June 17, 2024
Private Equity: General Partner Liability Insurance
Woodruff Sawyer recently issued its “Guide to Insuring Fund Liability Risks for Venture Capital and Private Equity Firms.” The publication provides an overview of the key coverages and claims scenarios. Here’s an excerpt from the discussion of the evolution of general partner liability coverage:
General Partnership Liability Insurance (GPL) is a longstanding insurance product tailored for executives acting in a different fiduciary capacity than a traditional corporation or LLC, such as on behalf of a general partner or limited partnership. Traditionally structured private or public D&O policies often exclude or limit coverage available to partnership entities, so a tailored solution was needed in the form of either a partnership endorsement to an existing D&O policy or a dedicated blended D&O/ General Partnership Liability policy. While the language is a bit more nuanced for partnership exposures, the exposures and types of claims covered were fairly uniform in the context of what a D&O insurance policy covers.
Over the last quarter century, the meaning of a GPL policy has evolved to be synonymous with a blended D&O/E&O/Fund Liability coverage suitable for asset management firms with private fund structures, usually with a GP/LP type structure. Therefore, we now have the “GPL” monicker.
GPL policies structured for these entities and structures are intentionally broadened to provide comprehensive coverage for everyday business management activities, such as oversight of limited partnerships, portfolio company investment, and overall investment management. In the following pages, we dive into specific elements of GPL policy structure and why it is imperative for venture capital and private equity firms to not only purchase a GPL policy, but to ensure they work with an insurance expert who understands the unique exposures of the firm.
The guide also discusses additional coverages available in the GPL market, including employment practices liability coverage, ERISA fiduciary coverage, financial institution fidelity bonds, and cybersecurity coverage, and addresses emerging SEC regulatory risks.
– John Jenkins