Directors and Officers (D&O) Liability
Directors and officers (D&O) liability insurance covers claims against a company's directors and officers for alleged wrongful acts in their management roles. It typically pays defense costs and settlements for individuals and, depending on the policy, reimburses or protects the company. See D&O coverage.
Last updated October 13, 2026
How D&O liability insurance works
D&O policies are usually written on a claims-made basis: coverage generally depends on when the claim is first made and reported, and on retroactive date and notice terms. Most policies do not carry a traditional duty to defend (the insurer usually advances or reimburses costs instead), defense costs typically reduce the limit, and the policy covers financial loss rather than bodily injury or property damage.
Coverage is commonly organized in parts. Side A protects individuals when the company cannot or will not indemnify them, for example in insolvency. Side B reimburses the company when it indemnifies its directors and officers. Side C protects the company itself. For public companies, entity coverage is generally limited to securities claims, while private company policies often extend entity coverage more broadly and may include employees as insureds.
Example
A hypothetical venture-backed company completes a financing round. Later, an investor alleges that the directors breached their fiduciary duties in setting the terms and sues both the directors and the company. Subject to the retention, limits, and exclusions, the D&O policy may respond to the cost of defending the directors and, if the policy includes entity coverage for this type of claim, the company.
What to watch for
- Common exclusions include fraud or criminal conduct (often applied after a final adjudication), bodily injury and property damage, and claims already noticed under a prior policy.
- Many policies exclude claims between insured parties. Look at the carve-outs, since disputes among founders, investors, and boards are a real source of claims for private companies.
- Report claims and circumstances on time. Late notice can jeopardize coverage under a claims-made form.
- A sale, merger, or wind-down can trigger change-in-control terms. See run-off.
- D&O is separate from employment practices and fiduciary liability, which may be written on their own policies or combined in a management liability package.
D&O vs. related terms
- D&O vs. errors and omissions. D&O responds to claims about how the company is managed and governed. E&O responds to claims that the company's professional services or products failed a customer. A single dispute can touch both, which is why many companies buy both.
- D&O vs. EPL. EPL covers employment-related claims such as discrimination, harassment and wrongful termination. These are usually separate from D&O, though some packages combine them.
- D&O vs. fiduciary liability. Fiduciary liability covers claims about the management of employee benefit plans, which D&O policies often exclude or limit.
- D&O vs. general liability. General liability covers bodily injury and property damage. D&O covers financial loss from alleged wrongful acts and typically excludes bodily injury and property damage.
- Individual vs. entity coverage. Individual coverage protects the people. Entity coverage protects the company itself, and its scope differs a lot between public and private company policies.
Second example: a wind-down and a later claim
A hypothetical venture-backed company fails to raise a new round and winds down. Months afterward, a creditor alleges that the directors mismanaged the shutdown and the company's finances. The D&O policy expired when the company stopped paying premium, and the claim was made after it ended. Without run-off coverage, which is a tail that extends the reporting period, the claim would likely fall outside the policy. If the company had purchased run-off or a tail at the time of the wind-down, the directors could have a funded response for claims made in that period, subject to the terms. Individual Side A protection matters most here, because the company may no longer have funds to indemnify the directors.
Questions to ask your broker or underwriter
- Does the policy include entity coverage for non-securities claims, or only for securities claims?
- How does the insured versus insured exclusion work, and are there carve-outs for investors, shareholders, whistleblowers and bankruptcy trustees?
- What counts as a claim, and does it include regulatory investigations, subpoenas and requests for information?
- What are the retentions for different claim types, and does the policy have a priority-of-payments clause that puts individuals first?
- How does the conduct exclusion work, and does it require a final adjudication before it applies?
- What happens on a sale, merger or wind-down, and how long can run-off last?
- For investor-appointed directors, how does this policy interact with the investor's own coverage and indemnification?
Why it matters for technology, AI, fintech and digital-asset companies
Venture-backed boards include investor directors who often ask about coverage before joining, and fundraising, valuation, and regulatory statements can draw claims. Our page on venture-backed startups covers how these programs are typically structured.
Regulatory scrutiny can add to the usual investor and governance claims. Statements about AI capabilities, token offerings, custody practices or compliance programs can draw questions from investors and regulators, and a D&O policy is typically where those allegations against directors and officers land. Founders in AI and digital assets should also check the policy's exclusions and definitions for regulatory matters, since coverage for investigations and fines varies. Hiring first employees raises employment practices questions that often sit alongside D&O in a management liability program.
See how this applies in practice: D&O insurance for startups and startup insurance by stage.
Related terms
Related coverage
Frequently asked questions
What is directors and officers (D&O) liability insurance?
Directors and officers (D&O) liability insurance covers claims against a company's directors and officers for alleged wrongful acts in their management roles. It typically pays defense costs and settlements for individuals and, depending on the policy, reimburses or protects the company.
What do Side A, Side B and Side C mean in D&O insurance?
Side A protects individual directors and officers when the company does not indemnify them. Side B reimburses the company when it does indemnify them. Side C covers the company itself, often only for securities claims at public companies. Private company policies frequently provide broader entity coverage.
Does D&O insurance cover a private startup?
Yes, private companies can buy D&O, and their policies often provide broader entity coverage than public company forms. What is actually covered depends on the wording, including exclusions, the insured-versus-insured provision, and any regulatory or investor claim terms.
Is D&O insurance written on a claims-made basis?
Usually. Coverage generally depends on the claim being first made and reported within the policy period, subject to retroactive date and notice conditions. Because of this, changes such as a sale, merger, or wind-down may call for run-off or tail coverage.
Who is covered by D&O insurance?
Directors and officers are the core insureds, and policies often include the company itself, subject to the form. Private company policies may also cover employees, and some include outside or investor-appointed directors and spouses. The definition of insured in the policy controls.
What is the difference between D&O and E&O insurance?
D&O covers claims against directors and officers about how the company is managed. E&O covers claims that a company's professional services or products caused a customer financial loss. A single dispute can involve both, so many companies carry both, and the coverage is not interchangeable.
Why do investors ask whether a startup has D&O insurance?
Investor-appointed directors and board members often want protection from claims linked to their board service, and investors see D&O as part of basic governance. Many financing documents ask for it. What the policy covers still depends on its wording, limits and exclusions.
What happens to D&O coverage if the company is acquired?
Most policies have change-in-control terms that end coverage for wrongful acts after the transaction, often converting the policy into run-off. Buyers and sellers usually arrange a tail for pre-closing acts. The length, cost and terms depend on the policy and the deal.
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