Side-A: the limit that protects directors when the company can't
When everything goes wrong at once, the company often can't indemnify its directors. Side-A is the limit that pays them directly. Most towers under-buy it.
What Side-A actually is
A D&O policy has three sides. Side-B reimburses the company when it indemnifies a director. Side-C covers the company for its own securities claims. Side-A pays the director directly, when the company cannot or will not indemnify them. Side-A is the only one that works when the indemnity is gone.
Most towers buy Side-A as an 'undifferentiated' limit shared across all three sides. That sounds efficient - until a large claim on Side-B or Side-C erodes the limit a director needs for personal exposure.
When the company can't indemnify
A company can't indemnify a director when it's insolvent, when the claim is a derivative action by shareholders, or when statute prohibits it (certain regulatory actions). In every one of those situations - the exact moments a director most needs protection - Side-B is useless and only Side-A responds.
Insolvency is the pointed example. A startup heading into a down-round or a regulatory freeze often stops indemnifying directors mid-litigation because there's no cash. Side-A is what keeps the director defended.
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Why a dedicated limit matters
A dedicated, or 'non-drop-down,' Side-A limit sits outside the shared tower and cannot be eroded by Side-B or Side-C claims. For venture-backed companies, even a $2M–$5M dedicated Side-A layer dramatically improves director protection for a modest premium bump.
Independent directors specifically - the board members investors insist on at Series B and later - increasingly require dedicated Side-A as a condition of joining. If your tower can't offer it, you may lose the candidate.
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General information only. Not insurance advice.