Also known as: change of control · change of control clause · change in control provision
A policy provision that is triggered when a company is acquired, merges, or transfers a majority of its voting control or assets, which typically converts its claims-made coverage, most often D&O, into run-off.
A change of control clause defines what happens to a policy when ownership of the insured company fundamentally shifts, such as through an acquisition, a merger, the sale of substantially all of its assets, or the transfer of a majority of its voting shares to a new owner. For D&O insurance, the standard consequence is that the policy converts to run-off the moment the deal closes: it stops covering new decisions and responds only to claims arising from wrongful acts committed before the closing date. Coverage for anything the company does after closing then shifts to the acquiring company's own program. Because the clause operates automatically, founders and their counsel need to arrange run-off, also called tail coverage, as part of the transaction rather than after it. For a venture-backed startup heading toward a sale, this provision is a key reason D&O terms get negotiated well before a term sheet is signed.
Change of control is a policy provision that is triggered when a company is acquired, merges with another business, sells substantially all of its assets, or has a majority of its voting shares transferred to a new owner. When it triggers, a claims-made policy such as D&O typically converts to run-off, meaning it will only respond to claims for wrongful acts committed before the transaction closed. Coverage for anything the company does after closing shifts to the acquirer's program.
At closing, your existing D&O policy usually goes into run-off. It no longer covers new wrongful acts, but it can still respond to claims reported later that arise from decisions made before the deal closed, provided you have secured run-off, or tail, coverage for that period. New activity after closing is covered by the buyer's own D&O program. This is why arranging run-off is a standard step in preparing a startup for sale.
No. An acquisition is the most common trigger, but change of control language usually also captures a merger, the sale of substantially all of a company's assets, or the transfer of a majority of its voting control to another party. The exact definition is set in the policy, so the threshold and the list of triggering events can vary by carrier. Reading the clause closely matters, because it fixes the precise moment your coverage converts to run-off.
Definitions are educational and may be modified by your specific policy language, endorsements, and state rules. For regulatory guidance, refer to the California Department of Insurance or the NAIC.
Last updated: July 2026.