Government Shutdown Causes Nonprofit Ramp Up – D&O, Cyber Concerns Emerge

Professional
// March 7, 2019
Reading Time: 3 minutes

This year began with the longest government shutdown in our country’s history. And while some Americans were kicking off 2019 with their health and wellness goals, millions of furloughed government employees were trying to figure out how to feed their families, while going to work without pay. For many of us, news of the 35-day government shutdown was just that: news. But for those directly impacted, it was not just news, but their life and livelihood.

Community and human needs do not stop just because the government has stopped functioning. In fact, the impact of the shutdown increased the need of assistance for millions of Americans. In times of great necessity, where do we turn?

When nonprofit organizations, like educational and food assistance programs that provide food for infants, children, veterans and seniors, are no longer funded federally, the strain on those already affected increases even more. Most community-based programs do not have the resources to continue operating for more than a few days once their funding has ceased, according to the National Council of Nonprofits.

Unfortunately, when there is a strain on nonprofit organizations and their capital, the need for directors and officers insurance is even more important as employees, volunteers and vendors can become desperate during periods of heightened stress. Consider these directors and officers claim statistics cited by the Insurance Journal:

  • Average cost to defend a directors and officers claim is $35,000-$100,000
  • Total average indemnity payment for an adverse judgment is $457,000
  • Average cost to defend a frivolous law suit is $5,000 (even ones that get thrown out)

Even a minor claim can significantly disrupt or even bring operations to a halt.

Small Companies, Big Risk:

As nonprofits are consumed by anxiety over funding and meeting the needs of their communities, another unforeseen issue is popping up that is likely not at the top of their list of concerns: their exposure to cyber and data breaches.

Small nonprofits are at greater risk for hacking due to lack of information technology resources and unsophisticated systems that can make them an attractive target. Schools, health care clinics and humane societies are housing personal information of patients, donors, students and volunteers, but do not have systems that are necessarily able to withstand the power of a motivated hacker. Sadly, a small clinic is more vulnerable than a large company or financial institution with more money and resources to use for their cyber security.

Recently, a small school experienced a data breach and hackers obtained social security numbers of their scholarship recipients. One student whose information was compromised sued the school and the board for not protecting their personal information.

As insurance professionals, we cannot prevent government shutdowns or protect against hackers, but we can advise our clients appropriately and help to protect them against the exposures they face.

USLI can accommodate a broad range of directors and officers insurance, including nonprofits, community associations and for-profit companies. With the increasing risk of unanticipated cyber exposures popping up, this is a great opportunity for cross-selling as well. Don’t wait to talk to your clients about their need for directors and officers and cyber liability coverage.

Please contact your Professional Lines underwriter for more information or a quote today.

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As always, thank you for your support and business.

Contact Chris Deveney
Nonprofit Directors and Officers Product Leader | 888-523-5545 Ext. 2756

Contact Meredith Bennett
Cyber Liability Product Leader | 888-523-5545 Ext. 2598

Written by Laurel Bennett
March 7, 2019

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