Welcome to the second LWVSC Governance Matters Memo, a quarterly source of information designed to help League members learn more about governance and how governance helps a board do its work and do its work better. ~Dahlia Handman, Ph.D., Governance Director, League of Women Voters of South Carolina 

In my first memo, I suggested that understanding good governance is like working on creating a great recipe…it requires the “right ingredients” (the right mix of board members), a chef (League presidents or co-presidents) to provide leadership and accountability (https://www.councilofnonprofits.org).

A big part of getting that recipe “right” is protecting that “mix,” enabling everyone to contribute and accomplish League goals.

The importance of Director and Officers insurance 

As part of good governance, local Leagues should consider investing in Directors and Officers (D&O) liability insurance to cover directors and officers from all actions and decisions in the course of their duties and the costs associated with legal defense.

Nonprofit organizations can and do face lawsuits. Nonprofit directors and officers face significant litigation risks, with studies indicating that 63% of nonprofit organizations in the U.S. have reported a Directors and Officers (D&O) liability claim over a 10-year period. (National Center for Charitable Statistics, 2025).

Why would a nonprofit get sued? While the most frequent type of D&O claim is related to employment practices, nonprofits are also sued by a variety of stakeholders, donors, government regulators, and critics. Common allegations often focus on breaches of fiduciary duty —accusations that board members mismanaged funds, acted in self-interest, or failed to oversee the organization’s activities, 

The misuse of funds or donor disputes —especially where donors believe their contributions have been misused.

Misleading statements, inaccurate disclosures or misrepresentation to stakeholders or the public as well as non-compliance with fundraising regulations or non-compliance with tax laws.

Contractual disputes from vendors over unpaid invoices or contracts.

What is at risk

Simply put, D&O insurance covers personal losses for board members and officers if you are sued because of your official capacity as well as the legal fees and other costs associated with legal actions. Coverage is essential because personal assets (homes, savings) are at risk, and personal insurance policies do not cover these types of claims.

How to manage risk beyond insurance

Here are steps you can take to manage risk as you consider D&O insurance. 

1. Review the nonprofit corporations code for South Carolina. It will help you understand the expectations of directors and officers including fiduciary duty, the duty of care (be diligent) and the duty to avoid conflicts of interest. Here is a link to the SC code https://www.scstatehouse.gov/code/t33c031.php
2. Run finances in a professional way, following good accounting processes and managing bank accounts. Regularly review financial statements and follow established financial controls.
3. Employment practices matter – even with part-time or contractual employees. Document procedures, maintain accurate and timely personnel/employment records. This also applies to student interns.
4. Use donations wisely and appropriately. If soliciting funds to support specific activities or purchases, use the funds only for those efforts. 
5. Conflict of Interest Policy Statements. Require annual disclosures of potential conflicts of interest.
6. Proper Documentation: Keep detailed records of board meetings and decisions.

Have questions? You can always reach me. 

~Dahlia Handman, Ph.D., Governance Director, League of Women Voters of South Carolina