Directors' & Officers' Liability
Know the Legal Risks of Being a Volunteer Board Member
According to the 2007 Canada Survey on “Giving, Volunteering and Participating” about 9% of Canadian volunteers serve on boards and committees compared to 36% of volunteers serving on boards in 2004. Despite their commitment to countless causes and organizations many board members may be unaware of the legal ramifications of their volunteer work and the possibility of being held personally liable. This liability applies to all non-profit organizations including clubs, associations, societies, leagues committees and charities.
The basic responsibility of directors is to represent the interest of the organization, their members and their constituencies in directing the affairs of the organization, and to do so within the law. In their role as “trustee”, directors have three basic duties:
- DILIGENCE to act reasonably, prudently, in good faith and with a view to the best interests of the organization and its members.
- LOYALTY to place the interests of the organization first and to not use one’s position as a director to further private interests.
- OBEDIENCE to act within the scope of the governing policies of the organization and within the scope of the other laws, rules and regulations that apply to the organization.
The term ‘liability’ refers to the responsibility of directors and organizations for the consequences of conduct that fails to meet a pre-determined legal standard. Usually, the term “consequences” refers to damage or loss experienced by someone, and being responsible for such “consequences” can mean having to pay financial compensation.
Directors and officers may be held personally liable for claims arising from:
- Activities of volunteers and/or staff in the name of the organization
- Employee discrimination
- Wrongful dismissal
- Breach of duties as described previously
- Volunteers
- Employees
- Government bodies
- Suppliers
- Customers
- General public
How to Minimize the Risk to Board Volunteers
The process of risk management is a simple three-part activity. It involves:
- Examining a situation and asking what can go wrong and what harm could result
- Identifying practical measures that can be taken to keep such harm from occurring; and
- If harm does occur, identifying the steps that can be taken to lessen the impact of harm and pay for any result damage or losses.
Directors’ and Officers’ Liability Insurance
A common risk management measure, and one that is particularly important in minimizing directors’ personal liability, is that the organization carry Directors' and Officer's Liability Insurance (DOLI). DOLI covers only those losses arising from a director’s own “wrongful acts” or those of the board.
Although few claims against directors are substantiated and fewer of these result in large financial rewards, the cost of defending any claim can be significant. This is where DOLI tends to prove its value. Volunteer Canada strongly recommends that organizations consider carrying DOLI.
In order to assist organizations with DOLI, Volunteer Canada is pleased to announce a national DOLI program available as a member benefit to all non profit organizations who join Volunteer Canada (with few exceptions). A Volunteer Canada membership costs $100 per year (except for volunteer centres) and features discounted DOLI rates and an array of other benefits. Click here for more information on Volunteer Canada membership.
By joining Volunteer Canada, all participants are subject to premium savings of up to 30%. Those organizations whose operating budgets/revenue are under $5,000,000 per year have pre-set costs as outlined in the chart below, and are required to complete a simple two-page application form. Organizations with operating budgets/revenue that exceed $5,000,000 per year are also subject to a premium savings of up to 30%; please note that the premium is not pre-determined and in order to provide a quotation, completion of an extended application is required.
Volunteer Canada Members
The $25 administration fee and appropriate sales tax are added to the policy costs below.
| Annual Budget/Revenue | Limits Per Certificate $500K | Limits Per Certificate $1 MM | Limits Per Certificate $2 MM | Limits Per Certificate $3 MM | Limits Per Certificate $5 MM |
| $0 - $50,000 | $353 | $448 | $733 | $923 | $1,303 |
| $50,001 - $100,000 | $543 | $733 | $923 | $1,065 | $1,493 |
| $100,001 - $250,000 | $690 | $909 | $1,399 | $1,705 | $2,777 |
| $250,001 - $500,000 | $780 | $1,001 | $1,553 | $1,877 | $3,084 |
| $500,001 - $750,000 | N/A | $1,123 | $1,724 | $2,060 | $3,390 |
| $750,000 - $1,000,000 | N/A | $1,246 | $1,897 | $2,262 | $3,697 |
| $1,000,001 - $2,000,000 | N/A | $1,491 | $2,275 | $2,716 | $4,003 |
| $2,000,001 - $3,000,000 | N/A | $1,797 | $2,716 | $3,255 | $4,310 |
| $3,000,001 - $5,000,000 | N/A | $2,152 | $3,255 | $3,905 | $4,615 |
| Over $5,000,000 | Subject to Underwriting | ||||
Most insurers have a minimum premium requirement of $1,200. The Directors’ and Officers’ Liability Insurance is now provided by Great American Insurance Group, offering premiums as low as $353. This insurer has been able to offer Volunteer Canada members a 5% reduction in premium from the previous term as well as enhanced coverage for the term of 2010 to 2011. Enhancements include but are not limited to:
- Program aggregate is no longer restricted to $50,000,000
- Insurer must give 90 days prior notice of non-renewal (from 30 days)
- The option to purchase an Extended Reporting Period at 40% of the premium (from 50% )
There are limited excluded classes of business and the common expiry date is March 31st. Please note that the costs collected are non-refundable and premiums are not subject to pro-rata costs. The full annual cost is due for those certificates commencing March 31st through September 30th and one-half of the annual cost is due for coverage commencing October 1st through March 30st.
Budgets/Revenues under $5,000,000 per year
Click here to download a two page application or contact Aon directly to receive your copy. Please send both the completed application and full payment to Aon at the address supplied. Upon receipt and acceptance of completed application and payment, Aon will issue a certificate of insurance and forward it to you along with a copy of the policy wording.
Budgets/Revenues over $5,000,000
Click Budgets OVER $5,000,000 to download an extended application or contact Aon directly to receive your copy. Send the completed application and other requested information to Aon at the address supplied.
Aon Reed Stenhouse Inc.
Dept. 700600, P.O. Box 3309, MIP
Markham, ON
L3R 6G6
Who is eligible for this program?
All nonprofit organizations in Canada who purchase a Volunteer Canada membership (subject to the following exceptions).
Classes of Organizations that are not Eligible for Directors and Officers Insurance
Questions about the National Directors’ and Officers’ Liability Insurance Program?
See our FAQ page. Still not sure?
Toll Free: 1-877-766-3104
E-mail: vcan.insurance@aon.ca .
