A recent decision of the Delaware Court of Chancery changes the previously prevailing view among venture capital and private equity funds (“Funds”) that in the event of litigation against a Fund’s director designee, serving in his or her capacity as a director on the board of the Fund’s portfolio company, the portfolio company provides full indemnification to the director representative, and the Fund acts as a secondary source providing such indemnification only in the event the portfolio company is unable to pay. Following the decision in Levy v. HLI Operating Company, Inc., absent a contractual agreement to the contrary, the Fund and its portfolio company may be considered co-indemnitors, sharing indemnification responsibilities to the directors serving the portfolio company on behalf of the Funds. The Court explained that: “[a]s a general rule, in absence of contractual language to the contrary, two insurers who insure the same person for the same risk must share the loss.”

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