D&O Insurance for Startups

The Corgi team

Jan. 10 2025 |
10 min read

D&O insurance (Directors and Officers insurance) protects founders, executives, and board members from claims alleging mismanagement, breach of duty, misleading statements, or other leadership decisions. For most venture-backed startups, D&O becomes required once you raise institutional capital, add independent directors, or enter contracts that expect governance protection.

Corgi offers D&O insurance designed for technology companies, with coverage built around fundraising, board risk, and fast-moving startup operations.

Who needs D&O insurance

D&O insurance is most common for:

• VC-backed startups with a board of directors

• Companies raising a priced round or planning one soon

• Startups with outside investors, advisors, or independent directors

• Founders signing customer contracts with governance and liability requirements

• Companies preparing for M&A, secondary sales, or an IPO path

If you have outside capital, a board, or a term sheet, you should assume D&O will come up in diligence.

When startups usually buy D&O

Most startups buy D&O at one of these moments:

• After a term sheet: Investors request D&O as a closing condition.

• When forming or expanding the board: Outside directors often require it.

• Before signing large customer contracts: Risk and scrutiny increase.

• Ahead of growth hiring: Executive hiring can trigger D&O expectations.

• During acquisition talks: Governance and disclosure risk rises.

If you wait until the last minute, you can delay the round or miss a contract deadline.

What D&O insurance covers

D&O is built to respond to claims tied to leadership decisions. Coverage varies by form, but a typical startup D&O policy is designed to address allegations such as:

• Breach of fiduciary duty

• Misstatements or omissions in fundraising materials

• Investor or shareholder disputes

• Governance failures and oversight allegations

• Certain regulatory and investigation-related defense costs (when covered)

• Employment-related claims against individual directors or officers (often limited and coordinated with EPLI)

D&O is often structured around three core coverage parts: Side A (Individual protection) protects directors and officers when the company cannot or will not indemnify them. Side B (Corporate reimbursement) reimburses the company when it indemnifies directors and officers. Side C (Entity coverage) provides coverage for the company itself for certain claims, commonly tied to securities-related allegations.

Not every startup needs every option in the same way; the right structure depends on stage, investor mix, and governance setup.

What D&O insurance does not cover

D&O is not a catch-all policy. Common limitations include:

• Fraud or intentional misconduct (typically not covered, often pending a final adjudication standard)

• Personal profit or illegal remuneration

• Prior known acts or prior claims (based on policy terms)

• Certain contractual liability and pure breach of contract claims (unless tied to covered allegations)

• Bodily injury and property damage (handled by other policies like CGL)

• Professional services failures (handled by Technology E&O)

• Cyber events (handled by Cyber Liability)

• Wage and hour claims (often excluded or limited, typically handled under EPLI carve-backs when available)

The policy language controls. The point is that D&O is focused on management and governance risk, not product performance or operational incidents.

How to choose limits and retention

D&O buying usually comes down to two numbers:

• Limit: The maximum amount the policy will pay for covered loss (defense and indemnity, subject to terms).

• Retention: The amount the company pays before coverage applies for certain parts of the policy.

How startups typically think about it:

• More investors and higher valuation usually means higher perceived exposure.

• A more complex cap table can increase dispute risk.

• A larger board and more independent directors can increase demand for stronger protection.

• Enterprise customers and regulated industries can increase scrutiny.

If you are unsure, a practical approach is to start with what your lead investor expects, then size the rest based on stage and risk profile.

Common D&O claim scenarios for startups

These examples show why startups buy D&O (they are not promises of coverage):

• A shareholder alleges misleading statements during fundraising.

• A dispute arises over dilution, option grants, or secondary sales.

• A board member claims they were misled about financial condition or runway.

• A competitor alleges unfair competition tied to leadership actions and communications.

• A regulatory inquiry leads to defense costs for directors or officers (coverage depends on facts and wording).

• A merger dispute triggers allegations against leadership about disclosure and process.

Startups do not need to be public to face governance claims; private company disputes are common, especially around financing and control.

D&O insurance for venture-backed startups

If you are venture-backed, D&O is often treated as standard infrastructure. Investors want it because it:

• Protects the board and founders

• Reduces friction in future financings

• Helps recruit independent directors

• Adds a structured process for governance-related claims

In many cases, the first time D&O is discussed is in a financing checklist, and the second time is when a board member asks whether the policy is bound.

Why choose Corgi for startup D&O

Built for startup timing

D&O comes up when timelines matter: term sheets, board formation, and contract deadlines. Corgi is designed to move fast so you can close rounds and sign customers without insurance becoming the blocker.

Underwriting aligned to technology risk

Corgi focuses on the inputs that matter for technology startups, including stage, governance, customer profile, revenue model, and security posture where relevant. That means fewer dead ends and clearer paths to a bindable quote.

One place to build your full liability stack