D&O and E&O insurance for investment managers
Directors and officers insurance (D&O) covers claims about how a firm is run. Errors and omissions insurance (E&O) covers claims about the investment services it provides. One dispute can involve both, which is why investment managers usually buy them together.
Cilantro Risk arranges both. This page explains the difference and what we check in a policy. Whether a particular claim is covered always depends on the policy itself.
Two coverages, two kinds of claims
D&O: management decisions
D&O is about people and the decisions they make. If a partner or officer is sued over how they managed the firm or a fund, D&O is the coverage that responds.
What decides it: was this person acting in a role the policy covers?
E&O: professional services
E&O is about the work the firm does for investors and clients. If someone claims the firm made a mistake in managing their money, E&O is the coverage that responds.
What decides it: is this a service the policy describes?
Typical allegations include investing outside the stated guidelines, a valuation an investor disputes, or a conflict that wasn't disclosed. How a policy responds depends on the facts and its terms, so these are examples and not promises of coverage.
Chubb's asset management overview has more examples of both kinds of claim.
Who the policy covers
The manager, the general partner, each fund, and each individual are separate in the eyes of an insurer. We list them all and check each against the policy:
- Entities: the named companies, funds, and subsidiaries that are included.
- People: the individuals and job titles that are covered.
- Roles: whether each person is covered for every role they hold.
- Outside boards: what happens when someone sits on the board of a portfolio company or another organization.
One policy, two coverages
D&O and E&O for investment managers are often sold together as general partners liability (GPL). GPL is the name of the combined policy, not a third kind of coverage. Other packages add more coverages. The name on the cover doesn't tell you which entities, claims, or services are included.
We check three things: whether the coverages share one limit, whether any of them has a smaller sub-limit, and how the retention works. The retention is the amount you pay before the policy does, like a deductible. We also check whether legal fees reduce the limit.
The Hartford's investment adviser resources show one example of a combined policy. Other insurers' policies differ.
What we look at beyond the headline limit
Legal fees and who controls the defense
Legal fees can come out of the limit or sit on top of it. The policy also says who picks the lawyer, and when you need the insurer's consent to spend money or settle.
When a claim has to be reported
Most of these policies are claims-made, which means they cover claims made and reported while the policy is active. Reporting deadlines, the retroactive date, and what happens to known problems when you change insurers all matter.
Regulators
An exam, an informal request, a subpoena, and a formal proceeding are different stages, and a policy may cover some and not others. We tell you where coverage starts.
Fixing your own mistakes
Some policies will pay to correct an operational error, such as a trade mistake, before anyone makes a claim. This is called cost of corrections. It usually has to be added, and it comes with its own limit and consent rules. We ask for it when we go to insurers.
What the policy won't pay
Fines, penalties, deliberate misconduct, problems you knew about before the policy started, and promises made in contracts are commonly excluded. Liability insurance also doesn't cover ordinary investment losses or guarantee performance.
When to call us
A new fund, a new strategy, a new advisory service, or a board seat are all reasons to look again. So are investor diligence and renewal.
Send us your entity chart, a description of your services, your current policies with endorsements, and any requirement from investors or a contract. We'll show you the policy language alongside each quote, so you're comparing more than price and limit.
Common D&O and E&O questions
Does D&O replace E&O?
No. D&O covers how the firm is run. E&O covers the services it provides. If one policy includes both, both parts matter.
Does a combined policy give each coverage its own limit?
Not necessarily. Many combined policies have one shared limit, so a large claim under one part leaves less for the other. We'll tell you which kind you have.
Does a regulatory inquiry always trigger coverage?
No. It depends on the stage of the inquiry, who it's directed at, and how the policy defines a claim. We'll point you to the language that applies.
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Tell us which entities and activities you want covered, and whether you're comparing a new quote or checking a policy you already have.