Understanding the differences between Directors & Officers and General Partnership Liability insurance is crucial for choosing the right protection based on your business structure and risk exposure.

Coverage and claims: Directors & Officers insurance protects individual company leaders against claims like breach of fiduciary duty, mismanagement allegations, and regulatory investigations, with common examples including lawsuits over strategic decisions or trade secret disputes. General Partnership Liability insurance provides comprehensive coverage for venture capital firms, combining D&O, Errors & Omissions, Outside Directorship Liability, and Employment Practices Liability to address the unique risks of managing investments and serving on portfolio company boards.

When you need each: D&O insurance is essential for any company with directors, officers, or board members who make strategic decisions and could face personal liability for their managerial actions. GPL insurance is specifically designed for venture capital firms and investment partnerships where partners serve on multiple boards and face complex liability exposures from both their fund management activities and directorship roles.

Typical limits: D&O policies typically offer coverage limits ranging from $1 million to $25 million or more, depending on company size and risk profile, with larger public companies often carrying significantly higher limits. GPL insurance limits are generally structured to accommodate the higher risk exposure of VC firms, often starting at several million dollars and scaling based on assets under management and portfolio size.

Coverage scope and applications

Directors & Officers insurance operates with three main coverage sides: Side A protects individual directors when the company cannot indemnify them, Side B reimburses the company for indemnification costs, and Side C covers claims against the entity itself. This targeted approach makes D&O ideal for traditional corporations, startups, and established companies where leadership faces standard corporate governance risks.

General Partnership Liability insurance takes a holistic approach by bundling multiple coverage types into one comprehensive policy. The integrated structure addresses the interconnected risks that VC firms face, such as when a partner's investment decision leads to both professional liability and directorship claims simultaneously.

Risk profiles and business structures

D&O insurance addresses risks that arise from standard corporate management, including shareholder disputes, regulatory compliance issues, and fiduciary duty breaches. These risks are common across most business structures but are particularly relevant for companies with outside investors or public shareholders.

GPL insurance specifically targets the unique risk profile of investment firms where partners wear multiple hats as fund managers, board members, and fiduciaries to different stakeholders. The coverage recognizes that VC firms face compounded liability exposures due to their involvement in multiple portfolio companies and complex stakeholder relationships.

The scenarios described are offered only as examples. Coverage depends on the actual facts of each case and the terms, conditions and exclusions of each individual policy. Anyone interested in the above product(s) should request a copy of the standard form of policy for a description of the scope and limitations of coverage.

What does D&O insurance cover?

D&O insurance provides protection for company leaders through three main coverage areas: Side A protects individual directors and officers when the company cannot indemnify them, Side B reimburses the company for indemnification costs, and Side C covers claims against the entity itself. The insurance covers claims such as breach of fiduciary duty, mismanagement allegations, regulatory investigations, shareholder disputes, regulatory compliance issues, and lawsuits over strategic decisions or trade secret disputes.

What does D&O insurance not cover?

D&O insurance typically excludes intentional criminal acts, personal profit or advantage obtained illegally, bodily injury and property damage claims, prior acts before the policy inception date (unless specifically covered), and claims arising from insured vs. insured disputes in some cases. The coverage also generally excludes routine business operations, contractual liabilities, and penalties or fines in certain jurisdictions.

How much D&O insurance is enough?

D&O coverage limits typically range from $1 million to $25 million or more, with the appropriate amount depending on company size, industry risks, and financial exposure. Smaller private companies often start with $1-5 million in coverage, while mid-sized companies typically need $5-15 million. Larger public companies often carry $25 million or more in coverage. The right amount should consider potential lawsuit sizes, regulatory fines, defense costs, and the company's ability to indemnify its officers and directors.

What does General Partnership Liability insurance cost?

GPL insurance costs vary based on assets under management, portfolio size, and risk exposure, but generally start at several thousand dollars annually and can reach tens of thousands or more for larger venture capital firms. The premium is typically calculated as a percentage of assets under management or based on the number of portfolio companies and board seats held by partners. Costs are generally higher than standard D&O insurance due to the comprehensive nature of the coverage and the complex risk exposures of investment firms.