Introduction

Directors & Officers (D&O) policies are not standardized. Small wording differences materially change what is covered for Canadian directors, officers, and entities. This buyer’s checklist focuses on clauses that most affect real‑world outcomes in Canada, where directors face unique statutory exposures (e.g., unpaid wages and source deductions) and remedies (e.g., oppression). Use the one‑line tests under each item to pressure‑test competing quotes before you bind.

Before the checklist, a quick glossary and why these issues matter in Canada:

• Canadian statutes can impose personal liability on directors for up to six months of unpaid wages (CBCA s.119) and for unremitted source deductions and GST/HST (ITA s.227.1; ETA s.323). Policies often exclude indemnity for these statutory amounts, though defence may still be covered depending on wording.

• Oppression remedy claims under the CBCA can target individuals personally; coverage often turns on definitions of “Claim,” conduct exclusions, and what counts as “Loss.”

• Priority-of-payments, Side A/B/C structure, severability, and “final adjudication” triggers determine whether defence is advanced and who gets paid first if limits are tight.

Contents

• Quick glossary: Sides A/B/C and Side A DIC

• The 25-clause checklist

• Canadian statutory exposures to watch

• How Summit applies this checklist for clients

• FAQ

Quick glossary

A D&O program typically has three “sides,” plus optional Side A DIC. The mapping below clarifies who is paid and when.

The Side mapping and priority language are commonly discussed by global brokers; a priority‑of‑payments clause typically elevates Side A over Sides B/C.

The 25-clause checklist

Each item includes a one‑line test to compare forms.

1) Final‑adjudication trigger in conduct exclusions (fraud, illegal profit)

• Look for “final, non‑appealable adjudication in the underlying proceeding” before any conduct exclusion applies, so defence is advanced through appeals. Test: Does the exclusion wait for a final, non‑appealable adjudication in the underlying action?

2) Advancement of defence costs and recoupment

• Policies should state current, periodic advancement, subject only to recoupment after a no‑coverage determination. Test: Does the form mandate contemporaneous advancement with any recoupment right spelled out?

3) Priority‑of‑payments (order of payments)

• Side A paid first, then Side B, then Side C; include a “freeze/release” feature so entity payments pause if individuals later need limits. Test: Is the Side A priority explicit and does a release mechanism exist?

4) Severability – application (non‑imputation)

• Prevents rescission against innocent insureds if a signer erred; limit imputation to specified executives. Test: Does the application severability protect innocent Ds & Os from rescission/imputation?

5) Severability – exclusions (conduct)

• Misconduct by one insured shouldn’t be imputed to others. Test: Are conduct exclusions non‑imputable across insured persons?

6) Non‑rescission wording for Side A/Side A DIC

• Best‑in‑class Side A (especially DIC) is non‑rescissable for innocent insureds. Test: Is Side A (or Side A DIC) expressly non‑rescissable for individuals not involved in misrepresentation?

7) Insured‑vs‑insured exclusion – carve‑backs

• Seek carve‑backs for derivative actions (independent of insured involvement), whistleblower/qui tam, former D&O after a cooling‑off period, and bankruptcy trustees/receivers. Test: Which carve‑backs are included: derivative (independent), former D&O after X years, bankruptcy fiduciaries, whistleblowers?

8) Definition of “Claim” – investigations and pre‑claim inquiries

• Include regulatory investigations, target/witness interviews, document demands, and pre‑claim inquiries (with sublimits). Test: Does “Claim” include informal and formal investigations and interviews?

9) Definition of “Loss” – fines/penalties and non‑monetary relief

• Clarify insurability “where permitted by law,” and how non‑monetary relief (e.g., restitution/disgorgement) is treated. Test: Does “Loss” address punitive damages where insurable and define treatment of disgorgement/restitution?

10) Allocation methodology for mixed matters

• Predetermined allocation (e.g., 80/20) avoids delays; avoid purely “relative exposure” language. Test: Is there a predetermined allocation to speed defence payments?

11) Bankruptcy/insolvency protections for insured persons

• Ensure policy proceeds are prioritized to individuals notwithstanding entity claims. Test: Does the wording protect Side A access if the entity is insolvent?

12) Outside Directorship Liability (ODL)

• Extend to outside boards served at the company’s request; understand double‑excess/triple‑excess and any sublimits or schedule requirements. Test: Is ODL provided on blanket basis for requested outside roles and on what excess basis?

13) Former directors/officers and run‑off

• Confirm coverage for former Ds & Os and transactional run‑off (change‑in‑control) terms. Test: Are past Ds & Os protected, and what automatic run‑off applies on change‑in‑control?

14) Tail/ERP options and pricing caps

• Extended Reporting Period should be optional with clear duration and capped pricing. Test: What ERP length and price cap are guaranteed in the form?

15) Prior acts/continuity date and prior‑pending litigation exclusions

• Seek broad prior‑acts with a single continuity date; narrow any PPLI language. Test: Is prior‑acts coverage broad and PPLI limited to specific matters?

16) Notice of circumstance (deemer) provision

• Lock tomorrow’s claim to today’s policy if you give timely notice of facts. Test: Can you “deem” a noticed circumstance as a claim in this policy period?

17) Order of advancement vs indemnification

• Side A should trigger unless and until the company actually pays indemnity, not merely because indemnity is theoretically “available.” Test: Does Side A apply unless the company has already paid indemnity?

18) Canadian wage‑and‑hour/wage liability treatment

• Many forms exclude statutory wage liabilities but may cover defence; confirm explicit wording and any EPL interactions. Test: Are statutory wage liabilities excluded and is defence still covered?

19) Canadian tax/withholding liability treatment

• Policies typically exclude indemnity for statutory source deduction and GST/HST liabilities; confirm any defence cost treatment. Test: Are statutory tax liabilities excluded while defence remains available?

20) Oppression remedy coverage posture

• Ensure oppression claims qualify as covered “securities/management” claims and consider allocation for non‑monetary relief. Test: Does the form cover defence and monetary relief for oppression claims (subject to exclusions)?

21) Definition of “Insured Person” breadth

• Include de facto/Shadow directors, functional equivalents, and committee members. Test: Are de facto directors and equivalent positions included?

22) Territorial scope, governing law, and liberalization

• Worldwide claims and permissive governing‑law options improve fit for cross‑border matters. Test: Is coverage worldwide with favourable governing‑law or liberalization wording?

23) Crisis, extradition, and asset‑&‑liberty costs

• Useful sublimits for dawn raids, bail bonds, and travel; confirm triggers. Test: Are crisis/extradition/asset‑&‑liberty sublimits included and when do they trigger?

24) Entity EPL interplay and carve‑backs

• D&O often excludes entity employment claims; look for carve‑backs or buy separate EPL. Test: Is there an EPL carve‑back or coordinated EPL policy?

25) Regulatory investigations/derivative demand costs

• Prefer express cover for books‑and‑records demands and derivative demand investigation costs. Test: Are derivative investigation and books‑and‑records costs covered?

Canadian statutory exposures to watch

• Unpaid wages: CBCA s.119 makes directors jointly and severally liable for up to six months’ wages if statutory preconditions are met. Policies often exclude indemnity for these statutory amounts; compare defence treatment and any wage‑and‑hour exclusions.

• Source deductions and GST/HST: Directors can be personally liable for unremitted employee withholdings (ITA s.227.1) and GST/HST (ETA s.323). Confirm exclusions and any defence coverage.

• Oppression remedy: Courts can impose personal liability on directors if it fairly rectifies oppressive or unfairly prejudicial conduct; insure defence and monetary relief where insurable by law.

How Summit applies this checklist

As an independent Canadian brokerage, Summit compares multiple carrier forms clause‑by‑clause, prioritizing Side A protections (non‑rescission, priority‑of‑payments), Canadian statutory exposures (wage/tax), and investigation coverage. To see how D&O works and engage a broker, visit Summit’s Directors & Officers Insurance. For compensation transparency, see How We Get Paid.

Note: Summit’s independence enables unbiased market shopping across carriers; you get dedicated account management and technology‑enabled service from quote to claim.

FAQ

What do “Sides A, B, and C” actually cover?

Side A protects individuals when the company can’t or won’t indemnify; Side B reimburses the company for indemnifying individuals; Side C covers the entity for certain claims (often securities for publics). Because all share one aggregate limit, a priority‑of‑payments clause matters.

Why insist on a “final, non‑appealable adjudication” trigger in conduct exclusions?

This wording ensures insurers keep advancing defence until there’s an ultimate judicial determination—avoiding denial based on mere allegations or early findings.

Does D&O cover unpaid wages or unremitted taxes assessed against directors in Canada?

Typically not as indemnity—most forms exclude statutory wage/tax liabilities—but defence coverage may still be available depending on the policy. Check exclusions and “Loss” definitions.

Are oppression remedy claims covered?

Often, yes, for defence and monetary relief that qualifies as “Loss,” subject to conduct and restitution/disgorgement exclusions and allocation. Review definitions and exclusions carefully.

What is Outside Directorship Liability (ODL)?

ODL extends protection to directors/officers serving at another organization at the company’s request, typically on a double‑ or triple‑excess basis and sometimes with sublimits.

This checklist is educational and not legal advice. Consult counsel to assess your specific exposures and policy wording.