Every fund and entity, accounted for
A venture firm is usually several legal entities: a management company, one or more general partners, the funds, and sometimes special purpose vehicles. A policy covers only the entities and people it defines as insured. Seeing the firm’s name on the first page doesn’t mean every fund is included.
We start by mapping your entities, and the people who act for each, against the policy. If you’re raising a new fund, we get it added before it starts investing. If you’ve had the same program for years, we check that newer vehicles made it on.
Board seats, covered from both sides
When a partner joins a portfolio company’s board, two insurance programs are involved: the portfolio company’s D&O policy and your firm’s. The portfolio company’s policy usually responds first. It covers your partner as that company’s director, and may not cover what the partner did on behalf of your fund. The Goggin case below turned on that kind of exclusion.
We review how your policy treats outside board seats. We can also look at a portfolio company’s D&O before your partner joins its board, so you know who pays first and where the gaps are.
What a GPL or VCAP package really includes
Venture policies are often sold as general partners liability (GPL) or venture capital asset protection (VCAP). These are names for a package that bundles several coverages, usually D&O and E&O, into one contract. Two packages with the same name and a similar price can protect you very differently.
When we compare quotes for you, we set out the answers side by side:
- Whether D&O and E&O share one limit or each has its own
- Whether legal fees count against that limit
- Which funds and outside board seats are included
- The stage at which a regulator’s inquiry counts as a claim
How we work with venture firms
Send us your entity chart, your current policies, and any insurance requirement from your investors. We read the policies, tell you in plain English what you have and what’s missing, and then go to insurers for terms that fit.
We also handle the rest of the firm’s insurance. The management company is a small business with employees, bank accounts, and data, so we look at cyber, crime, and employment practices coverage alongside the investment liability.
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 Risk.