A retired accountant agrees to join the board of her church in Orlando. She has served on two nonprofit boards before, she knows the congregation, and it seems like a straightforward way to help.
Eighteen months later the church terminates its office administrator, and the administrator files suit alleging wrongful termination and discrimination. The complaint names the church and each board member individually.
The question she should have asked before agreeing to serve is whether the church carried directors and officers coverage. Nobody had told her, and nobody on the board knew the answer.
Church Boards Make the Kind of Decisions That Get Litigated
Every congregation has a governing body — a board, a council, a session, a vestry, a group of elders or trustees. Whatever it is called, it makes decisions with legal consequences.
Hiring and firing. Compensation. Contracts with vendors and builders. Property purchases and sales. Budgets, loans, and use of restricted funds. Membership discipline. Program approvals. Facility use decisions.
Any of those can produce a claim, and the claim will typically name the individuals who made the decision alongside the organization.
What D&O Covers
Directors and officers liability responds to claims arising from decisions made in a governance capacity. Common allegations:
Employment-related claims — wrongful termination, discrimination, harassment, retaliation, failure to promote. These are the most frequent D&O claims against nonprofits by a wide margin.
Breach of fiduciary duty — allegations that leadership mismanaged funds, failed to exercise appropriate oversight, or acted in self-interest.
Financial mismanagement — misuse of designated or restricted gifts, budget decisions, or failures of internal control.
Contract disputes with vendors, contractors, or partner organizations.
Governance disputes — challenges to decisions about membership, discipline, property, or denominational affiliation. These are more common in congregations than people expect, and they can be bitter.
Intellectual property claims — using copyrighted music, images, or materials without proper licensing.
The coverage generally pays defense costs as well as settlements or judgments, and defense is often the larger number.
Employment Practices Liability
Because employment claims dominate this category, the relationship between D&O and employment practices liability coverage matters.
Some policies bundle them. Some treat employment practices as a separate coverage part that must be added. Some church programs include neither by default.
A congregation with paid staff — a pastor, an administrator, childcare workers, a custodian — has employment exposure whether or not it has thought about it. Hiring, discipline, and termination generate claims at churches the way they do anywhere else, and the religious dimension can complicate rather than simplify them.
Why Volunteer Board Members Need This
There is a widespread assumption that volunteer board members of nonprofit organizations cannot be held personally liable. That is not a reliable assumption.
Federal and state volunteer protection provisions exist, and they do provide meaningful protection in some circumstances. But they contain exceptions, they do not apply to every kind of claim, and — most importantly — they do not prevent someone from being named in a lawsuit. Even a claim that ultimately gets dismissed requires a defense, and defense costs money.
D&O coverage is what pays for that defense.
Anyone asked to serve on a church board should ask whether the coverage exists before agreeing. It is a normal question, and a church that cannot answer it has identified something worth fixing.
What to Check on the Policy
Does D&O coverage exist at all? Many basic church packages do not include it.
What is the limit? Defense costs in a contested employment matter accumulate quickly.
Are defense costs inside or outside the limit?
Who is an insured? Look for coverage extending to directors, officers, trustees, employees, and volunteers acting in a governance capacity. Board members serving on committees should be covered too.
Is it claims-made? D&O is typically written on a claims-made basis, which means the policy responding is the one in force when the claim is made, not when the decision was made. This creates two issues worth understanding: the retroactive date determines how far back coverage reaches, and a church changing carriers or letting coverage lapse can create a gap covering past decisions.
What are the exclusions? Bodily injury and property damage belong on general liability, not here. Intentional wrongdoing and personal profit are typically excluded. Some policies exclude claims between insureds, which matters in governance disputes.
Governance Practices That Reduce the Exposure
Coverage handles the claim. Good practice reduces the odds.
Written bylaws that are current and actually followed.
Documented minutes recording decisions and the reasoning behind them.
Conflict of interest policies and recusal when they apply.
Financial controls — dual signatures, independent review, separation of counting and depositing, periodic audit or review.
Employment documentation — written job descriptions, performance records, consistent process, and counsel involved before terminations that carry risk.
Restricted fund discipline. Designated gifts used for other purposes are a recurring source of claims and one of the easier ones to avoid.
Ask Before You Serve
Prestige Insurance Group works with churches, synagogues, ministries, and religious schools across Florida and can review whether your board is covered, at what limit, and what employment practices coverage would add.
Call our Miami office at 305-969-8776, our Orlando office at (407) 993-2331, or our Stuart office at 561-983-4333, or request a quote online.
This article is general information and not legal advice. Liability protections for volunteer directors depend on statutory provisions and the facts of each situation; consult qualified counsel regarding your organization’s circumstances and refer to your policy for the terms that apply.
