Most charter schools must purchase D&O Insurance (Directors & Officers Insurance) from their state education department or state charter authority.   What most charter schools don’t understand, though, is how D&O Insurance helps protect their charter school and its board of directors from potential claims.

What is D&O Insurance?
Directors and Officers Insurance typically cover “wrongful acts” made by the directors and officers of an entity within their capacity to make decisions regarding the entity’s activities.  For charter schools, a “wrongful act” is usually defined as errors, misstatements, omissions, neglect, or breach of duty committed or attempted…”

A charter school’s D&O Insurance policy will exclusive wrongful acts arising out of the provision of professional services.   The school must purchase a separate E&O policy to cover those claims.

Who Can Sue?

Almost anyone can sue the directors and officers of a charter school.   Most claims, though, arise from the following groups: the entity itself, current or former directors and officers, employees, shareholders, investors, lenders, vendors, customers, and competitors.  Employees account for 96% of D&O claims for charter schools!

Important Note: D&O Insurance policies for charter schools will usually include intentional acts exclusions for directors and officers who knowingly and willingly commit fraudulent acts.  For this reason, all D&O policies should consist of a “Severability Clause” that will provide insurance to the innocent directors and officers who did not participate in the fraudulent acts.   We also recommend that the charter school include the organization itself in the policy.

Type of Claims

The following are samples of the types of claims a D&O insurance policy will provide coverage for:

•  Providing inaccurate financial information to a lending institution.
•  Providing inaccurate information to a surety bonding company.
•  Receiving deposits for future services and failing to deliver those services.