Does my fund need D&O, E&O, or both?
Most firms that manage money for investors end up with both, because they answer different claims. D&O covers claims about decisions made running the firm and its funds. E&O covers claims that you made a mistake in the work itself, such as investing outside the stated guidelines or a disputed valuation. If your firm doesn’t manage outside money yet, D&O may be enough for now. Many firms buy the two together on one policy, which works as long as you know whether they share a limit.
What D&O covers
Directors and officers insurance protects the people who run the firm when they’re sued over decisions they made in that role. It pays for lawyers and for covered settlements or judgments, up to the limit.
It covers people only in the roles the policy describes. A partner’s work for a separate vehicle, or on a portfolio company’s board, may need to be named or covered elsewhere.
What E&O covers
Errors and omissions insurance covers claims that the firm made a mistake in its professional work: managing a portfolio, valuing an asset, or following a mandate. A fund losing money isn’t a claim on its own.
E&O covers only the services the policy describes, so that description has to match what your firm actually does, including work through affiliates.
When one dispute touches both
An investor dispute can involve both coverages at once. An allegation that a valuation was wrong points to E&O. An allegation that the firm’s leaders failed to oversee it can point to D&O. When the two sit on one policy, often called general partners liability (GPL), they may share a single limit. When they sit on separate policies, each has its own terms, and the question becomes which one pays first.
For each program, we check:
- Which entities, funds, and people each coverage names
- Whether D&O and E&O share one limit
- How each treats a regulator’s inquiry
- What happens to past work if you change insurers
How we help
Send us your current policies and a short description of what your firm does. We’ll show you which claims each policy would answer and where they leave a gap.
What happens when the coverage doesn’t fit
Having insurance doesn’t settle what it covers. The public court record below involves other firms, not Cilantro clients, and each outcome depended on its own facts, policy language, and governing law.
Goggin v. National Union Fire Insurance
Two directors of U.S. Coal also managed separate investment entities. When claims were made about what they did in those overlapping roles, they asked for coverage under a D&O policy.
In November 2018, the Delaware Superior Court ruled that an exclusion for acts in an outside capacity applied to the claims tied to the investment entities. The ruling was about that one policy. It was not a finding of misconduct, and it did not say the directors had no insurance anywhere.
What we check for you: Every role your people hold, including board seats and other vehicles, and which policy covers each one.
Delaware Superior Court opinion, November 30, 2018Further reading
Background from insurers and regulators. These pages describe their own products and rules, and are not an offer of coverage from Cilantro.