Question 1

Does D&O insurance cover nonprofits and their board members?

Accepted Answer

Yes. Nonprofit organizations carry the same types of D&O exposure as for-profit companies. Volunteer board members have no employment relationship to fall back on, making D&O protection particularly important. Smaller organizations can often secure $1M in coverage for under $1,000 annually.

Question 2

What is the difference between D&O insurance and professional liability?

Accepted Answer

D&O covers claims from governance and management decisions. Professional liability covers claims from professional services or advice. The two policies cover different failure modes and the triggers don't overlap cleanly. Many businesses need both.

Question 3

Is D&O insurance required by law?

Accepted Answer

There is no universal legal requirement. However, institutional investors, lenders, and PE sponsors frequently require it as a condition of funding. The practical answer is that while D&O isn't legally mandated, the absence of it creates real consequences: personal exposure for board members and potential covenant breaches with lenders.

Question 4

What is a claims-made policy and why does it matter for D&O?

Accepted Answer

A claims-made policy responds based on when the claim is made, not when the conduct occurred. This makes the retroactive date critical. If you switch carriers and the new carrier sets a more recent retroactive date, conduct from the gap period is uncovered. Retroactive date continuity is non-negotiable at every D&O renewal.

Question 5

Does D&O insurance cover employment disputes?

Accepted Answer

A wrongful termination claim against an individual officer may be covered under D&O. The same claim against the company as an employer typically falls under EPLI, a separate policy. Review the EPLI exclusion in your D&O form carefully.

Question 6

Can a startup afford D&O insurance?

Accepted Answer

Yes, often more easily than founders expect. The more relevant question is whether a startup can afford not to have it. Investor board members will frequently ask whether D&O is in place before accepting a seat.