Directors & Officers
Insurance
Directors and Officers (D&O) insurance is designed to protect C-suite officers and board members if they’re sued over decisions they made on the startup’s behalf.
Typically, a D&O incident might work like this:
Someone sues a member of your board over a decision related to your startup.
Your startup covers the legal fees associated with the lawsuit.
You make a claim on your D&O policy.
Your D&O insurance reimburses you for the legal fees.
Having a D&O policy means you can offer directors and officers peace of mind: they know they won’t have to use their personal assets to cover legal fees in the event of a lawsuit. Know you need D&O coverage?
Who
Any startup that has raised capital from investors, or has a corporate board or advisory committee should have Directors and Officers coverage.
Across industries, about 26 percent of private companies reported a D&O-related loss in the last three years. On average, those incidents cost $399,394.
Translation: D&O incidents are fairly common. Experienced board members know this, and will likely require proof of D&O coverage from any startup asking them to serve.
Vouch’s D&O coverage may also be helpful if you offer employees or co-founders equity. That’s because our policy – unlike many others out there – includes cap table coverage (more on that below).
Another unique feature of Vouch’s D&O is that it covers Intellectual Property (IP) claims. If someone alleges your product violates their copyright, Vouch’s D&O policy can handle the legal costs.
When
In most cases, you’ll want a D&O policy in place when you raise capital or appoint a board member. Don’t wait for a potential board member or investor to request that you get D&O coverage if you know that you plan on bringing on external directors.
If you’re in a highly litigious or regulated industry (like fintech), it’s best to get coverage as early as possible.
Questions about your startup’s situation? Shoot us a note at hello@vouch.us – we’ll help you understand your D&O exposure.
Why
D&O insurance provides protection that isn’t offered by any other policy. This protection includes coverage for lawsuits claiming your leadership or board did something or failed to do something that led to a stakeholder’s loss.
“Stakeholders” for the purposes of D&O insurance might include…
Investors
Customers
Suppliers
Competitors
Partners
Government agencies
That’s a big group, which explains why more than a quarter of private companies faced a D&O loss in the last three years.
Boost credibility
D&O isn’t just about managing risk. Having this policy can also boost your credibility. As you vie for top talent with other startups, showing that your company will protect their financial assets may give you an edge.
Venture capitalists
And then there’s the VC question. Venture capitalists tend to be wealthy. They expect portfolio companies to have D&O coverage because it’s the most effective way to protect their personal assets.
IPO
Plus, if you plan to go public, you’ll want your D&O insurance to cover as much of your activity as possible prior to your IPO. While you may be able to adjust a policy’s retroactive date to offer some after-the-fact coverage, it’s easier to get the policy in place now.
What
D&O insurance is designed to protect startups against lawsuits alleging problems with disclosures and reporting, regulatory proceedings, securities claims, and mergers & acquisitions.
A standard D&O policy includes three types (or “sides”) of protection: A, B, and C. Each protects different parts of your business.
Side A
Assets of individual directors and officers, when the startup can’t indemnify the individual to cover costs related to a claim.
Side B
Reimbursements to the startup for covering a board member’s or officer’s claim-related costs.
Side C
Defense costs/settlements for claims alleged against the Company for negligence or breach of duty.
While a D&O policy can help reduce the financial risks facing your C-suite and board, it does not provide comprehensive startup coverage. Specifically, D&O does not cover:
Damage to your business property or losses caused by your product. These may be covered by a Business Owner’s Policy.
Claims that your professional work caused a financial loss, which are typically covered by Errors & Omissions insurance.
Employee injuries, which are covered by Workers’ Compensation.
Employee lawsuits, which may be covered by Employment Practices Liability, Fiduciary, or Employee Benefits Liability insurance.
Data breach-related costs. These may be covered by Cyber insurance.
Vouch D&O insurance also offers two coverage types not available in many other D&O policies, as mentioned above:
Cap table disputes
If someone takes legal action against your company’s ownership percentages or equity distributions, Vouch’s policy is designed to cover the costs of defense.
Intellectual Property (IP) protection
If someone alleges your product infringes patents, trademarks, or copyrights, and sues your leadership for it, Vouch’s policy is designed to cover the costs of defense.
Why
Driving is one of the riskiest things we do every day. You know this, which is why you get auto insurance for yourself – you just might not think to get it for your business.
If your startup uses personal or rented cars for business purposes, your company faces these risks just as your employees do.
If your employee causes an accident, they could wind up in a lawsuit which can cost your startup thousands of dollars.
HNOA coverage can protect your startup from the risks associated with incidental driving. Get it here.
Why Vouch?
Vouch’s founders, Sam and Travis, know the hassles of startup insurance firsthand: they’re founders themselves with experience in the litigation-heavy world of fintech.
This experience drove them to launch Vouch, whose policies are designed specifically for startups. And the process of getting them is founder-friendly: apply in just 10 minutes, and have coverage within 24 hours.
Combine the hassle-free process with the unique IP and Cap Table coverage included in the Vouch D&O policy, and it’s clear why startups love working with Vouch.
How
Instead of a few weeks swapping PDFs with a broker, you can…
Apply in just 10 minutes.
Get covered within 24 hours.
Handle everything online.
Explore additional startup coverages
Foundational protection for the risks of running a startup.
Protection from disaster and theft.
Protection for your founders, officers and board members.
Protection for bugs in your product that cause financial losses.
Protection for mistakes with employee benefit plans.
Protection for allegations of wrongdoing in the workplace.
Protection for the damages caused by data breaches.
