Directors and officers insurance is not a public company product: at a private company, the owners, officers, and board members can be sued personally — by employees, customers, competitors, creditors, and regulators — over the decisions they make running the business, and neither the corporate structure nor a general liability policy protects their personal assets when that happens.

The most persistent myth in management liability is that D&O exists for shareholder class actions against public companies, so a private company has nothing to insure. The claims record says otherwise: private company directors and officers get sued by the people closest to the business — employees alleging wrongful acts in how they were managed, customers and vendors alleging misrepresentation, minority owners disputing how the majority ran the company, creditors after a downturn, and regulators enforcing the growing list of rules that apply long before a company ever files with the SEC. Those suits name individuals, not just the entity, and they land squarely in the gap that general liability was never designed to fill. This article walks through where private company D&O claims actually come from, the claim types that show up most, and how Side A, Side B, and Side C divide the protection.

• Why do private company owners think D&O is a public company product?
• Where do private company D&O claims actually come from?
• What claim types show up most at private companies?
• What do Side A, Side B, and Side C actually cover?
• How does Avanti Group build a private company D&O program?

Why do private company owners think D&O is a public company product?

The myth has a logical shape, which is why it survives. D&O insurance grew up around securities litigation — shareholder suits alleging that a public company’s leadership misled the market. A private company has no public shareholders and no stock price to misstate, so the reasoning goes: no shareholders, no D&O exposure. The first half is true and the conclusion is false, because securities claims were never the only thing D&O responds to.

Directors and officers insurance covers “wrongful acts” — actual or alleged errors, misstatements, misleading statements, neglect, or breaches of duty committed by directors and officers in their capacity running the company — and it protects the personal assets of the individuals as well as the balance sheet of the entity. That definition says nothing about being publicly traded. Any business with owners, officers, or a board — which is to say, any business — has people making decisions that someone else can later characterize as a wrongful act. A private company reviewing its commercial insurance program will find that nothing else on the schedule does this job: not property, not auto, and not general liability. That is why directors and officers coverage anchors the management liability side of a private company’s program rather than sitting in a public-company-only category.

Where do private company D&O claims actually come from?

At a public company, the classic claimant is a shareholder. At a private company, the claimants are closer to home: employees, customers, vendors, competitors, co-owners, creditors, and regulators. The exposure does not shrink when a company stays private — it changes shape and moves closer.

Employees are the most frequent source. Employment-related allegations — discrimination, retaliation, wrongful termination, harassment — are typically the province of employment practices liability coverage, but they routinely name officers and directors individually alongside the company, and how a D&O and EPLI program is structured together determines who is protected and by which policy. The exposure starts small: under the Iowa Civil Rights Act, Iowa Code chapter 216, state employment discrimination claims can reach employers with as few as four employees — which means the employment-driven claims that dominate private company management liability apply to nearly every private employer in the state, not just the ones with an HR department. In an economy like Iowa’s, built overwhelmingly on privately held and family-owned companies, that is not a niche exposure. It is the default one.

Customers, vendors, and competitors form the second ring — contract and misrepresentation disputes, unfair competition allegations, claims over hiring away employees or misusing information. Co-owners form the third: minority shareholder and partner disputes over how the majority ran the company, valued it, or bought someone out are a distinctly private company phenomenon, and family businesses are not exempt — succession and buyout disagreements produce some of the bitterest fiduciary claims there are. And when a company hits financial distress, creditors and bankruptcy trustees can pursue directors personally over decisions made on the way down, which is precisely when the company itself has no money to stand behind them.

What claim types show up most at private companies?

Across those claimant groups, the same handful of claim types recur: employment-related suits naming individual officers; breach of fiduciary duty claims from minority owners, partners, or family members; misrepresentation claims from customers, lenders, or investors who say they relied on what leadership told them; competitor claims over talent and trade practices; creditor and trustee actions after insolvency; and regulatory investigations and enforcement actions from state and federal agencies whose rules apply regardless of whether a company is public.

None of these land on a general liability policy. General liability covers bodily injury, property damage, and personal and advertising injury — a customer slipping in the lobby, not an allegation that the officers mismanaged the company. The distinction is the same one that separates general liability from professional liability: different policies answer for different kinds of harm, and claims about management decisions belong to the management liability family. A private company that carries GL, auto, property, and workers comp but no D&O has insured its premises, its vehicles, its buildings, and its payroll — and left the personal assets of the people running it exposed to the claims most likely to name them.

What do Side A, Side B, and Side C actually cover?

A D&O policy is really three coverage agreements stacked inside one form, and the letters describe who gets paid.

Side A covers the individual directors and officers directly when the company cannot or will not indemnify them — most importantly in insolvency, when the company that promised to stand behind its leaders no longer can — and it is the layer that protects personal assets with typically no retention for the individual. Side B reimburses the company for what it spends indemnifying its directors and officers, which is how most claims actually pay — the company defends its people, and Side B pays the company back. Side C, entity coverage, covers claims made against the company itself; at private companies Side C is typically written broadly, which is a meaningful structural advantage over public company forms, where entity coverage is limited to securities claims.

The letters are the easy part. The hard part is the form behind them: definitions of “claim” and “wrongful act,” insured-versus-insured exclusions and their carve-backs, conduct exclusions, retentions that differ by side, and how the policy allocates when a suit names both the company and its people. Two private company D&O policies with the same limit can behave very differently at a claim, for exactly the reasons that sublimits, exclusions, and conditions quietly shape any policy — the coverage is in the language, not the limit.

How does Avanti Group build a private company D&O program?

At Avanti Group, D&O for a private company is never sold as a checkbox line on a package quote. Before recommending a management liability structure, the firm runs a Business Risk Diagnostic™ — mapping who could actually bring a claim against the leadership team, from the ownership structure and any minority holders, to the employee count and the states involved, to lender covenants and the regulatory bodies that touch the operation — and then reading the proposed forms to see which of those claims each side of the policy would answer.

That sequence matters because most private company D&O programs are not underpriced — they are under-built: an entity-only structure here, a missing Side A there, an EPLI tower that stops before it reaches the officers who get named. Getting the structure right is what separates a directors and officers program that protects the people in the seats from one that only protects the company they sit in. If leadership’s personal assets are relying on a policy no one has read against the actual ownership and employment picture, it is worth pressure-testing the whole commercial insurance program before a claim does it for you.

Frequently Asked Questions

Does a private company really need D&O insurance?

Yes, if it has owners, officers, or a board making decisions — which every company does. The myth that D&O is a public company product comes from its origins in securities litigation, but the coverage responds to “wrongful acts” in managing a company, not just shareholder suits. Private company directors and officers are sued by employees, customers, vendors, competitors, minority owners, creditors, and regulators, and those suits name individuals personally. General liability, property, and workers comp policies do not respond to claims about management decisions, so without D&O the personal assets of the leadership team are the backstop.

Where do most private company D&O claims come from?

The most frequent source is employees — employment-related allegations such as discrimination, retaliation, wrongful termination, and harassment that name officers and directors individually alongside the company. After that come customer and vendor disputes alleging misrepresentation or breach, minority shareholder and partner disputes over how the company was run or valued, competitor claims over talent and trade practices, creditor and bankruptcy trustee actions after financial distress, and regulatory investigations. Unlike the public company world, the claimants are people close to the business, which is part of why the claims get personal quickly.

What is the difference between D&O and EPLI?

D&O covers wrongful acts by directors and officers in managing the company — fiduciary, financial, and governance decisions. EPLI (employment practices liability insurance) covers employment-related claims: discrimination, harassment, retaliation, wrongful termination, and similar allegations. The two overlap because employment suits frequently name officers individually, and at private companies the coverages are often structured together in a management liability package. What matters is that the two policies are coordinated — who is an insured under each, which policy responds first, and where the retentions sit — so an employment claim that names both the company and its officers does not fall into a seam between them.

What are Side A, Side B, and Side C in a D&O policy?

They are the three coverage agreements inside a D&O policy, defined by who gets paid. Side A pays individual directors and officers directly when the company cannot or will not indemnify them — most critically in insolvency — and typically carries no retention for the individual. Side B reimburses the company for what it spends indemnifying its directors and officers, which is how most claims are actually paid. Side C, entity coverage, covers claims against the company itself; at private companies Side C is usually written broadly, while public company forms limit it to securities claims. A well-built program makes sure all three sides match the company’s actual ownership and indemnification picture.

Doesn’t my LLC or corporation protect me from being sued personally?

The corporate form limits owners’ liability for the company’s debts and obligations in many situations, but it does not stop a claimant from suing directors and officers personally for their own alleged wrongful acts — breach of fiduciary duty, misrepresentation, discrimination, and similar allegations are made against the individual, not just the entity. Defending those claims costs real money even when the allegations fail, and if the company is insolvent or legally unable to indemnify, the individual stands alone. That is exactly the gap Side A of a D&O policy exists to fill, and it is why the corporate structure and the insurance program are complements, not substitutes.

Related reading

Other articles in the Commercial Foundations series:

• D&O Side A, Side B, and Side C Explained — A directors and officers policy is three coverage agreements stacked inside one form: Side A pays individual directors and officers directly when the company cannot or will not indemnify them, Side B reimburses the company for indemnifying its people (how most claims actually pay), and Side C covers claims against the entity itself — and because the three sides usually share one policy limit, order-of-payments provisions and a dedicated Side A DIC layer exist to keep entity defense costs from eroding the protection of the individuals. Second article in the Management Liability cluster.