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Robert Hilbert Nonprofit Resource Center

This guide provides access to websites and databases containing information and resources for those in the nonprofit sector.

What is D&O Insurance?

Directors and officers liability insurance, commonly known as D&O, is one of the most talk-about and valued policies for nonprofit organizations.

In basic terms, D&O insurance is used for board members in the case that legal allegations are taken against them. Consider that without D&O insurance, nonprofit directors and officers of an organization are not protected from allegations and can be held personally liable for any circumstances that may arise. You might also want to consider that as the size of your board of directors and organization increases, so does your exposure. The more events, programs, and activities your nonprofit is involved in, the greater the opportunity for allegations.

Before purchasing D&O insurance, has compiled several questions to discuss with your board:

  • Have you faced allegations in the past? If so, what were the defense costs?
  • How at-risk is your organization? In other words, how extensive is your network?
  • If you do face an allegation, can your entity afford to not have insurance?
  • What nonprofit insurance companies are available to you? Which offers the best options to fit your nonprofit's needs?
  • Will not having insurance make it difficult for you to find board members willing to serve, knowing they face personal liability?

There are three different types of coverage available. What type of coverage your organization needs will depend on specific risk factors and levels of exposure to your team. explains the differences in coverage types:

  • A-Side Coverage: This level of coverage specializes in protecting the personal assets of your leadership team in situations where the organization itself is unable or unwilling to provide protection.
  • B-Side Coverage: Known as "corporate reimbursement coverage" is for when a nonprofit can indemnify its leadership (the organization can be reimbursed for expenses associated with the legal defense of protection of their members).
  • C-Side Coverage: This type of coverage differs from A and B in the event legal action is taken against the nonprofit. C coverage will kick in when a lawsuit alleges a breach of fiduciary obligations with your organization along with specific organization directors and officers.

It is important to know that D&O insurance is not one-size-fits-all, and additional insurance, such as General Liability insurance and/or Employment Practices Liability coverage may also need to be bundled or held instead of D&O insurance. It is important to discuss your insurance needs with several insurance carriers. Policies can contain subtle as well as substantive variations, and also offer different approaches to claims handling. For a more thorough discussion about D&O insurance, read the following article, "What Do You Know About D&O" written by the Nonprofit Risk Management Center. Or purchase their eBook, Covered: An Insurance Handbook for Nonprofits.