Directors and officers insurance protects the people who run the company from personal liability for decisions they make in that role. For a venture-backed device company, it is usually the first management liability coverage an investor asks about, and it often appears as a condition of closing.
The exposure grows with outside capital and regulatory scrutiny. Once a company has a board, institutional investors, and FDA obligations, decisions about clearance strategy, quality, disclosure, and financing all become potential claims. This page covers what D&O responds to, why regulatory exposure raises the risk, and how the program should change at each financing.
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 the defense cost alone can be significant well before any question of liability is settled.
Most programs are built in layers. One part protects individuals when the company cannot indemnify them, another reimburses the company when it does, and a third covers the entity itself for certain claims. Which layer answers depends on the claim and on how the company's indemnification provisions are written.
Why Regulatory Exposure Raises D&O Risk
A regulatory event rarely stays contained to the regulatory team. An FDA enforcement action, a quality system finding, or a question about what the company represented during clearance can produce a management liability claim alongside it, brought by investors who believe they were misled about the risk.
That linkage is why device companies carry more D&O exposure than a comparable business without a regulated product. The decisions that create regulatory risk are made at the leadership level, and they are documented.
How The Program Changes By Financing Stage
At seed stage, the exposure is modest and the coverage is often minimal. That changes at the first priced round, when outside directors join the board and the financing documents frequently require D&O as a closing condition. Limits typically scale with the size of the raise and the composition of the board.
An exit changes it again. On an acquisition, directors usually need run-off or tail coverage so they remain protected for decisions made before closing, because the buyer's program will not cover the prior board.
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