Insurance Curator Directors and Officers (D&O) liability insurance is essential for nonprofits, NGOs and charities in the United States. Volunteer boards, executives, and paid staff face a range of exposures — from donor disputes to employment claims and regulatory investigations. This article provides concrete claim examples, explains how D&O policies typically responded, and draws practical lessons boards can use to manage risk and secure better coverage.
Quick snapshot: why this matters for U.S. nonprofits
- High litigation sensitivity in certain states (e.g., New York, California) can increase claim frequency and defense costs.
- Typical market pricing for small nonprofits: roughly $1,000–$5,000 annually for a $1M aggregate limit; higher-risk programs and larger charities can pay substantially more. (Sources: Insureon, Forbes Advisor)
- See market guidance: Insureon — “Directors & Officers Insurance Cost” and Forbes Advisor — “How Much Does D&O Insurance Cost?”
- https://www.insureon.com/insurance/directors-officers-insurance/cost
- https://www.forbes.com/advisor/business-insurance/directors-and-officers-insurance-cost/
Real-world claim examples (anonymized case studies) — how D&O responded
Case Study 1 — Donor challenge to use of funds (Midwest arts nonprofit, Chicago, IL)
- Scenario: A major donor alleged funds restricted to a specific program were used for general operations. The donor sued the board for breach of fiduciary duty and sought return of $250,000.
- D&O response: Legal defense under the nonprofit D&O policy covered counsel to defend directors and officers; the insurer paid defense costs (~$75,000) and negotiated a $50,000 settlement to avoid protracted litigation.
- Lesson: D&O typically responds to fiduciary-duty allegations including defense costs and settlements (subject to policy limits and exclusions). Early notification and using insurer‑approved counsel helped limit defense spend.
Case Study 2 — Employment practices claim (social services NGO, Boston, MA)
- Scenario: Two former employees filed wrongful termination and discrimination claims, alleging systemic HR failures and retaliation. Potential damages claimed: $300,000.
- D&O response: Employment Practices Liability (EPL) is often included or offered as a D&O endorsement. The policy covered defense and, after mediation, the policy paid a $120,000 settlement. Defense costs ran ~$90,000.
- Lesson: Ensure your D&O includes or is paired with EPL coverage. Good HR documentation and prompt internal investigations can materially reduce settlement amounts.
Case Study 3 — Grant-related investigation (Environmental NGO, Seattle, WA)
- Scenario: A federal grant auditor alleged improper grant reporting; regulators threatened debarment and demanded $400,000 in restitution.
- D&O response: Regulatory inquiries can trigger coverage, but many policies exclude fines/penalties for intentional wrongdoing. The insurer funded investigation defense (~$150,000) and obtained a negotiated resolution where the NGO repaid $60,000 and implemented compliance controls — the policy did not cover the repayment of government fines but did defend board members.
- Lesson: D&O helps with defense against regulatory probes, but charities should understand exclusions for government fines and intentional acts. Consider crime and fidelity coverage for grant misuse exposures.
Case Study 4 — Volunteer director sued over alleged negligence (small community charity, Phoenix, AZ)
- Scenario: A board member was personally sued after a program participant alleged negligence in program oversight. Claim value: $80,000.
- D&O response: Policy covered both defense and indemnification of the volunteer director. The claim was dismissed after $18,000 in defense costs.
- Lesson: Volunteer directors rely heavily on D&O for personal protection; D&O terms that expressly cover volunteers are critical for recruitment and retention.
How D&O typically responds — coverage elements and common limitations
| Coverage Element | Typical D&O Response | Common Limitations/Exclusions |
|---|---|---|
| Defense costs | Insurer pays defense costs (often outside or eroding the limit depending on policy) | Some policies erode limits with defense; advance-payment timing varies |
| Settlements/judgments | Insurer pays covered settlements/judgments up to limits | Exclusions for fraud, willful misconduct, and criminal acts |
| Regulatory investigations | Insurers often cover defense for investigations into covered wrongful acts | Fines, penalties, and some government restitution may be excluded |
| Employment practices (EPL) | Often included by endorsement or in D&O package | Separate sub-limits and exclusions for wage claims or intentional acts |
| Indemnification of directors | D&O can reimburse entity for indemnifying directors | State indemnification rules and entity assets affect recovery |
| Volunteer protection | Many D&O forms explicitly include volunteers | Confirm volunteer coverage is named; some carriers require endorsements |
Average defense costs vary by claim type: small wrongful termination or volunteer defense claims often run $10k–$100k; complex regulatory or grant investigations and class claims can exceed $250k–$1M. (Sources: Insureon, Forbes Advisor)
Carrier examples and pricing guidance (U.S. market examples)
Below are illustrative carrier references and market pricing ranges for U.S. nonprofits (pricing is illustrative and will vary by location, revenue, program exposure, prior claims, and limits). Use these as market signals — obtain formal quotes.
| Carrier (U.S.) | Typical small nonprofit pricing for $1M/$1M limit | Notes |
|---|---|---|
| Hiscox | ~$1,000–$3,000 annually (small, low-risk orgs) | Hiscox targets small organizations with online binding options and simplified underwriting |
| Travelers | ~$1,200–$5,000 annually | Broad market presence and tailored nonprofit forms |
| Chubb | ~$2,000–$10,000+ annually | Often used by larger charities with higher limits and complex programs |
Sources for ranges: Insureon marketplace data and market overviews from Forbes Advisor. Actual quotes in New York City, Los Angeles, Boston, Chicago or Seattle will reflect state litigation climate and program-specific exposures.
- https://www.insureon.com/insurance/directors-officers-insurance/cost
- https://www.forbes.com/advisor/business-insurance/directors-and-officers-insurance-cost/
Practical lessons and actions for nonprofit boards (U.S. focus)
- Buy appropriate scope: Ensure D&O covers volunteers, includes EPL as needed, and addresses regulatory investigations and grant exposures. See tailored guidance in Why Nonprofits Need Directors and Officers (D&O) Liability Insurance: Protecting Volunteer Boards on a Budget.
- Shop for limits and retentions: Match limits to revenue size and program risk. For cost-sensitive boards, see Affordable D&O Solutions for Charities and NGOs: Limit Selection and Retention Tips.
- Document governance: Minutes, conflict-of-interest disclosures, clear financial controls and documented board oversight materially reduce claim exposure.
- Prompt notification: Report potential claims immediately to preserve coverage — delayed notice can jeopardize defense rights.
- Understand exclusions: Review policy language on intentional acts, punitive fines, and government restitution.
- Prepare for donor/ fiduciary disputes: Learn how D&O responds to these claims in the context of nonprofits in Fiduciary and Donor Disputes: How Directors and Officers (D&O) Liability Insurance Handles Nonprofit Claims.
Board checklist before buying or renewing D&O (brief)
- Confirm volunteer directors are expressly covered.
- Compare whether defense costs erode limits.
- Ask carriers for sample endorsements relevant to grants, volunteers, and EPL.
- Obtain multiple market quotes (Hiscox, Travelers, Chubb and specialty nonprofit markets).
- Maintain governance documentation and conflict-of-interest records.
- Budget for deductibles/retentions and consider higher deductibles for premium savings only after assessing risk tolerance.
Final takeaway
D&O insurance for nonprofits in the U.S. is not one-size-fits-all: it responds well to the common claims nonprofits face — fiduciary duty allegations, employment claims, regulatory probes — but coverage limits, endorsements, and exclusions govern how much protection the board and volunteers actually receive. Use real claim examples to understand how defense costs, settlements, and regulatory outcomes unfold, then apply those lessons to structure coverage, strengthen governance, and obtain competitive quotes from established carriers.
External sources and market context used in this article:
- Insureon — D&O cost guidance: https://www.insureon.com/insurance/directors-officers-insurance/cost
- Forbes Advisor — D&O insurance cost overview: https://www.forbes.com/advisor/business-insurance/directors-and-officers-insurance-cost/