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Board Governance Tip Sheet
Why Every Nonprofit Should Consider Directors & Officers (D&O) Liability Insurance
What is D&O Insurance?
D&O insurance protects a nonprofit organization, its directors, officers, and often senior leaders against claims alleging wrongful acts in the governance or management of the organization. It helps pay legal defence costs and, when covered, settlements or judgments.
Why It Matters
- Protects volunteer board members from personal financial risk.
- Provides defence against claims such as breach of fiduciary duty, conflicts of interest, or governance failures.
- Supports protection against many employment-related claims when paired with or including Employment Practices Liability (EPLI).
- Helps recruit and retain experienced board members who expect appropriate governance protections.
- Demonstrates strong risk management and good governance to funders, donors, and stakeholders.
Important Reminder
General Liability insurance does not replace D&O insurance. General Liability typically covers bodily injury and property damage, while D&O addresses claims arising from management and governance decisions.
Questions Every Board Should Ask Annually
- Do we have D&O insurance?
- What are our coverage limits?
- Does the policy include Employment Practices Liability (EPLI)?
- Are volunteers, committee members, and former directors covered?
- Have we reviewed our coverage with our insurance broker in the past 12 months?
Helpful Resources
- National Council of Nonprofits – Board Roles & Responsibilities: https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/board-roles-and-responsibilities
- BoardSource – Nonprofit Laws & Regulations FAQs: https://boardsource.org/resources/nonprofit-laws-and-regulations-faqs/
- Council on Foundations – Guide to Directors & Officers Liability Insurance: https://cof.org/content/guide-directors-and-officers-liability-insurance
- Nonprofits Insurance Alliance – Boards & Officers Insurance Resources: https://insurancefornonprofits.org/resources/nonprofit-boards-and-officers-key-facts-about-insurance-and-legal-liability-e-book/
BVU Takeaway
Directors & Officers Liability Insurance should be viewed as a governance best practice rather than an optional expense. It protects the organisation and the people who serve it, while strengthening board recruitment, organisational credibility, and long-term sustainability.