Directors & Officers (D&O) insurance pays the legal defense costs and settlements when a company's directors, officers, or board members are personally sued for alleged wrongful acts in their management roles — including breach of fiduciary duty, misrepresentation, misuse of funds, and employment-related decisions. Who this is for: Any for-profit corporation, nonprofit, LLC with a management board, or startup with outside investors that has individuals serving in a leadership capacity.
TL;DR — Key Takeaways
- D&O insurance protects individual executives personally, not just the company entity — their personal assets (home, savings) are on the line without it.
- Claims-made coverage is the industry standard for D&O; the policy in force when the claim is reported responds, not the policy in force when the alleged act occurred.
- Private company D&O typically runs $3,000–$15,000 per year for $1M in limits; nonprofits often pay less; public companies pay dramatically more.
- Investors — especially VCs and PE firms — routinely require D&O coverage as a condition of funding.
- D&O does not cover intentional fraud, criminal acts, or claims brought by one insured against another insured (the "insured-vs-insured" exclusion).
What Is D&O Insurance and What Does It Cover?
Directors & Officers insurance is a management liability policy with three standard insuring agreements, commonly called "Side A," "Side B," and "Side C."
| Side | Who It Protects | What It Pays |
|---|---|---|
| Side A | Individual directors and officers directly | Defense costs and settlements when the company cannot indemnify them (e.g., bankruptcy, prohibited by state law) |
| Side B | The company (entity) | Reimburses the company after it has indemnified its directors and officers |
| Side C | The company entity itself | Covers securities claims brought against the company (most common in public-company policies; increasingly added to private-company forms) |
Side A-only DIC (Difference in Conditions) towers are also common at larger companies where directors want a dedicated limit that can't be eroded by entity claims.
What D&O Typically Covers
- Breach of fiduciary duty claims from shareholders, investors, or creditors
- Alleged misrepresentation in financial statements or investor presentations
- Mergers and acquisitions disputes
- Failure to comply with regulations or workplace laws (when not covered by EPLI)
- Bankruptcy creditor suits against directors
- Derivative suits brought by shareholders on behalf of the company
- Regulatory investigations and government subpoenas (defense costs, policy-form dependent)
What D&O Does Not Cover
- Intentional fraudulent or criminal acts (covered until final adjudication of guilt in most forms)
- Bodily injury or property damage (covered by CGL)
- Claims arising from pollution (covered by separate environmental policy)
- Insured-vs-insured claims (one director suing another on the same policy)
- Prior-known claims or circumstances if disclosed before binding
How Much Does D&O Insurance Cost?
Premiums vary by company size, revenue, industry, governance structure, and prior claims history. The table below shows illustrative annual premium ranges for a standalone private-company D&O policy with a $1M per-claim / $1M aggregate limit.
| Company Type | Annual Revenue | Typical Annual Premium |
|---|---|---|
| Early-stage startup (pre-revenue) | < $2M | $2,500 – $5,000 |
| Growth-stage private company | $2M – $25M | $4,500 – $12,000 |
| Mid-market private company | $25M – $100M | $10,000 – $35,000 |
| Nonprofit (501(c)(3)) | Any | $1,500 – $8,000 |
| Public company (small-cap) | $50M – $250M | $75,000 – $300,000+ |
Key premium drivers: - Industry: Financial services, healthcare, and tech command higher rates due to regulatory and securities exposure. - Prior claims or litigation history: A single prior D&O claim can increase renewal premiums 30–100%. - Board composition and governance: Outside directors, audit committees, and documented processes reduce pricing. - Retention (deductible/SIR): Higher retentions — $10K, $25K, or $50K — meaningfully lower premiums. - Limit stacked vs. combined: Policies may have separate limits per Side A/B/C or a shared aggregate.
Claims-Made vs. Occurrence: Why D&O Is Always Claims-Made
D&O insurance is written exclusively on a claims-made basis. Under claims-made, coverage is triggered when: 1. A wrongful act by a director or officer occurs, AND 2. A claim (written demand for monetary damages or a covered proceeding) is first made and reported within the policy period (or an extended reporting period, if applicable).
This differs from occurrence-based policies (like CGL), where the policy in force when the incident happened responds — even if discovered years later.
Retroactive date: D&O policies include a retroactive date. Claims arising from wrongful acts that occurred before the retroactive date are excluded. When changing carriers, securing "full prior acts" coverage (retroactive date matching your company's inception) is critical.
Extended Reporting Period (ERP/tail): If a company is acquired, ceases operations, or cancels its policy, directors remain exposed to future claims for past acts. Purchasing a 1, 3, or 6-year tail endorsement extends the window to report those claims.
How to Get D&O Insurance in 5 Steps
- Gather your company profile. Underwriters need your most recent two years of audited or reviewed financial statements, a current organizational chart, a list of directors and officers with bios, and disclosure of any pending litigation or regulatory inquiries.
- Complete an application. D&O applications (often called a "Management Liability Questionnaire") ask detailed questions about governance, ownership structure, pending litigation, and financials. Accuracy is legally important — material misrepresentation can void coverage.
- Obtain quotes from multiple carriers. Carrier appetite varies significantly. A broker working the admitted and E&S markets simultaneously will surface meaningful coverage and pricing differences across insurers like Chubb, AIG, Travelers, Berkley, Markel, and others.
- Review coverage form differences. Not all D&O policies are equal. Key form differences include definition of "wrongful act," severability of the application (whether one officer's misrepresentation voids coverage for all), and breadth of "claim" triggers.
- Bind coverage and calendar renewal. Because D&O is claims-made, a lapse in coverage leaves directors exposed. Set a 90-day pre-renewal calendar reminder to start remarketing.
Real-World Example: Startup D&O Claim
Scenario (illustrative — not a guarantee of coverage or outcome):
A Series B SaaS company in Austin, Texas, raises $18 million from two venture funds. Six months later, revenue falls 40% below projections disclosed in the pitch deck. The lead investor files suit against the CEO and CFO individually, alleging material misrepresentation in the financial models used to support the raise.
- Claim type: Investor lawsuit for breach of fiduciary duty and misrepresentation
- Defense costs incurred: Approximately $420,000 over 18 months of litigation
- Settlement: $850,000
- D&O policy: $2M limit, $25,000 retention, claims-made form — policy was in force when the claim was filed
- Outcome: Insurer paid defense costs and contributed to settlement net of the retention. Without D&O, the CEO and CFO would have faced personal financial liability.
This type of investor-vs.-management claim is among the most common triggers for private-company D&O in the US. The Chubb 2024 Private Company Risk Survey found that nearly 1 in 4 private companies had faced a D&O-type claim in the prior three years.
Frequently Asked Questions
Do I need D&O insurance if my company is small or not yet profitable?
Yes — company size does not shield individual executives from personal liability. Investors, creditors, employees, and regulators can all sue directors and officers personally. Startups are especially exposed during fundraising rounds, when financial projections and disclosures are scrutinized.
Is D&O insurance required by law?
No US state requires D&O insurance by statute. However, investors (VCs, PE sponsors, lenders, strategic partners) frequently require it by contract as a condition of investment or credit agreements. Public companies are also expected to carry it as a matter of governance best practice and investor expectations.
Does D&O cover employment practices claims?
Generally, no. D&O policies typically exclude or narrowly cover employment-related claims (discrimination, harassment, wrongful termination). A standalone Employment Practices Liability Insurance (EPLI) policy — or a Management Liability package combining D&O + EPLI + Fiduciary — is the correct tool for those exposures.
What is the "insured-vs-insured" exclusion?
The insured-vs-insured exclusion bars coverage when one insured (e.g., a former officer) sues another insured (e.g., the current board) under the same policy. The exclusion was originally designed to prevent collusive suits but can have unintended consequences in derivative actions. Many modern D&O forms carve back coverage for shareholder derivative suits and certain regulatory actions.
How does D&O interact with E&O (Errors & Omissions)?
D&O covers management decisions and governance acts. E&O (also called Professional Liability) covers professional services delivered to clients — an entirely different exposure. A technology company, for example, may need both: D&O for investor/board exposure and E&O for client claims about its software.
What is a "Side A DIC" policy and who needs it?
A Side A DIC (Difference in Conditions) policy provides excess coverage for individual directors and officers — on top of, or in place of, the Side A insuring agreement in a standard D&O policy. It fills gaps when the underlying D&O has been exhausted or when the entity can't or won't indemnify. Common at mid-market and larger companies where individual directors negotiate their own coverage as a condition of board service.
Can nonprofits get D&O insurance?
Yes, and nonprofits often pay less than for-profit entities for comparable limits because they typically lack investor/securities exposure. Nonprofit D&O policies — sometimes called Directors, Officers & Trustees (DO&T) — are widely available from admitted carriers. Volunteer directors have the same personal liability exposure as paid board members.
What "prior acts" date should we request?
Request a retroactive date matching your company's date of incorporation or the date your first director assumed a management role. Accepting a rolling retroactive date each year creates a gap that can leave past conduct uninsured.
Why Place Your D&O Through Morrow?
- Access to multiple D&O markets. As an independent agency, Morrow places D&O with admitted carriers and E&S market specialists — giving you competing quotes and genuine form-level comparisons, not just one carrier's paper.
- Management liability expertise. D&O, EPLI, and Fiduciary Liability are interrelated coverages. Morrow analyzes the combined Management Liability tower — not just D&O in isolation — so coverage gaps don't fall between policies.
- Investor-driven deadlines met. Funding rounds move fast. Morrow delivers bindable quotes within 24–48 hours for most private-company D&O submissions and can issue evidence of coverage for investor closing checklists on short notice.
- Renewal benchmarking. Morrow benchmarks your renewal pricing and terms against the broader market at every renewal cycle — not just when you ask — so you're never unknowingly overpaying.
- Claims advocacy when it matters most. If a claim is filed against a director or officer, Morrow stands between you and the carrier: tracking coverage positions, pushing for timely acknowledgment of defense obligations, and escalating coverage disputes when needed. [Morrow to confirm: specific claims advocacy contact and process]
Get a D&O Quote from Morrow
Protect your directors and officers — personally. A D&O claim without coverage can reach six or seven figures in defense costs alone. Morrow will benchmark your existing coverage or build a new program from scratch.
Request a D&O Quote → | Call Morrow
Trust strip: Morrow (Afthonea Inc, DBA Morrow) is a licensed independent commercial insurance agency. [Morrow to confirm: NPN, licensed states, and carrier panel.] Ratings sourced from Google Reviews. Coverage placed with admitted and surplus lines carriers rated A- or better by AM Best.
Related Coverage and Resources
- Commercial Insurance Overview — Parent pillar: full coverage menu for businesses
- Employment Practices Liability (EPLI) Insurance — Covers wrongful termination, harassment, and discrimination claims
- Errors & Omissions (E&O) / Professional Liability Insurance — Covers professional services claims from clients
- Fiduciary Liability Insurance — Covers ERISA plan administrators for benefit plan decisions
- Management Liability Insurance Cost Guide — Benchmarks, pricing factors, and what to expect at renewal
- D&O vs. E&O vs. EPLI: What's the Difference? — Side-by-side comparison for management liability coverages
Author: Written by the Morrow Commercial Insurance Editorial Team. Editorial content reviewed for accuracy against current carrier policy forms, NAIC model act guidance, and published underwriting guidelines. Published: June 2026 Last updated: June 2026
Sources: - National Association of Insurance Commissioners (NAIC) — Management Liability market data and model act guidance - Insurance Information Institute (III) — Directors & Officers Liability overview - Chubb — 2024 Private Company Risk Survey - U.S. Securities and Exchange Commission (SEC) — Proxy disclosure rules and governance guidance - Delaware General Corporation Law (DGCL) §145 — Indemnification of directors, officers, employees, and agents - Internal Revenue Service (IRS) — Nonprofit governance and Form 990 requirements