Case Study: Enhancing E&O Coverage for a Growing SaaS Company

Background

A U.S.-headquartered SaaS company with annual revenues exceeding $100 million and 30% of its operations abroad experienced a data breach that triggered investigations under both the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA). Their existing E&O policy provided only $1 million in coverage, far short of the $10 million recommended for their scale and exposure.

Challenges Resulting from the Incident

The breach exposed customer data across multiple jurisdictions, leading to regulatory fines, legal defense costs, and contractual disputes with downstream clients. The company’s shared limit E&O policy quickly proved insufficient as initial reserves for legal and compliance costs exceeded $1 million. Additionally, clients claimed the company failed to secure their data, further compounding potential liabilities.

‍

The challenges of this situation included:

• Inadequate Coverage Limits The company’s rapid growth—250% in five years—had outpaced its insurance policy, leaving a significant coverage gap.
• Regulatory Compliance Gaps Existing policies lacked provisions for evolving domestic and international privacy regulations.
• Cost and Retention Concerns The insurer proposed a substantial premium increase and higher retention, creating budgetary strain for the client.
• Risk Management Deficiencies Limited proactive measures, such as employee training and IT security protocols, left the company exposed.

Flow’s Approach:Our team facilitated a comprehensive strategy to address the company’s needs.

• Policy Restructuring Collaborated with the insurer to increase coverage to $10 million, structured in blocks of $5 million, with retention capped at $100,000.
• Enhanced Cyber Liability Ensured the E&O policy included robust cyber coverage addressing first- and third-party losses, regulatory fines, and voluntary investigation expenses.
• Risk Mitigation Measures Introduced employee training, data encryption, and multi-factor authentication (MFA) to improve cybersecurity. Third-party IT security consultants and legal advisors were engaged to enhance compliance and reduce future risks.
• Collaborative Renewal Process Organized a renewal meeting involving the insurer, the agent, and key stakeholders to negotiate terms and demonstrate the client’s improved risk profile.

Key Outcomes

• Expanded Coverage The policy limits exceeded $10 million, addressing regulatory, contractual, and liability risks.
• Improved Risk Posture Proactive measures, such as compliance training and technology upgrades, reduced future exposure and strengthened the company’s insurability.
• Sustained Client Confidence By showcasing commitment to risk management, the company not only secured better coverage but also instilled trust among clients and stakeholders.
• Cost Management: While premiums increased, the negotiated terms provided comprehensive protection tailored to the company’s current and future needs.

Aligning E&O coverage with business growth and shifting regulatory landscapes is critical. Through strategic negotiation and risk management, a Flow Broker transformed a potentially devastating shortfall into a sustainable solution, positioning the client to navigate any future incidents with confidence.