Skip to main content

A Bubble of Protection -

 

By Bankston, Karen
Proquest LLC

meeting-800x800When members step up to serve as directors, their credit union agrees to protect them from personal liability for carrying out their board responsibilities a promise that takes the form of directors and officers insurance as part of the organization's management liability coverage.

But with the incidence and costs of litigation on the rise in the financial services industry, according to a recent survey by the law firm Norton Rose Fulbright (www.nortonrosefulbright. com), how can directors ensure that adequate protections are in place? Specialists recommend regular reviews of the risk exposures facing your credit union with a special focus on regulatory and business expansions to ensure that your liability coverage is up to the task.

Credit unions are immune to the most common type of lawsuit filed against directors-the sort filed by stockholders unhappy with investment returns, notes insurance consultant Scott Simmonds (www.ScottSimmonds.com), Saco, Maine. And credit unions are unlikely to face legal action from regulators, like the Federal Deposit Insurance Corp.'s suits against shuttered savings and loans a quarter-century ago and against big banks rocked by securities losses more recently. A notable exception was the National Credit Union Administration's lawsuit against officers of the failed Western Corporate Federal Credit Union (WesCorp) in 2010; board members were not named in the complaint, and the case was eventually settled before going to trial.

As a director, you should be familiar with the indemnification provisions in your credit union's bylaws and other legal documents, says Jay Isaacson, director of product management with CUNA Mutual Group (www.cunamutual.com), Madison, Wis. These provisions specify under what circumstances the credit union can protect its directors and officers from legal claims associated with fulfilling their responsibilities to the organization.

Under Rule 750 of the NCUA Rules and Regulations, credit unions may indemnify directors as long as they fulfill their fiduciary responsibilities: the duty of care (e.g., attend meetings regularly, engage in board discussions, assess and understand financial reports, and make the best possible decisions for the organization), the duty of loyalty (consider the credit union's interests and avoid conflicts of interest), and the duty of obedience (comply with laws and regulations in carrying out their board responsibilities), Isaacson explains.

READ MORE>> A Bubble of Protection - Top News - InsuranceNewsNet.com#.U6bN_p3D-Ch

Comments

Popular posts from this blog

NCOFCU Newsletter

The Bucket Coach is a financial advice book designed by Fire Services Credit Union, Tronto, Canada. and written exclusively for Fire Fighters It's a practical guide for household financial management, including investments, credit and mortgages, and retirement. Developed with contributions from Fire Fighters," NCOFCU Newsletter : " Kevin Connolly Chief Executive Officer    Fire Services Credit Union Phone: 416-440-1294 ext 301  Toll Free: 1-866-833-3285 E-mail:  kevin@firecreditunion.ca 1997 Avenue Rd Toronto, ON M5M 4A3 

New from AutoLink

New from AutoLink

Sunday Reading - What is the Dow Jones?

    What is the Dow Jones? Created in 1896, the Dow Jones Industrial Average is one of the world’s oldest and most widely recognized stock indexes—a measure tracking the stock performance of a selected group of companies ( see most recent data ). Originally designed to track America’s leading industrial firms, the Dow has evolved into a cultural and financial shorthand for the health of the US economy. As of 2025, it measures 30 major companies —like McDonald's, Boeing, and Nike—across sectors such as technology, healthcare, finance, and consumer goods.  Unlike most modern indexes, which are weighted by the total value of a company’s shares, the DJIA uses a price-weighted formula —meaning stocks with higher share prices exert more influence, regardless of company size. The DJIA has been updated 59 times since its creation to reflect changes in the US economy ( see ch...

Powell Rejects Any Plan for Fed to Intervene in Secondary Market to Bring Down Rates

  Frank Diekmann October 20, 2025 2:22 am No Comments PHILADELPHIA–Federal Reserve Chair Jerome Powell said there are no plans for the central bank to directly intervene in secondary mortgage markets in an attempt to help bring down mortgage rates, an idea some have proposed as a means of addressing the affordability crisis In housing. Jerome Powell Speaking at the  National Association for Business Economics  conference in Philadelphia, Powell spoke to the Fed’s progress with “quantitative tightening,” that is, its work to reduce the more than $6 trillion of securities it holds on its  balance sheet . Read more about the Balance Sheet HERE Those holdings include approximately $2 trillion in mortgage-backed securities (MBS), which are bundles of home loans that are packaged together and sold to investors, usually by middlemen  Fannie Mae and Freddie Mac , noted Realtor.com. Rolling Off Balance Sheet As the report noted, the Fed dramatically increased M...

The Role and Hazards of an Interim Executive

  The Role and Hazards of an Interim Executive Leadership transitions are rarely smooth. A change at the top can trigger uncertainty, speculation, and anxiety. Staff worry about their jobs, members wonder about continuity, and boards feel the weight of stewarding the organization through uncertain change. The utilization of an interim executive director is meant to stabilize the organization and allow the board enough space and capacity to find the right successor leader. Here’s a catch: if an interim executive is also a candidate for the successor role, the very purpose of an interim engagement is compromised. With an Interim, there’s always a second wave of anxiety Every leadership transition comes with some anxiety. The staff sometimes don’t know what’s going on. The board is worried about continuity, and members may be worried about joining. One task of an interim is to absorb some of that anxiety and provide reassurance that things are moving forward. But there is al...