Association Liability

What is it and why do you need it?

The Scenario – yes it was an honour when members of your organisation asked if you could sit on their committee.  You knew it carried great responsibility. They are depending on you to make appropriate decisions for the organisation. 

They chose you because they felt you had the skills to assist in supervising the organisation to continue forward, to grow and prosper and deliver the services that the membership expect.

 But what if you made a mistake? What if one of the other members of the committee made a mistake and you were included in with them? Would you be personally liable? Would the organisation protect you?

The answer is that the law provides that under given circumstances, directors, officers, employees and/or volunteers can be held personally accountable for their actions. These individuals can be held accountable for failing to act in accordance with the conduct in line with the duties owed to the members who put you there.
 

Therefore an Association needs Financial Protection for its directors, officers, employees, and volunteers and there are two methods by which an organisation can provide this

  • Indemnification.
  • Insurance

There is of course a third method – do not be on a committee at all!

Indemnification or Insurance – the issues

Statutes permit non-profit corporations to indemnify their directors and officers against loss incurred as a result of certain types of claims. Such indemnification does not provide protection in all instances.

Plus the organisation may not have sufficient financial resources with which to pay the losses and defence expenses.  Therefore most non-profit organisations purchase Association Liability insurance.

While there is a financial outlay buying insurance, it is a much cheaper solution compared to the consequences. So we strongly recommend considering the protection of an Association Liability policy.

Who can help?

An insurance broker's role is to act as your representative and work in your interests, seeking the best cover at the best price for you with their skill, market knowledge and experience. Call a good one.

Call CPR –Experts who will save you 

What is an incorporated Association?

Association Liability - What is it?

Association Liability - Claims Examples

Association Liability Proposal Forms

Association Liability Policy Wordings

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A new report – called "Show Me The Money!" by insurer XL Catlin and law firm Wotton + Kearney – is the second in a series of three white papers on securities class actions and their impact on the Directors & Officers Liability (D&O) market. The main conclusion is that Directors’ and officers’ (D&O) insurance premiums are under-priced significantly and need to rise strongly to restore profitability. The main risk areas are those exposed to securities class actions, 

It says Directors & Officer's Side A, Side B and Side C cover has been chronically underpriced since at least 2011, while the frequency of class actions is increasing as more plaintiff lawyers and litigation funders enter the space.

The analysis suggests last year’s overall premium pool of about $210 million would need to increase by at least three times to establish a profitable market, if it is assumed all other factors stay unchanged.

“Recent market developments would indicate most D&O insurers are now endeavouring to restore some semblance of profitability to their portfolios after years of market losses,” the report says.

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