I typically start talking to my clients about EPLI when they cross the 10 employee threshold. Once a startup gets to that point it is typically beyond the founding team and first couple of hires that the founders probably knew well or had targeted. When you get past 10 you are starting to bring in people outside of that tight circle. You are also going to begin to have some churn as it relates to employees coming and going.
As a startup, if you have this many employees it usually means you are going up from there as well. Most of the time the founding team and build out staff is going to be small. Once some funding comes in this triggers expansion. If you are expanding fast you are going to need to protect yourself against claims that EPLI protects you from.
If you have D&O already (most funded startups will), EPLI is a fairly inexpensive add on. Usually it’s less than $2k/annual at 10 odd employees. It’s going to come down to when management feels it is important enough to pull the trigger on. Given the rise in EPLI claims in recent years, it’s becoming more and more important. The earlier you get it the better.
A funding round that will trigger expansion is a pretty good trigger if you wanted to look to a particular event. I would think series A versus a seed round but that will depend on the size.
This is an issue I talk to clients about quite a bit so here comes the shameless plug. If this is something you feel warrants some discussion feel free to reach out with a call or an e-mail. I will be happy to act as a resource for you.
Business Insurance & Investment Services of MA