December 12, 2018

Unicorns under pressure

Employment-related claims for private tech companies likely to rise in 2019.

2018 was another challenging year of legal and regulatory scrutiny for technology companies, especially the fastest-growing tech companies, or Unicorns, valued at over $1 billion. We saw once again that founders and technologists might take on the persona of superhero or celebrity CEOs, but they are not always the best leaders.

This was magnified by incidents of harassment that are often fostered by a protective, and sometimes reckless culture. Google recently revealed the firing of 48 employees for sexual harassment during the past two years, a disclosure that came shortly after reports that it protected some male executives facing sexual misconduct allegations and offered them large sums to leave the company.

We expect to see more of this and a rise of employment-related claims for private tech companies in 2019. This will include claims due to both harassment and internecine warfare or infighting among founders, where executives will exit, leaving trade secrets at risk.

D&O insurers of private companies will need to assess the magnitude and strategy surrounding these employment-related claim exposures. Traditional private company D&O is written on a duty-to-defend basis where an insurer must provide counsel, but the Unicorns, with significant backing from venture capitalists, will likely seek to defend themselves and use their own councel.

You can read the rest of our insurance predictions here.