Contractual Requirement with a PEO

Lumen was introduced by their Professional Employer Organization (PEO) broker. A PEO typically handles all benefits, payroll, workers’ compensation and other services. Signing with a PEO typically requires a company to carry general liability (GL) and other lines of coverage. This was the first inflection point: contractual requirement. This is when we put a small Business Owner’s Policy (BOP) in place. This policy offered general liability, business personal property coverage, and several other lines of coverage most small businesses should have. 

First Commercial Lease

Like many startups, they officed in a co-working space in downtown Austin.  The company was off to a great start and was already bursting at the seams in their co-working space. They eventually decided to move into their own commercial space, reaching another insurance inflection point: signing a commercial lease. This is the first time they had significant insurance requirements as dictated by their landlord. At this point we had to increase the general liability limits and increase the business’ personal property to keep up with the requirements and cover their new business personal property.  

Significant Funding

Due to the founding team, vision, execution, and growth, it was a slam dunk for a local Austin based VC to lead a significant round. Securing funding was the next inflection point for insurance. As part of the term sheet, they were required to obtain directors and officers (D&O) insurance. This coverage insures the directors and officers for their decisions on behalf of the company. This is common since a significant amount of cash was infused into the company in need of protection. Second, there was also a new director on the board from the lead VC firm. Third, it is typically required as part of the term sheet. We were able to secure terms with a reputable carrier for an amount that was approved by the board.  

Explosive Employee Count

By this time this organization had grown to more than 200 employees. Though their PEO had an EPLI policy in, the self-insured retention was set at $75k, meaning anything under $75k is out of pocket. They also needed to look at 3^rd party coverage, since at any moment an employee could file an employment related lawsuit. Their exposure was growing with every employee they hired. In some months they were hiring as much as 40 new employees. This drove another insurance inflection point: explosive employee count. This drove the need to obtain a more robust Employment Practices Liability Insurance (EPLI) policy to protect the company against employment related lawsuits such as discrimination, harassment, wrongful termination, etc. This growth also caused them to outgrow their PEO, and they eventually had to put workers’ compensation in place.  

Professional Services and Massive Amounts of Client Data

Like many successful startups, they eventually outgrew their commercial space and moved to another location in Austin. By this time, they already had errors & omissions in place due to the nature of their business. However, they were in need of a substantial technology errors & omissions and cyber policy. With onsite servers and the exposure they had to a data breach, it was time to obtain cyber coverage and more comprehensive technology errors & omissions. We were able to take the risk to market and place coverage with a reputable carrier.  

The Acquisition 

Like many successful startups, they eventually outgrew their commercial space and moved to another location in Austin. By this time, they already had errors & omissions in place due to the nature of their business. However, they were in need of a substantial technology errors & omissions and cyber policy. With onsite servers and the exposure they had to a data breach, it was time to obtain cyber coverage and more comprehensive technology errors & omissions. We were able to take the risk to market and place coverage with a reputable carrier.  

Bottom line 

Like many successful startups, they eventually outgrew their commercial space and moved to another location in Austin. By this time, they already had errors & omissions in place due to the nature of their business. However, they were in need of a substantial technology errors & omissions and cyber policy. With onsite servers and the exposure they had to a data breach, it was time to obtain cyber coverage and more comprehensive technology errors & omissions. We were able to take the risk to market and place coverage with a reputable carrier.  

About Lumen  

Lumen Insurance Technologies is a tech-focused commercial insurance agency based in Austin, Texas. Lumen is hyper-focused on providing the technology startup ecosystem with quality commercial insurance coverage (e.g., D&O, E&O, Cyber, etc.) following a funding event and beyond.  

Check us out on the web at www.lumeninsure.com to find more blog topics, general info or to get help with finding coverage. Email us at info@lumeninsure.com if you would like to suggest a topic for future blogs.  

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