GPL Insurance for Private Equity Firms – What Questions To Ask


Many private equity firms are concerned about their liabilities, including exposure to lawsuits for breach of fiduciary duty, claims for wrongful acts or omissions, and regulatory or securities investigations. One of the best ways to minimize and protect against these liabilities is general partnership liability (“GPL”) insurance. In this article, we identify some key questions a private equity firm thinking about purchasing GPL insurance should consider.

Why Get Coverage?

One of the leading reasons for getting GPL insurance is to insure the indemnification obligations of the funds and protect fund assets. The typical fund indemnity covers the fund manager and general partner and their respective officers, directors, employees, partners, and agents. This indemnity is usually funded by the liquid assets of the fund, or by calling capital contributions or a return of distributions through clawback obligations. Limited partner clawback obligations are often subject to limitations on the amount that can be clawed back and/or the time during which the clawback can be required. When a claim or investigation occurs requiring payment, carefully drafted GPL insurance, designed to cover such indemnification obligations, can reduce or eliminate the need for such capital calls or limited partner clawbacks. Also, there is often a gap between the scope of liability and the scope of indemnification. Fund indemnification does not usually occur to the extent the loss arises from the gross negligence, recklessness, or willful malfeasance of the indemnitee. GPL insurance (which usually needs to be modified to specifically address this issue) can help close coverage gaps in indemnification arrangements, and protect the fund manager, general partner, and other entities or individuals from non-indemnifiable loss.

Please see full alert below for more information.

LOADING PDF: If there are any problems, click here to download the file.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Mintz Levin | Attorney Advertising

Written by:


Mintz Levin on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:

Sign up to create your digest using LinkedIn*

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.