Introduction

Directors & Officers (D&O) liability for venture-backed startups is different from mature public-company programs. This page provides stage-based guidance, a practical term‑sheet checklist, a simple RFP template, and a “what to send” list to secure non‑binding market indications in ~48 business hours. Summit places startup D&O programs for Canadian companies outside Quebec and tailors wording, limits, and retentions to each cap table, runway, and U.S. nexus. For a primer, see our overview of Directors & Officers (D&O) Insurance.

What D&O Covers and Why Startups Need It

D&O protects individuals (directors, officers, and in many cases, board observers and advisory directors) and, for certain claims, the entity, against alleged wrongful acts in managing the company. It pays defense costs and settlements/judgments where insurable by law. Startup triggers commonly include alleged misrepresentation in fundraising, breach of fiduciary duty, mismanagement, cap table disputes, derivative demands, investor litigation, and employment‑related leadership decisions. Coverage is typically organized by “Sides”:

• Side A: Protects individual insureds when the company cannot indemnify (e.g., insolvency or legal prohibition).

• Side B: Reimburses the company when it indemnifies directors/officers.

• Side C: Entity coverage for securities claims (generally private placement misrepresentation; for public companies, entity securities coverage is broader).

Term‑Sheet Builder: Key Clauses to Get Right

Use these as negotiation anchors when reviewing indications and binders:

• Limits and Structure: Single ABC tower vs. ABC tower plus dedicated Side‑A DIC (Difference‑in‑Conditions) layer for non‑indemnifiable claims.

• Retentions (Deductibles): By claim type (securities, EPL‑related D&O, other). Lower or nil retention for Side A. Consider step‑ups for U.S. claims.

• Conduct Exclusions: Fraud, illegal profit/advantage—seek “final, non‑appealable adjudication” wording and severability of exclusions.

• Insured v. Insured Carve‑outs: Permit shareholder derivative claims, whistleblower claims, and claims by bankruptcy trustees/receivers.

• Priority/Order of Payments: Prioritize Side A to protect individuals in financial distress scenarios.

• Defense: Duty to defend vs. reimbursement; panel counsel flexibility; consent standards; allocation mechanics.

• Claim Reporting: Notice, interrelated claims, and prior/pending litigation dates aligned to your corporate history.

• Outside Directorship Liability: Coverage for service on portfolio SPVs, industry associations, or boards at the company’s request.

• Bankruptcy/Insolvency Provisions: Non‑rescission of Side A where available; debtor‑in‑possession considerations.

• Territory/Jurisdiction: Global coverage with U.S. securities claim clarity and Canada‑specific compliance.

Stage‑Based Guidance (Illustrative, Not Legal Advice)

The ranges below reflect common patterns we see in Canada’s venture market (outside Quebec). Actual terms depend on revenue, burn/runway, cap table, governance, claim history, sector, and U.S. footprint.

Notes: “Limit range” is aggregated across all Sides unless stated; EPL exposures often sit on a separate EPL policy—coordinate retentions and severability. For companies with heavy U.S. investor participation or sales, consider higher limits and Side‑A DIC earlier.

Side‑A DIC: When and Why It Matters

Side‑A DIC is a dedicated layer for individuals that drops down when: (1) the ABC carrier denies or cannot pay (e.g., bankruptcy estate challenges, narrow exclusions), (2) local regulations impede indemnification or insurance response, or (3) a catastrophic U.S. securities or derivative claim exhausts the ABC tower. Benefits include:

• Broader “difference‑in‑conditions” wording to fill gaps and narrower exclusions.

• Non‑rescission provisions and “pay on behalf of” mechanics focused on individual protection.

• Priority of payments for directors and officers during insolvency or liquidity crises. Add Side‑A DIC once investor scrutiny, U.S. exposure, or balance‑sheet fragility makes non‑indemnifiable risk material (commonly Series B/C onward, earlier for cross‑border tech and life sciences).

U.S. Exposure for Canadian Startups

Operating in or fundraising from the U.S. increases frequency/severity for D&O claims. Underwriters will drill into:

• Corporate structure: Delaware subsidiaries/parent, intercompany agreements, and where board meetings occur.

• Investors and fundraising: U.S. VC participation, Reg D private placements, solicitation materials, side letters.

• Revenue and employees in the U.S.: State concentrations (e.g., CA, NY, MA, TX), sales practices, HR governance.

• Public‑company pathway: Late‑stage financing behavior, pre‑IPO communications, research coverage, or SPAC conversations. Impacts you may see: higher retentions for U.S. securities claims, larger requested limits, U.S.‑specific endorsements, and earlier recommendation for dedicated Side‑A DIC. Coordinate D&O with your EPL and Cyber programs to avoid allocation disputes in employment‑driven leadership claims.

Simple RFP Template (Copy/Paste)

Use this outline to solicit comparable D&O indications:

• Company: Legal name, jurisdiction of incorporation, year founded, business description (100–200 words).

• Financials: Trailing 12 months revenue, current cash, burn rate, runway, next 12‑month plan (high level); last financing round/date/amount; pre‑money valuation if recent.

• Cap Table & Governance: Board list/observers; key investors; protective provisions; indemnification agreements; bylaws excerpt.

• Operations Footprint: Employee count by country; revenue split (Canada/U.S./ROW); key states/provinces; material contracts.

• Litigation & Claims: Any past or pending claims/demands; regulatory inquiries; customer/investor disputes.

• Prior Insurance: Current/past D&O carrier, limits, retentions, retro dates; 5‑year loss runs if available.

• Requested Structure: Target limits; preferred retentions; Side‑A DIC interest; desired effective date.

• Counsel & Audit: Outside legal counsel and audit/review firm (if applicable).

• Risk Controls: Whistleblower policy; code of conduct; board minutes cadence; financial controls; HR policies.

What to Send for 48‑Hour Indications

A complete submission accelerates underwriting. Send these items for a non‑binding indication in ~48 business hours:

• Pitch deck and/or latest investor update (PDF).

• Latest signed financial statements or internal management accounts; current cash and monthly burn.

• Cap table summary; board and officer list; any board observer agreements.

• Incorporation documents; indemnification agreement template; bylaws excerpt on indemnification/advancement.

• Brief U.S. exposure memo: employees by state, revenue split, U.S. investors, and any U.S. subsidiaries.

• Any prior D&O policy/binder and 5‑year claims/loss history (if applicable).

• Completed Summit startup D&O intake (we’ll provide after intro call). Share securely with your Summit account manager or via Contact Us. We place programs across Canada outside Quebec.

How Summit Works With Startups

• Independent market access: We shop multiple carriers to fit your stage, sector, and U.S. footprint.

• Fast, founder‑friendly process: One intake; coordinated broking across D&O, EPL, and Cyber to reduce gaps and allocation disputes.

• Transparent compensation: See how we’re paid on How We Get Paid.

• Claims advocacy: If something happens, start at Claim Services and we’ll coordinate with the insurer and counsel.

FAQ

• When should we buy D&O? As soon as you formalize a board or close an institutional round; some angels also require it pre‑seed.

• How do we size the limit? Start with board expectations, investor rights, and U.S. exposure; then model cash runway and worst‑case defense costs. Use the stage table above as a directional guide.

• Does D&O cover fraud? Intentional illegal acts are excluded; policies aim to defend until a final, non‑appealable adjudication determines excluded conduct.

• What about employment claims? D&O responds to leadership allegations in certain employment‑related matters, but primary coverage is Employment Practices Liability (EPL). Align D&O and EPL terms.

• Will Side‑A DIC duplicate ABC coverage? No—its purpose is to drop down when ABC won’t or can’t respond and to provide broader, individual‑focused protection.

Next Steps

• Book a 15‑minute scoping call via Contact Us.

• We’ll confirm submission needs, target limits/retentions, and priority clauses, then approach markets for ~48‑hour indications. Final terms require full underwriting and carrier approval.