Directors and Officers Insurance in Canada

Also called D&O insurance. If someone sues the people who run your company over how it was managed, directors and officers insurance is the policy that helps pay to defend them.

Written by

Beatriz Alban Cabaco

Content Researcher

Reviewed by

Sean Nolan

10 years in insurance

Last updated

September 20, 2026

What is directors and officers insurance?

Directors and officers (D&O) insurance pays the cost of defending, and any settlement of, a claim that the people running a company made a wrongful decision in managing it. It’s built to protect their personal assets as well as, on some policies, the company itself.

It’s about how the business is run, not about injuries or damage. If a customer is hurt or their property is damaged, that’s general liability insurance.

Legal defence costs

Lawyers’ fees and the cost of responding to a claim or investigation, even one without merit.

Settlements and damages

What a settlement or a court-awarded judgment costs, up to your policy limit.

Protection for the individual

Cover for a director or officer personally when the company can’t or won’t pay.

Cover for the company

On some policies, the company’s own costs when it’s named in the claim as well.

Who needs directors and officers insurance?

A good test: could someone other than you, such as an investor, an employee, a lender or a regulator, blame the people running the company for a loss? If so, this is worth asking about.

Startups and founder-led companies

Founders make big decisions fast, and co-founders and early investors can disagree about them.

Private companies with employees

Hiring, firing and workplace decisions can lead to claims that name the directors.

Companies with investors or lenders

People who put money in can claim it was mismanaged or misrepresented.

Charities and nonprofits

Volunteer board members can still face claims over funds, staff or conflicts of interest.

Family and closely held businesses

Disputes between owners and family members can turn into claims against the directors.

Companies preparing to raise or sell

Investors and buyers often ask about cover, and past decisions can come under scrutiny.

What does a real claim look like?

These examples are illustrative, not real cases. In each one, someone blames the people running the organization, and the policy is what helps pay for the defence, up to the limit.

An investor says the finances were misrepresented

A startup raises money from an investor, then struggles. The investor claims the founders overstated the company’s prospects and sues them personally. D&O insurance can respond to the cost of defending the claim, and to a settlement if one is agreed.

A former employee names the directors

A former employee claims they were dismissed unfairly and names the directors along with the company. Depending on the policy, employment claims may be included in D&O insurance or need a separate employment practices policy, so it’s worth asking which applies.

A donor questions how a charity spent its money

A donor believes the board mismanaged funds or bought services from a business a board member owns. The volunteers on the board face a claim personally. D&O insurance can help pay for the defence, whether or not the claim succeeds.

Who can bring a claim against directors and officers?

More people than owners expect. This table shows the general pattern, and what a policy responds to depends on its wording.

Who	A typical allegation
Investors and shareholders	The company was mismanaged or its prospects were misrepresented
Employees	Wrongful dismissal, discrimination or harassment
Creditors and suppliers	Decisions made while the company was in financial trouble
Competitors	Unfair business practices or misuse of confidential information
Customers	Misleading statements about the business
Regulators and governments	Not following a statute or a filing requirement
Donors and members (charities and nonprofits)	Misuse of funds or a conflict of interest

Who is protected, and when? The three parts of a policy

Policies are often described in three parts, called Sides A, B and C. What each includes varies by insurer.

Part	Who it protects	When it applies
Side A	The directors and officers personally	When the company can’t or won’t pay for their defence or a settlement
Side B	The company	When it pays for the directors and officers and is reimbursed
Side C	The company itself	When the company is named in the claim. It’s limited on some policies, and only covers certain claims on others, so ask

What can directors be personally responsible for in Canada?

Directors can be personally responsible for more than decisions that turn out badly. Depending on the company’s governing law and province, examples include:

Payroll deductions the company withheld and didn’t remit
GST or HST it collected and didn’t remit
Wages it owes to employees
Environmental obligations
Breaches of the duty to act honestly and in the company’s best interests

This is general information, not legal advice, so check what applies to you with your lawyer or accountant. Also ask your insurer whether a D&O policy responds to these amounts, because cover varies.

Claims-made cover: why timing matters

Most D&O policies are written on a claims-made basis. That means the policy generally has to be in force when a claim is first made, not only when the decision was taken.

The retroactive date is the earliest date the policy will cover. A wrongful act before that date usually isn’t covered.
When a director leaves, cover generally continues for claims made while the policy is in force, so it’s worth confirming how former directors are treated.
When the company is sold, stops trading or lets the policy lapse, cover for later claims may end. Many insurers offer extended reporting, sometimes called a tail, which gives more time to report claims. Availability and terms vary.

Ask your insurer about the retroactive date and about extended reporting before you buy, and again before a sale or a wind-down.

How is D&O different from other business policies?

They answer different questions, and many businesses need more than one.

Policy	It responds to claims about	Example
Directors and officers	How the company was run	An investor says the founders mismanaged the business
Professional liability	Your advice or service cost a client money	A consultant’s plan fails and the client sues
General liability	Injury or property damage you cause to others	A customer slips in your shop
Employment practices	How you hire, manage and dismiss staff	An employee claims discrimination. Sometimes included in D&O, sometimes bought separately
Cyber	A data breach or cyberattack	Customer records are stolen

How much does directors and officers insurance cost?

There isn’t one price. What you pay depends on your organization and the cover you choose. The only reliable number is a quote for your own business, and Clearly Rate doesn’t set prices. The insurer does.

What affects the price

The type and size of the organization
Your industry and how risky it is
Annual revenue and number of employees
Outside investors or borrowed money
The number of directors and officers
The company’s financial health
The limit and the deductible you choose
Your claims history

How to keep your premium down

Describe your organization accurately, since gaps between what you told the insurer and the facts can cause problems at claim time. Choose a limit that fits your exposure and your investors’ or lenders’ expectations. Ask what a higher deductible would save, and whether you’re comfortable paying that amount yourself.

Is directors and officers insurance required?

No general law requires it, but others may ask for it.

Situation	What’s usually expected
You take outside investment	Investors may ask for it as a condition of investing
You borrow from a lender	A lender may ask about it, so check your loan terms
You recruit board members	Directors, including volunteers, often ask whether the organization has cover

Get ready: what an insurer will ask

Having these to hand makes a quote faster.

Who owns the company, and who its directors and officers are
Recent financial statements
The number of employees
Any known claims, disputes or incidents
Your current and past policies, if you have them
Details of any investors or lenders

What directors and officers insurance doesn’t cover

It responds to claims about how the organization was managed. It generally won’t cover:

Fraud, dishonesty or intentional and criminal acts
Bodily injury or property damage, which falls under general liability insurance
Errors in professional advice or service, which fall under professional liability insurance
Data breaches, which usually need a separate cyber insurance policy
Fines and penalties, in many cases
Problems you already knew about before the policy started

Exclusions vary by insurer, so read the list before you buy.

Business insurance FAQs

What's the difference between D&O and E&O insurance?

D&O insurance responds to claims that the people running a company made wrongful decisions in managing it. E&O insurance, also called professional liability, responds to claims that your professional advice or service cost a client money. A company can need both. See professional liability insurance.

Do charities and volunteer boards need it?

It’s often worth asking about. Board members who volunteer can still face claims over how money is managed, employment decisions or conflicts of interest, and D&O insurance can respond whether or not directors are paid. Policies for charities and nonprofits are set up differently, so ask about the terms.

Does it cover former directors?

Often, for claims about things they did while serving, as long as the policy is in force when the claim is made. It depends on the policy’s claims-made terms and on whether extended reporting is available, so ask before someone leaves the board.

Can a sole proprietor buy it?

Usually not. D&O insurance is designed for corporations and other organizations with directors or officers, and insurers may not offer it to a sole proprietorship or partnership. For a sole proprietor, professional liability and general liability are usually the more relevant policies.

Is it worth it for a small private company?

It depends on who could bring a claim, such as investors, lenders, employees, creditors or regulators, and on whether you could pay for a defence yourself. That’s a question to put to a licensed insurer or broker, and this page isn’t a recommendation either way.

Does it cover unpaid payroll taxes or wages?

Not necessarily. Directors can be personally responsible for some amounts the company owes, but whether a D&O policy responds to them varies by insurer and wording, and some policies limit or exclude them. Ask about these specifically before you buy.

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