Most Texas non-profit boards believe two things that are both partly wrong: that the charitable immunity statute protects the directors, and that the general liability policy covers board decisions. Neither holds up. Chapter 84 of the Civil Practice and Remedies Code says so directly, and the general liability form covers bodily injury and property damage — not the wrongful acts a board gets sued for. Directors and officers coverage sits in the space between.
Doesn’t Texas charitable immunity already protect our board?
Not in the way boards assume, and the statute is explicit about the limits.
Chapter 84 — the Charitable Immunity and Liability Act of 1987 — does real work. Section 84.004 gives volunteers immunity from civil liability for acts or omissions within the course and scope of their volunteer duties. Sections 84.005 and 84.006 cap the liability of a non-hospital charitable organization and its employees at $500,000 per person and $1,000,000 per occurrence for death or bodily injury, and $100,000 per occurrence for property damage.
Now the three limits that matter for a board.
1. The caps only exist if you carry insurance
Section 84.007(g) provides that the caps “do not apply to any charitable organization that does not have liability insurance coverage in effect” covering the acts and omissions of the organization, its employees, and its volunteers, at least at those limits. The statute says the requirement “may be satisfied by the purchase of a $1,000,000 bodily injury and property damage combined single limit policy.”
Read that as an instruction: let coverage lapse and you have not saved a premium, you have removed a statutory ceiling.
2. The caps do not cover duties owed to the organization
Section 84.007(b) states that Chapter 84 does not limit the liability of an officer or director for breach of duties owed to the organization or its members. That is precisely the category most D&O claims fall into — self-dealing allegations, mismanagement of restricted funds, failure to oversee, disputes between the board and members.
3. The caps are about bodily injury and property damage
Sections 84.005 and 84.006 cap damages for death, bodily injury, and property damage. An employment claim, a defamation claim, or a claim over how the board handled a membership dispute is none of those things. Chapter 84 does not answer them, and neither does the general liability policy.
Section 84.007(a) adds that the chapter does not apply to conduct that is intentional, wilfully negligent, or done with conscious indifference or reckless disregard for the safety of others.
What standard are Texas non-profit directors actually held to?
Section 22.221 of the Texas Business Organizations Code sets it out. A director “shall discharge the director’s duties, including duties as a committee member, in good faith, with ordinary care, and in a manner the director reasonably believes to be in the best interest of the corporation.” A director who complies is not liable to the corporation, a member, or another person — and a person seeking to establish liability must prove the director did not act in good faith, with ordinary care, and in a manner reasonably believed to be in the corporation’s best interest.
That is a protective standard. It is also a standard that gets litigated, and litigating it is expensive. A director who is ultimately vindicated under §22.221 has still spent two years and a great deal of money getting there — unless someone is paying defense costs. That is the practical case for D&O coverage: it is defense-cost insurance more often than it is indemnity insurance.
What does a non-profit D&O policy actually cover?
D&O responds to “wrongful acts” in the management of the organization — the claims the general liability policy is silent on:
- Employment practices. Wrongful termination, discrimination, harassment, retaliation, and failure to promote. Most non-profit D&O policies bundle employment practices liability, and this is where the majority of real claims come from.
- Financial oversight and fiduciary allegations. Misuse of restricted funds, failure to supervise a bookkeeper, budget decisions that a donor or member disputes.
- Governance disputes. Board removal fights, election and voting disputes, contested membership discipline, allegations that the board acted outside the bylaws.
- Third-party management claims. Vendors, donors, grantors, and members alleging misrepresentation or breach in how the organization was run.
- Regulatory inquiries. Attorney General or state investigations, subject to policy terms.
What it does not cover: bodily injury and property damage (general liability), employee injury (workers’ compensation), employee theft (crime and fidelity), abuse and molestation claims (a separate purchase), and intentional or fraudulent conduct, which is excluded once finally adjudicated.
Should we add fiduciary liability too?
If the organization sponsors a retirement plan or a health plan, yes. ERISA fiduciary exposure is a distinct coverage, and D&O policies frequently exclude or sublimit it. A small non-profit with a 403(b) and three trustees has real exposure that nobody on the board has thought about.
The mechanics that decide whether the policy responds
Claims-made, and the retroactive date
D&O is written claims-made: the claim must be made and reported during the policy period. Board decisions get litigated years later. Two consequences follow. First, the retroactive date on the policy determines how far back conduct is covered — switching carriers can silently reset it and erase years of protection, so ask for it in writing at every renewal and never accept a later one. Second, if you ever non-renew or wind the organization down, buy extended reporting period coverage — tail — or the exposure runs uninsured.
Who is insured
Confirm the definition of insured persons covers past, present, and future directors, officers, employees, volunteers, and committee members. Non-profits run on volunteers who serve in quasi-officer roles, and a narrow definition leaves them out.
Indemnification and Side A
Check whether your bylaws and certificate of formation actually obligate the organization to indemnify directors, and whether Side A coverage is present for the situations where the organization cannot or will not indemnify — typically insolvency.
Defense costs inside or outside the limit
Most non-profit D&O policies pay defense costs inside the limit, meaning defense erodes the money available to settle. Know which structure you have before you set the limit.
How much should a non-profit carry?
There is no formula, but three things push the number up: paid employees (employment claims are the most common), a board with meaningful financial authority, and any program serving vulnerable populations. A small all-volunteer organization with no staff has a different profile from a $4 million-budget ministry with 20 employees, and the second one should not be at a $1 million limit by default.
What we would insist on regardless of size: a written conflict-of-interest policy with annual signed disclosures, board minutes that record the basis for significant decisions, dual signature controls on disbursements, an annual financial review or audit appropriate to budget size, and documented onboarding so new directors know the bylaws they are being held to. Every one of those is both a governance improvement and an underwriting input.
If you serve on a board in Guadalupe, Comal, or the surrounding counties and cannot say from memory whether the organization carries D&O — and what its retroactive date is — that is the thing to resolve at the next meeting, not the next renewal. Send us the declarations page and we will read it against Chapter 84 and tell you exactly where the board is exposed. Our non-profit and ministry insurance practice does this work, and our risk management team helps build the governance documentation underwriters ask for.
Related reading: What Insurance Does a Church Need in Texas?
