As Litigation Risk Increases, Private Equity Sponsors Should Re-Evaluate Their Professional Liability Insurance Programs

Private equity fund sponsors are facing increased litigation risk from regulators and private parties, including limited partners and stakeholders in portfolio companies.  As a result, private equity firms should re-examine their professional liability insurance policies to ensure that their coverage is properly aligned with this increasing risk. 

Simply put, private equity sponsors must treat their professional liability insurance as a critical risk-management component of their business.  Most, if not all, private equity fund sponsors have some form of a professional liability program in place, typically in the form of a general partner liability—or "GPL"—policy.  In many cases, these policies are "off-the-shelf" and are not sufficiently tailored to meet a particular fund sponsor's specific business needs or risks, particularly as litigation and regulatory risk continues to increase.