What should a Series A D&O policy cover?
It depends on who runs the company and what the round changes. The policy should name the company and its subsidiaries and protect the founders, officers and directors when they’re sued over decisions made in those roles. Check the total limit and which coverages share it, since legal fees usually come out of the same limit that pays settlements. Check the retention, how quickly a claim has to be reported, and what is excluded. If D&O is bundled with other coverage, make sure one pool of money is what you intended.
Why D&O comes up at the Series A
D&O insurance (directors and officers insurance) protects the people who run a company when they’re sued over decisions they made in that role, for example by investors. If the round adds an investor or an independent director to your board, that person takes on the exposure personally, so they want to know a policy is in place before they join.
Investors often ask for D&O as part of a funding round like a Series A. The requirement tells you what they want to see. It doesn’t tell you whether the policy covers everyone it should, how much is left after legal fees, or what is excluded. Those details decide whether the policy works when a claim arrives.
What the policy does for founders and the board
A D&O policy pays for lawyers and for covered settlements or judgments, up to the policy limit. Without it, those costs can fall on the company or on the individuals themselves.
Most policies have up to three parts. One protects individuals directly when the company can’t or won’t cover them, and is the part meant to protect their personal assets. One repays the company when it does cover its people. One covers certain claims against the company itself.
D&O is about decisions, not the product. A claim that your product or service didn’t work as promised and cost a customer money is professional liability or technology E&O, which is a separate policy. One dispute can involve both, which is why some companies buy them together.
Six things to check in a Series A D&O quote
A certificate that satisfies the round can still leave gaps. Before you accept a quote, check:
- Who counts as insured: the named company and usually its subsidiaries, but newly created or acquired entities may need to be added
- The total limit and which coverages share it, since legal fees usually come out of the same limit that pays settlements
- Whether D&O is bundled with E&O or other coverage, because three coverages on one policy can mean one pool of money, not three
- The retention, which is the amount you pay before the policy does, like a deductible
- How quickly a claim has to be reported
- What is excluded, especially earlier matters and misconduct
Timing, and what changes after the round closes
If your investors have asked for D&O, their deadline sets yours, and a new board member will want it in place before they join. Start a few weeks ahead so there’s time to compare options rather than take the first quote. Send us the financing documents and your current policy, if you have one, and we’ll tell you what you have, what’s missing, and what it would take to meet the requirement.
A policy is written for the company you described when you bought it. A later round, a new board member, an acquisition, or a change of ownership are all reasons to look at it again, and a sale usually ends the existing policy’s coverage for anything that happens afterward.