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What is Directors & Officers (D&O) Insurance and does my organization need it?

By: Patrick Ryder RPLU, CPCU, Account Executive, Executive Liability Practice, HUB International Insurance Services Inc.

If you are a nonprofit, or currently sit on the board of a nonprofit you may have heard of directors and officers (D&O) Insurance. But how does it work?

The directors and officers of nonprofits owe specific duties to the entity they serve and expose their personal assets through a variety of liabilities related to the management of the organization including:

  • Duty of Care – requires that a person act in the same manner that a reasonable person in a similar circumstance would.
  • Duty of Loyalty – prohibits conflicts of interest when acting as a fiduciary and mandates that the directors and officers place the organization’s interests ahead of their own.
  • Duty of Obedience – dictates the organization’s directors and officers run the organization in accordance with its mission statements, charters and bylaws. Additionally, this requires that the organization complies with all applicable laws in their governing jurisdiction.

A breach of any of these duties can result in costly litigation that can cause financial hardship for both the individual directors and officers and the nonprofit entity. Many insurance carriers offer D&O coverage for nonprofits to protect them from this financial loss, but the coverage’s included in those policies can vary widely. A thorough understanding of the nuances is needed to insure the coverage responds appropriately.

Side A – Individual Directors and Officers

Side A responds when a company is unable – legally or financially – to indemnify its directors and officers (personal protection). Common examples of this would be either bankruptcy of the organization, or a lack of resources to fully indemnify its’ directors and officers. This part of the insurance policy should pay on a first-dollar basis – that is, there should be no self-insured retention or deductible.

Side B – Indemnification of Directors and Officers

Side B is the part of the D&O policy that reimburses a company for its indemnification obligation to its directors and officers, legally permissible in Colorado. Side B responds most commonly in claims brought against directors and officers and is subject to a self-insured retention or deductible. 

Side C – Entity Coverage

Side C of the D&O policy, also known as “entity coverage,” ensures there is corporate coverage whenever the corporation is sued along with the directors and officers.

Directors and officers liability insurance is an important part of any risk management program for a nonprofit. Most commonly it can be purchased in a package policy along with employment practices, fiduciary and cyber liability insurance – providing peace of mind that while serving the community and the organization, the personal assets of your board members are protected.

Learn More

Contact HUB International 
Hub International Services at 303-984-0298 to discuss D&O insurance for your organization.

HUB International Services, Inc.
Hub International Services, Inc. is the endorsed broker of choice by Colorado Nonprofit Association and Alliance of Nonprofits for Insurance (ANI). We offer a wide range of competitive insurance packages tailored to meet the unique needs of your nonprofit. Contact us at 303-894-0298.


Topics of Interest: 
Financial ManagementGovernance


These articles, samples, and resources are offered for informational purposes only and should not be construed as professional advice. If used, your organization should tailor samples to best fit the organization’s specific circumstances. We encourage your organization to seek appropriate professional assistance as needed.

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