Venture capital funds and private equity funds, which manage funds of third parties and even their representatives who serve as directors in those companies, may be exposed to diverse lawsuits. It is very important to make sure that these funds appropriately control the type of insurance they arrange. It is also recommended that the funds conduct a due diligence process for the insurance of their portfolio companies to ensure that they are properly covered.
Directors’ and Officers’ Liability Insurance (D&O)
Protects the officers against personal claims against them filed by third parties for negligence in the management and supervision of the business. For example, investor claims, claims from competitors, and employer-employee relations claims.
The officers of the general partner (GP) are exposed to lawsuits as directors of the general partner, directors of the fund, and directors of the portfolio companies. Therefore, it is necessary to make sure that the officers’ policy provides full coverage for the officers accordingly.
Errors and Omissions Insurance for Venture Capital Funds
A policy that covers claims by third parties for negligence in the provision of professional services, both against the general partner and against the fund. Since there may be an overlap between the negligence covered under the professional liability policy, and the negligence covered under the D&O policy, it is recommended to draw up a policy adapted to cover both risks – insurance for investment managers (IMI Insurance).
Protects the company from claims by third parties because of a cyber incident, for example, claims for information leakage. The insurance also protects the company’s own damages because of a cyber incident (first-party coverage): loss of income as a result of the incident, payment of ransom expenses, initial response team, payment of reporting expenses, expenses for regulatory investigations, and more.
Employment Practice Liability Insurance
This insurance covers the company and the company’s officers as a result of claims against them by employees related to employer-employee relations. These are not lawsuits related to non-payment of wages but lawsuits related to the work environment, such as illegal dismissal. For example, without conducting a legal hearing, discrimination in the workplace, and more. This policy is all the more important when there are employees in the US, where these claims are much more common.