Why You Need Directors and Officers Insurance for Your Booster Club

Booster clubs are unique, independent organizations that allow parents and students to show their support for high school or college athletes. With events to plan and money to fundraise, it can be easy to lose sight of the danger that could be hiding right under your nose. It’s easy to think that everyone on your booster club’s board is infallible, but this unfortunately isn’t the case. And lawsuits against booster clubs happen more often than you probably suspect. It’s important to make sure your volunteers and board members are protected in case of a claim.

What Is Directors and Officers Insurance?

Directors and Officers insurance (D&O insurance) protects your board members and booster club from claims based on mismanagement. Common D&O claims include:

• Breaking booster club bylaws
• Discrimination based on race, sexuality, gender, etc.
• Intellectual property theft
• Misrepresentation
• Failure to count votes

A director or officer on your booster club board is open to claims relating any of the above and more. They may be sued by parents, third parties, or even the club itself while they are operating as a member of the board. D&O insurance has three sides. One (Side A) protects the club, another (Side B) reimburses the organization for compensating the victim, and lastly Side C, which allows both members of the board and the booster club to be protected if named co-defendants in a securities lawsuit.

Lawsuits often arise out of stressful situations where a third party has lost money, status or credit as a result of the board’s decision. The blame for this loss can be placed on one single board member or the entire organization.

Not having D&O insurance leaves your booster club open for lawsuits that could drain your savings. Board members will also feel more comfortable serving on your club’s board if they know that decisions they make are covered under insurance. No one wants to be facing a lawsuit by themselves, after all, and personal liability insurance isn’t likely to be of use in this case.

Limits for D&O insurance varies, but typically cover $1 million per claim. Even if a decision is made by the board as a whole, an individual member can be sued for the decision.

How Does D&O Insurance Work?

Before purchasing a D&O insurance policy, it’s important to note how it works if you ever need to file a claim. First, Directors and Officers insurance policies are typically claims-made policies. Having a claims-made policy means that the policy will only be effective if the actual lawsuit is filed while the policy is active, no matter when the incident regarding the lawsuit occurred. So if a board member made a decision before the policy was in effect and is later sued after the policy is purchased, that board member will be covered. On the other hand, if the D&O policy is cancelled or expires and a board member is sued for an incident that happened while the policy was active, they won’t be covered. An occurrence policy would cover this case. Occurrence policies only cover claims if the incident occurred while the policy was active despite when the claim was made.

Each D&O policy is different depending on your agreement and understanding with the insurance company, as well as your booster club’s specific needs. If your booster club’s board frequently makes decisions that affect third parties or other members of the club, it may be wise to invest in a D&O policy with higher limits. Be sure to speak with an insurance agent about your club’s unique needs.