Due to the ownership structure of most private venture backed companies, the risk of claims is reduced. As such, D&O rates for private firms are very favourable compared to their public counterparts. The largest areas of risk may be in merger-related activities and stock repurchases from founders or key executives. Additionally, employment practices related litigation (EPL) now represents over 25% of all lawsuits against directors and officers.
For many rapid growth companies, probability of litigation can increase because strong human resources practices and procedures are not yet in place. Other areas of litigation may include key technical employees, moving between competitors. This type of litigation frequently names the directors or officers in the recruitment of the individual and in soliciting trade secrets. Today, D&O policies are structured to provide protection against the exposures which private companies face. These provisions include entity coverage for EPL. Premiums are frequently under £5,000 for a £1 million limit of liability.
