What is Side A D&O coverage and when do biotechs need it?

Side A coverage is the part of a D&O policy that responds when the company is unable or legally prohibited from indemnifying its directors and officers. The two trigger scenarios are insolvency (the company cannot pay) and non-indemnifiable claims (typically derivative actions where indemnity is barred by statute).

For private biotech, Side A is included as part of an A/B/C combined D&O policy and rarely needs to be separately analyzed. For public biotech, IPO-stage, and SPAC-track companies, a dedicated standalone Side A or DIC (difference-in-conditions) policy is industry standard, sized at $5 million to $25 million on top of the underlying program.

The driver is securities class action exposure. Public biotechs face SCA litigation on virtually every adverse Phase 2/3 readout, and individual directors and officers are the primary defendants. If the underlying D&O is exhausted by entity (Side B/C) claims, the directors and officers personally are unprotected without Side A. Side A premium is meaningful but trivial relative to the protection.