Museums and Cultural Institutions

Often non-profit museums and cultural institutions are unaware of the significant need for – and benefit of – a high-limit Umbrella policy that also includes Excess D&O Insurance. As a result, these entities can run the risk of exposing the assets of both the entity and individual board members to litigation and reputational damage.

D&O lawsuits for non-profit museums and cultural institutions can involve employee-related allegations including discrimination (age, race, sex), harassment, and wrongful termination. Lawsuits against these entities also involve allegations from third-parties who allege inefficient administration or supervision, waste of assets, misleading reports or other misrepresentations, libel and slander, failure to deliver services, infringement of copyright or trademark or other unauthorized use of title, plagiarism or other misappropriation of ideas, and acts beyond the granted authority. The average cost for these nonprofits jut to defend a lawsuit runs between $35,000 and $100,000, with judgments and awards that may potentially run into the millions.

Claims Scenarios

Following are some claims examples to help you drive the need for a high-limit Umbrella policy that includes Excess D&O coverage to your non-profit clients. 

A lawsuit that made headline news involved a donor who made a significant contribution to a non-profit art gallery. The funds were to be used for specific purposes as outlined by the donor. Instead, the nonprofit, through its executive director and board of trustees, decided to spend the funds to expand the building. The donor filed suit against the board, alleging misappropriation of funds. Defense costs ran $100,000 with a settlement of $3 million. The gallery’s D&O limits were at $1 million with no Umbrella policy secured to step in to cover the shortfall, forcing the gallery to close.

Another claim involved an executive director of a contemporary art museum who was put on temporary leave after four employees filed a lawsuit against the organization alleging a long history of sexual and physical assault carried out by an unnamed co-worker. The decision to file the lawsuit came after the museum board failed to appropriately respond to allegations by six women employed by the museum in the past five years, with multiple incidents of sexual harassment, a physical assault, a sexual assault, and, in two cases, rape, which had been reported to museum officials, including the director. The litigation case is pending.

In yet another case, directors of a foundation that operated an art museum in the Midwest sued the foundation and some of its fellow directors, alleging mismanagement as well as a scheme by some directors to move the foundation’s art collection to another museum out of state. After lengthy litigation and mediation and a public relations crisis, the foundation settled the lawsuit for an undisclosed amount, made changes to its management and restated its commitment to the state.

We can help you provide non-profit clients a high-limit Umbrella policy that also includes Excess Directors & Officers insurance as part of our Museums & Cultural Institutions program. Employment Practices Liability Insurance (EPLI) is automatically a part of our Excess D&O if it’s already included in a client’s underlying D&O coverage.