Disaster of the Month: D&O Insurance

By Su Epstein

Saxton B. Little Library,  Columbia CTinsurance

To be honest, insurance was not something I really thought much about.  Personal insurance (home, auto, etc.) sure, but for the Library?  When I began as a Library Director, I knew the Library had a basic liability policy and I did review it.  I made sure it covered should someone get hurt in the building and if, heaven forbid the building had a fire, the contents would be covered.  But after that, I gave it very little thought.

A few years down the road, however, the make-up of our library board changed.  Personalities shifted and perspectives clashed.  Things came to a head over a fundraising event.  Tensions had been high and communications poor.  At a very public planning meeting, outside of the Library, a full-fledged shouting match erupted.  Accusations and names flew like startled birds.  A board member left, threatening to sue for defamation of character.  I consulted a lawyer and learned the board member had grounds.  At the same time, there arose issues with the vendor contracts for the fundraising event.  This too posed a potential litigious situation.  I called upon my inner Research Librarian, and hit the books and the internet.

It was then that I learned of Directors’ and Officers’ Liability Insurance (often called D&O).  This insurance, purchased by the organization reimburses the organizations leadership for losses or advancement of defense costs of legal actions coming about from alleged wrongful acts in their capacity as leadership of the institution.    Policies vary by the amount of coverage, but are offered by almost all of the major insurance companies.  Costs are based on not only the amount of coverage, but the size of the board and institution.

For our institution the cost increased our insurance line approximately five hundred dollars annually.  It was not an easy sell.  However, the cost of one lawsuit would be far greater.  At the time, my library was facing two possible legal actions.  A situation that six months earlier would have been inconceivable for all of us.

In the end, the fundraising event went off, but not without some very problematic hitches.  The former Board member decided they liked the Library more than they hated the Board and dropped the suit.  The Library Board purchased D&O insurance.  For me, it was all a little too close for comfort.

I don’t know if such insurance is needed and as the coverage varies, it must certainly be analyzed on a per library basis. Likewise, needs can be greatly affected by circumstance.  What I do know, definitively, is that is far better to research and discuss the options before there is a potential need.

Comments are closed.