Why venture‑backed startups in Canada buy D&O (and Side‑A DIC)

Updated: November 2025

Directors & Officers (D&O) liability insurance is a standard ask from institutional investors and independent directors. It protects the personal assets of directors and officers and, depending on structure, reimburses the company for indemnification obligations and certain entity claims. Canadian corporate law also makes clear that directors can face personal exposure through the oppression remedy, which is why many venture‑backed boards budget for Side‑A DIC as a personal‑asset backstop. See: CBCA s.241, CNCA s.253, and the Supreme Court’s decision in Wilson v. Alharayeri (2017 SCC 39).

What D&O covers for private, VC‑backed companies

• Side A: personal asset protection for directors/officers when the company cannot or will not indemnify them.

• Side B: reimburses the company for indemnifying directors/officers (defence costs, settlements, judgments).

• Side C (entity coverage): for private companies, typically entity securities claims (varies by form and insurer).

Policy wording matters. Expect conduct exclusions (e.g., fraud) to apply only after final adjudication; defence costs are commonly advanced subject to reservation of rights. Work with counsel to align indemnification agreements and by‑laws with the policy.

Side‑A DIC in one minute (board‑level explainer)

Side‑A DIC (Difference‑in‑Conditions) is an excess, director‑only layer that is broader than traditional Side A. It is designed to: (1) sit excess of the ABC tower for catastrophic, non‑indemnifiable claims; and (2) “drop down” to fill gaps if the underlying insurer rescinds or is insolvent, if the company refuses to indemnify, or if the claim is not otherwise covered under the ABC primary. Because the entity is not an insured, Side‑A DIC limits are reserved for individuals and are often non‑rescissable with minimal exclusions. References: primers from leading brokers and markets — Marsh, Aon, and Woodruff Sawyer (2025 guide).

Investor‑ready limit bands and funding‑close language

The right limit depends on investor mix, cash runway, regulatory exposure, and board composition. As practical, investor‑recognized starting points drawn from broker guidance and long‑running market commentary:

Sources and further reading: Woodruff Sawyer — choosing private‑company D&O limits and Side‑A DIC overviews from Marsh and Aon. Use these bands as budgeting anchors only; your final structure should follow counsel’s advice and carrier feedback.

Funding‑close checklist language founders actually use

It is common for financing documents to include an insurance condition before first close or within a short post‑close window. Examples and resources: Canadian and U.S. model document sets — CVCA model documents and NVCA model documents — are frequently referenced by counsel; some investors publicly state the requirement (e.g., Dogwood Ventures notes D&O as a term‑sheet item). For drafting, founders’ counsel often uses formulations like:

• “Company shall have bound a D&O policy with limits not less than CAD $[X]M, with [priority of payments] and [final‑adjudication conduct exclusion] provisions acceptable to Investors; certificate of insurance to Investors before funding.”

• “Side‑A DIC of CAD $[Y]M to be placed at [A/B round] if an independent director is appointed or upon reaching [headcount/revenue] thresholds.”

See: CVCA model portal above, NVCA releases (2024–2025 updates), and an example investor blog affirming the D&O requirement (Dogwood Ventures: “Require companies to purchase … D&O insurance”).

Canadian legal context: why boards care (oppression remedy)

• CBCA oppression remedy (s.241) and CNCA (s.253) empower courts to rectify conduct that is oppressive, unfairly prejudicial, or that unfairly disregards stakeholder interests. See Corporations Canada guidance, CBCA s.241, and CNCA s.253.

• In Wilson v. Alharayeri, the Supreme Court confirmed that personal orders against directors can be fit under s.241 where a director is implicated in the oppressive conduct and personal liability is appropriate in the circumstances.

These authorities are frequently cited by underwriters and counsel when explaining why Side‑A and Side‑A DIC matter for private companies (personal‑asset protection, broader drop‑down in gap scenarios).

Affordable positioning: how Summit helps founders budget smartly

• Market comparison across leading insurers to balance limit, retention, and Side‑A DIC structure for your current stage.

• Stage‑appropriate placements (e.g., Side‑A‑only options for independent director recruitment, and stepped‑up towers as you scale).

• Transparent compensation and fees: see How We Get Paid.

• Dedicated account management and claims advocacy from a modern Canadian brokerage with technology‑enabled servicing.

Two‑step fast‑track quote workflow (target 48‑hour turnaround)

1) Submit a complete pack: cap table, latest pitch deck/financials, by‑laws + indemnification agreements, investor rights/voting agreements, org chart, prior insurance (or “no prior”), and any known claims/incidents. 2) 15‑minute call to align limits/retentions and decide on Side‑A DIC. We then market to carriers and return a comparative summary — our target is 48 hours from complete submission, subject to underwriter response times and risk complexity.

Start here: Directors & Officers Insurance or contact us at Summit Cover — Contact.

Funding‑ready checklists (for founders, CFOs, and counsel)

• Before signing the term sheet

• Align board indemnification agreements and priority‑of‑payments language.

• Decide budgeted limit and Side‑A DIC trigger conditions.

• Before first close

• Bind D&O (and Side‑A DIC if required) and circulate COI to investors; docket policy number, retroactive date, retentions, notice and consent clauses.

• Post‑close hygiene

• Calendar notice/consent obligations, multi‑year premium financing if applicable, and board onboarding with claim‑reporting protocols.

• Change‑of‑control prep (run‑off)

• Price a 6‑year tail (commonly 200–350% of annual premium in market references) and confirm who pays under the purchase agreement; align with escrow timelines and reps/warranties insurance where used. See typical tail constructs in public M&A filings and broker commentary.

FAQ (structured Q&A)

• When is D&O “required” for a Canadian startup?

• It is commonly an investor condition at Series A+ or when an independent director joins. Model venture documents (see CVCA and NVCA) are often referenced, and some funds explicitly state D&O in their term‑sheet explanations (e.g., Dogwood Ventures’ public post). Specific wording and timing vary by deal.

• Do private‑company D&O policies respond to oppression remedy claims?

• They can, subject to the policy’s definition of “Claim,” insured‑versus‑insured carve‑outs, conduct exclusions, and final‑adjudication wording. Placement quality matters. The legal risk exists (see CBCA s.241 and Wilson v. Alharayeri); Side‑A (and Side‑A DIC) are intended to protect individuals when the entity cannot/will not indemnify.

• What are common Side‑A DIC drop‑down triggers?

• Underlying insurer insolvency or rescission; company refusal or inability to indemnify (e.g., bankruptcy); broader Side‑A DIC terms overriding narrower primary wording. See broker primers from Marsh and Aon.

• How do we pick a limit without over‑spending?

• Use the table above as a budgeting anchor and then adjust for runway, governance (independent directors), regulatory exposure, and M&A. Woodruff Sawyer’s guidance on typical availability for early‑stage companies is a useful reference point.

• What underwriting materials should we prepare to hit a 48‑hour target?

• Clean governance documents (by‑laws, indemnification agreements), cap table, financials, pitch deck, resumes of key executives, prior coverage or “no prior,” and any incident/claim details. Your Summit broker will provide a secure upload link and a one‑page checklist.

Important notes

• This page is general information for Canadian startups and is not legal advice. Always consult qualified counsel. Coverage varies by insurer and wording.

• Summit places coverage for Canadian clients outside Quebec. For cross‑border risks, we coordinate with licensed partners where required.

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See also: Directors & Officers Insurance • How We Get Paid • Contact Summit