High-profile Case Shines a Spotlight on Obligation of Nonprofit Directors

By Richard L. Weber, Esq. ‘Nonprofit boards should consider obtaining ‘directors and officers’ insurance coverage (aka “D&O” coverage) and employee “fidelity insurance” in order to protect board members that diligently perform their duties.’ Nonprofit organizations are an essential fixture in our communities. Often, the engine that drives a nonprofit is its board of directors. Service on a nonprofit board is to be commended. However, a recent court case underscores how important it is that individual directors understand the fiduciary obligations that come with nonprofit board service. In September 2019, The College of New Rochelle filed for bankruptcy after 115 years of operation. This particular bankruptcy was commenced in The United States Bankruptcy Court for the Southern District of New York as a “Chapter 11” filing — a variation of bankruptcy that seeks “reorganization” of the insolvent organization to satisfy debts and (if possible) move forward with continued operation in some form in the future. Over the following months, a number of creditors filed claims in the bankruptcy, seeking to recover payment on debts owed by the college, and the campus itself was put up for auction. On Jan. 14, 2021 the committee established to protect the interests of unsecured creditors

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