Sigma Phi Epsilon offers chapters and Alumni & Volunteer Corporations the opportunity to purchase Director’s & Officer’s Liability Coverage through the national Fraternity on a voluntary participation basis.

What is Director’s & Officer’s Liability Coverage?

D&O protects members and volunteers from claims arising out of their fiduciary responsibilities as directors and officers. The current policy runs from December 31, 2007 through December 31, 2008, with a $2 million per occurrence / $2 million aggregate limit with a $2,500 deductible for undergraduate chapters and Alumni & Volunteer Corporations (AVCs). The coverage is through Landmark American Insurance Company, rated “A” by the AM Best Company, and it includes coverage for DEFENSE costs paid in addition to the policy limits with no cap. There is also “breach of contract” coverage up to a $25,000 limit available to insured parties even if they are not direct parties to a contract.

This coverage is different from General Liability Insurance Coverage that protects the undergraduate members and volunteers while acting within the scope of their duties for the Fraternity against claims arising out of bodily injury and/or property damage to a third party.

Cost:

D & O is available at the reasonable cost of $500 per policy year.

Minimum cost for an AVC to buy a stand-alone D&O policy would be about $1,500.

Claim Scenarios:

• The AVC sells the chapter house and invests in a new building. They get sued by an alumnus for wasting the assets of the trust.
• The cook sues the AVC claiming they were negligent for failing to supervise the undergraduate brother, who she claimed had sexually harassed her by use of foul language in her presence.
• The AVCTrustees purchase goods that are not directly applicable to the Fraternity. Other alumni sue alleging misuse of funds.
• The AVC enters into a verbal agreement with a contractor to do work over the summer and then changes their mind. The contractor brings a claim for financial loss due to his preparation to do the work and loss of other business.
• A member sues the local chapter and the National Fraternity alleging he was wrongfully expelled from the fraternity and sustained damages to his reputation as a result.
• The alumni directed the undergraduates to terminate a contract with a caterer for meal service at the chapter house prior to the beginning of the semester due to the caterer’s failure to secure appropriate liability and workers’ compensation insurance for his catering business. The caterer sues the local chapter, alumni volunteers, and national Fraternity alleging breach of contract.

Who Brings Claims Against Non-Profit Organizations?

• Donors who feel their contributions have not been used to further the expressed aim of the organization.
• Board members who disagree with a majority decision on the use of funds.
• Members of the organization who believe they have been wrongfully expelled from the organization.
• Employees of local chapters and national fraternity alleging wrongful termination, discrimination or harassment.

Why do AVCs Need the Coverage?

• Non-profit organizations are not immune from costly litigation.
• Employment related suits such as harassment and wrongful termination are at an all time high. Coverage for these claims is not provided by the General Liability or Worker’s Compensation coverages.
• Directors and Officers are subject to duties of diligence, obedience, and loyalty, and can be sued for negligence in the performance of those duties.
• A claim could threaten personal assets of directors, officers and trustees.
• A financial burden defending a D&O lawsuit can drain a non-profit organization’s badly needed resources.
• Prospective volunteers want assurance their liability is covered before they agree to serve.