D&O Coverage for Home Care Non-Profits

In our previous blog post, we discussed the necessary insurance coverages for home care firms. One of the coverages mentioned was Directors’ and Officers’ (D&O) Liability. This type of Management Liability for Home Care Firms may often be overlooked, especially in the case of non-profit firms. Directors’ & Officers’ Liability offers protection to the directors and officers of public, private, and non-profit organizations for decisions they may have made regarding the operation of the business.

Coverage Basics

D&O Liability insurance protects the individual directors and officers of a health care firm; however it is the duty of the home care organization as a whole to pay for this coverage. It’s also the firm itself that will be held financially responsible for any wrongdoing or claim of wrongdoing on the part of a director or officer.  Non-profit D&O insurance can include coverage for defense costs, settlements and judgments, and also helps to protect the personal assets of board members (a good tool to attract and retain quality board members.)

Naturally, not everybody will agree with the decisions made by directors and officers. These decisions may be in the best interest of the organization; however that won’t always stop a displeased third party from bringing a lawsuit against an individual or the entity.  Non-profit board members can be held personally liable for the actions and oversight of the organization.

Why Should Directors and Officers Be Insured?

A common misconception many non-profit home care providers believe is that their general liability or business umbrella policy will cover any director or officer wrongdoing. Therefore, they view D&O coverage as an unnecessary expense. Unfortunately, a standard general liability or umbrella policy doesn’t have the ability to respond to a management liability lawsuit, which could be detrimental to an already financially-stretched non-profit home care firm.

Another myth about D&O insurance is that only a large, financially lucrative company needs it. A business of any size will typically employ an officer or director. Any type of business leader could potentially be targeted by third-party lawsuits due to the way they manage or oversee their company.

Why Non-Profits are Especially Vulnerable

The key function of directors or officers in a non-profit home care entity is to maintain the organization’s financial stability as well as provide the needed resources to accomplish the firm’s overall goals and purposes; in this case to provide quality care to patients. Typically, these non-profit organizations are limited in the support and funds they can provide for a director or officer, making their directors more vulnerable to mistakes, as well as legal claims that could be financially damaging.

Common D&O Liability Claims

Typical legal claims that directors and officers face include:

  • Misusing the organization’s funds
  • Misrepresenting company assets
  • Medicare/Medicaid billing and audit issues
  • Failure to comply with healthcare rules and regulations
  • Lack of corporate governance

These legal claims can come from an organization or business, as well as patients and their families. These are not the only individuals who can sue a director or officer, however. Lawsuits can also arise from:

  • Third-party healthcare providers
  • Creditors
  • Regulators
  • Employees
  • Competitors

At Manchester Specialty Programs, we understand that no two home care non-profits are the same, and that means that their insurance needs will differ as well. We specialize in designing a comprehensive management liability program for you that not only covers the needs of directors and officers, but also home care employment practices liability risks, which we discuss here. Our coverage protects the financial health of an organization in addition to the personal assets of the health care organization’s directors and officers. For more information about our products and services, you or your local insurance broker may contact us at 855-972-9399.