Running an investment partnership isn’t just about generating returns. It’s about making fiduciary decisions, maintaining governance discipline, and standing behind choices that affect other people’s capital.

For venture capital and private equity firms, those decisions carry personal exposure for general partners. That exposure doesn’t disappear because outcomes were market-driven or decisions were made in good faith. When investors, regulators, or other stakeholders question how a fund was managed, claims often reach the individuals behind the partnership, not just the entity itself.

General Partnership Liability (GPL) Insurance exists for exactly this reason. GPL Insurance coverage is designed specifically for investment partnerships, helping protect general partners, fund managers, and affiliated entities from the legal, regulatory, and financial consequences of managing a fund. If you’re raising institutional capital, onboarding limited partners, or taking board seats across portfolio companies, GPL Insurance is a core infrastructure.

Key Takeaways

• General Partnership Liability Insurance protects general partners from claims tied to fiduciary duties, governance decisions, and fund management.
• GPL Insurance coverage is designed for investment partnerships and differs fundamentally from general liability insurance.
• Most GPL Insurance programs bundle multiple protections, including Directors and Officers coverage, Errors and Omissions protection, and Outside Directorship Liability.
• Common claims involve investor disputes, disclosure issues, regulatory inquiries, and portfolio company board service.
• Understanding both what GPL Insurance covers and what it excludes is essential to building a complete, defensible risk strategy.

What Is General Partnership Liability Insurance?

General Partnership Liability (GPL) Insurance is a management liability policy built for investment partnerships, including venture capital, private equity, and other fund structures organized around a general partner (GP)–limited partner (LP) model.

In practice, GPL Insurance programs bundle several forms of protection into one coordinated policy, most commonly:

• Directors & Officers Insurance coverage for partnership leadership
• Errors & Omissions Insurance coverage tied to fund management activities
• Outside Directorship Liability Insurance for portfolio company board service
• Employment Practices Liability Insurance as an optional add-on for employee-related claims

Unlike General Liability Insurance, which covers physical injury or property damage, GPL Insurance responds to claims arising from how a partnership is governed, managed, and represented to investors and regulators.

The goal is straightforward: protect the individuals and entities responsible for fund decisions when those decisions are challenged.

Core Areas of General Partnership Liability Coverage

While coverage details vary by carrier and policy structure, most GPL Insurance programs are built around the following categories of risk.

1. Breach of Fiduciary Duty

General partners owe fiduciary duties to their limited partners. When investors believe those duties weren’t met, litigation often follows. Common allegations include:

• Failure to act in investors’ best interests
• Inadequate oversight or diligence
• Conflicts of interest
• Deviating from the fund’s stated mandate

GPL Insurance helps cover legal defense costs and potential settlements tied to these fiduciary claims, even when decisions were made in good faith and with proper intent.

2. Partnership Mismanagement and Governance Disputes

Not all disputes are framed explicitly as fiduciary breaches. Many focus more broadly on how the fund was run. GPL coverage typically responds to claims involving:

• Governance process failures
• Inadequate internal controls
• Failure to follow partnership agreements or policies
• Strategic or operational mismanagement

Losses amplify scrutiny. GPL exists to protect GPs when hindsight-driven disagreements escalate into lawsuits.

3. Limited Partner and Investor Claims

The GP–LP relationship is the heart of GPL Insurance exposure. Most policies cover claims brought directly by limited partners or co-investors, including disputes over:

• Fees and expense allocations
• Side letter interpretation
• Preferential treatment allegations
• Reporting or transparency concerns
• Strategy drift

These are among the most common sources of fund litigation, and one of the primary reasons institutional LPs expect GPL coverage to be in place.

4. Misrepresentation and Disclosure Allegations

Fund managers face scrutiny over what they disclose and how. GPL Insurance typically covers allegations that the partnership:

• Misrepresented fund performance
• Overstated portfolio valuations
• Omitted material information
• Provided misleading fundraising or investor communications

Even unintentional errors can become legally significant when investors believe they relied on inaccurate or incomplete information.

5. Regulatory Investigations and Defense Costs

GPL coverage often extends beyond lawsuits to regulatory matters. Many policies help cover defense costs associated with:

• SEC or state regulator inquiries
• Subpoenas
• Compliance investigations
• Enforcement-related proceedings

As regulatory oversight of private funds has increased, investigation coverage has become a critical component of GPL programs.

6. Errors & Omissions in Fund Operations

GPL Insurance frequently includes professional liability-style protection for mistakes in fund management.

This can include claims tied to:

• Due diligence failures
• Capital call or distribution errors
• Valuation or reporting mistakes
• Administrative or operational missteps

As fund structures scale and operational complexity increases, these exposures become harder to avoid and more expensive to defend.

7. Portfolio Company Board Service (Outside Directorship Liability)

General partners often sit on portfolio company boards, creating an additional layer of personal exposure. GPL programs commonly include Outside Directorship Liability, which helps protect GPs against claims arising from board-level decisions. 

This coverage matters because:

• Portfolio company Directors & Officers Insurance limits may be insufficient
• Multiple parties are often involved in governance disputes
• GPs can be named personally alongside founders and executives

For active investors, board protection is one of the most valuable aspects of GPL Insurance.

8. Defense Costs From Day One

One of the most practical benefits of GPL Insurance is defense cost coverage. Fund-related claims are expensive long before fault is determined. GPL policies typically help fund:

• Attorney fees
• Court costs
• Investigation response
• Settlement negotiations

In many cases, defense expenses, not judgments, represent the largest financial exposure.

What General Partnership Liability Insurance Doesn’t Cover

GPL Insurance is intentionally broad, but it’s not designed to cover every category of risk a partnership faces. Understanding the boundaries of coverage is essential because gaps often only become visible once a claim or investigation is underway.

• Fraud, Criminal Acts, and Intentional Misconduct: GPL Insurance doesn’t protect partners against deliberate wrongdoing. Claims involving fraud, criminal activity, or intentional misconduct are excluded across the market. In practice, most policies will still fund defense costs until there is a final adjudication, but coverage will not apply if intentional misconduct is ultimately proven.
• Bodily Injury and Property Damage: GPL Insurance policies do not cover physical injury or property damage. These risks are addressed under General Liability Insurance, not management liability coverage.
• Cyber Incidents and Data Breaches: Cyber events are typically excluded unless a separate Cyber Insurance policy is in place.
• Regulatory Fines and Penalties: While GPL Insurance often covers the cost of defending regulatory investigations, it generally doesn’t cover fines or penalties imposed by regulators.
• Known Issues and Prior Acts: Claims arising from circumstances that were known, or reasonably should have been known, before the policy began are typically excluded.
• Employment-Related Claims (Without EPLI): GPL Insurance doesn’t replace Employment Practices Liability Insurance.

How General Partnership Liability Insurance Fits Into a Broader Risk Strategy

GPL Insurance doesn’t stand alone. Most mature investment firms pair it with other policies that address different categories of exposure, including:

• General Liability Insurance
• Cyber Insurance
• Crime Insurance
• Employment Practices Liability Insurance

Together, these policies form a layered risk strategy that reflects how modern investment firms operate. GPL anchors that strategy by addressing fiduciary, governance, and investor-related risk, while other policies handle operational and transactional exposures.

General Partnership Liability Insurance Is About Defending Decisions, Not Outcomes

General Partnership Liability Insurance exists to protect the people responsible for managing other people’s capital. It recognizes that even well-governed funds, acting in good faith, can face investor disputes, regulatory scrutiny, or board-level claims once outcomes are viewed in hindsight.

As funds grow, take on institutional capital, and deepen their involvement with portfolio companies, the cost of defending fiduciary and governance decisions can become material quickly. GPL Insurance helps ensure that a single lawsuit, investigation, or board-related claim doesn’t jeopardize the partnership or expose general partners personally.

Frequently Asked Questions

Does GPL Insurance protect individual general partners personally?

Yes. One of the core purposes of GPL Insurance is to protect individual general partners and fund managers from personal financial exposure arising from partnership-related claims.

Is GPL Insurance the same as General Liability Insurance?

No. GPL covers governance, fiduciary, and management-related claims. General liability covers bodily injury and property damage.

Does GPL Insurance cover portfolio company board service?

Often, yes. Many GPL programs include Outside Directorship Liability.

Is GPL Insurance required to raise a fund?

Not legally, but many institutional limited partners expect it.

What happens if a fund winds down or a GP steps away?

Claims can arise years after decisions are made. In these cases, runoff or tail coverage may be needed.

How Are Defense Costs Handled?

Most GPL Insurance policies cover defense costs. In many policies, defense costs reduce the overall policy limit.

Vouch Specialty Insurance Services, LLC (CA License #6004944) is a licensed insurance producer in states where it conducts business. A complete list of state licenses is available at vouch.us/legal/licenses. Insurance products are underwritten by various insurance carriers, not by Vouch. This material is for informational purposes only and does not create a binding contract or alter policy terms. Coverage availability, terms, and conditions vary by state and are subject to underwriting review and approval.