Private Equity: We understand the difference between venture capital and private equity firms. Although the insurance needs are similar, the expectations of investors are quite different.REITS
click here Venture capital investors expect risk. Private equity investors typically have a lower tolerance for risks; however private equity acquisitions often trigger lawsuits. We know how to design insurance programs than take this into account.
We have been insuring private equity and venture capital companies since our inception, including their portfolio companies. We also have experience with claims arising from this space.
In cases of an IPO and /or M&A, litigation is not only frequent but should be expected.
We have designed innovative program structures that
allow for the transfer of risk for: General
Partners, Limited Partners, Members, General Partnership,
specific professional malpractice, dedicated outside directorship
protection and employments practices.General partners typically have board representation on each portfolio company. These can raise insurance issues that must be addressed with the correct policy language. We have placed D&O/E&O/EPL insurance for private equity firms from $1 to over $50 million limits.
Private Equity Management Liability (“PEML”) is a comprehensive insurance product designed to protect the private equity firm and its individuals against claims arising out of the activities performed in managing the fund. The policy consists of several coverage parts, including:
Directors’ and Officers’ Liability: protects the directors and officers of the private equity firm, its subsidiaries and related entities (i.e. Funds, General Partners, Investment Holding companies) against alleged errors, omissions, misleading statements, breach of trust or breach of warranty
Outside Directorship Liability: coverage for directors, officers or employees for wrongful acts while acting in a capacity of director, officer or manager of a portfolio company
Professional Liability: covers claims alleging failure to perform professional services (investment advisory services)
Employment Practices Liability: protects officers and employees against suits alleging wrongful termination, sexual harassment, failure to hire or promote, and discrimination
Crime: protects the entity against direct financial loss sustained because of employee or third party dishonesty, fraud or computer crime.
These programs typically have numerous layers of carriers, be sure to ask us about PurX®, the only true/ pure excess policy wording in the industry.
Investment Advisor: Investment Advisors are under growing compliance and regulatory scrutiny and continue to be held to an ever-increasing level of professional duty. Individuals and firms are increasingly at risk of being sued for the services they perform. Even when lawsuits and claims appear to have little or no merit, the cost of defending those allegations could severely impact the financial condition of a business. ExecutivePerils develops solutions to meet the industry's need for competitive and affordable E&O insurance for Investment Advisors.
For investment advisers, the risks of a substantial claim may be particularly acute: The potential losses arising from such a claim, especially if brought by a corporate retirement plan or a wealthy individual client, could be millions of dollars.
All current financial lines policies are written on a claims-made basis. That is, each E&O policy is in force for a given period, usually one year, and any claims commenced during that policy period are applied to that policy, regardless of how long it may take to defend and resolve the claim. Thus, the purpose of purchasing new policies annually is to insure against potential new claims, not to keep insurance in force for claims that were previously asserted and are still pending. Of course, after a claim has been made, it normally is too late for an uninsured defendant to commence the process of purchasing insurance to cover the claim. Under most financial lines policies, the insurer has an obligation to pay the policyholder’s defense costs, subject to a deductible or a retained limit. Under such policies, the policyholder chooses its counsel, subject to the consent of the insurer, and the insurer pays the defense counsel’s attorneys’ fees. Occasionally, policies provide that the insurer will conduct the defense, using counsel of the insurer’s choosing and at the insurer’s expense. Claims may be resolved by settlement or by judgment. A core feature of any liability policy is to indemnify the policyholder for defense and settlement, subject to any applicable policy limit. Such payments are commonly termed “indemnity” payments, to differentiate them from the payment of legal costs and other defense expenses. Some financial lines policies promise to pay any settlements or judgments “on behalf of” the policyholder—that is, the insurer will pay the claimant directly. Other policies promise to indemnify the policyholder for the sums that the policyholder has already paid in settlements or judgments.
An Investment Adviser can be vulnerable to a variety of types of charges, such as:
A claim that a client suffered investment losses, did not achieve as much gain as was due, lacked access to funds, or was harmed in some other way because the adviser recommended
selected an unsuitable investment. A claim that a client was damaged because the adviser breached its _ fiduciary duty to the client, either through self-dealing
some other breach of the client’s trust. A claim that the adviser gave investment advice
executed a client’s instructions carelessly
negligently, which resulted in a loss for the client.
A claim that the adviser breached its client agreement.
All policies have a "settlement" provision, which will allow the insurer to settle with plaintiff OR not to settle but not be responsible for any amount occurred above the potential settlement amount. This is commonly called the "Hammer Clause"!
“Please see polic(ies) and endorsement(s) for exact terms, conditions and exclusions. Each insurance company has its own policy language. We encourage you to seek legal advice prior to securing any insurance."
- E & O Insurance Coverage for Investment Advisers
By David B Goodwin and Bert Wells