Directors and officers insurance protects the people running the company from personal liability for decisions made in that role. For a venture-backed digital health company it is typically the first management liability coverage an investor raises, and it often appears as a condition of closing.
Digital health carries a specific overlay. Decisions about regulatory positioning, clinical claims, data practices, and reimbursement are exactly the decisions that generate management liability claims when something goes wrong. This page covers what D&O responds to, the exposures particular to digital health, and how the program should change by stage.
What D&O Responds To
The policy responds to claims against directors and officers alleging mismanagement, misrepresentation, or breach of duty. Those claims come from investors, employees, regulators, competitors, and acquirers, and defense costs accrue long before any question of liability is resolved.
Programs are built in layers: one protecting individuals when the company cannot indemnify them, one reimbursing the company when it does, and one covering the entity for certain claims. Which layer responds depends on the claim and on the company's own indemnification provisions.
The Exposures Particular To Digital Health
Regulatory positioning is the first. The decision about whether a product is a regulated device, and how aggressively to characterize it, is a leadership decision that investors may revisit if the regulatory posture later proves wrong.
Clinical claims and marketing are the second. Statements about efficacy and outcomes are scrutinized by regulators and by investors who funded the company on the strength of them. Data practices and reimbursement or billing representations round out the list, and each is a decision made at the top of the company.
How The Program Changes By Stage
The trigger is usually the first priced round, when outside directors join the board and the financing documents require coverage. Limits scale with the size of the raise and the composition of the board rather than with revenue.
Employment practices exposure grows alongside headcount and is frequently written with or beside D&O. At exit, run-off coverage protects directors for decisions made before closing, and it is far easier to negotiate as part of the transaction than afterward.
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