Fund Directions - Taking A Look At Liability Insurance

Taking A Look At Liability Insurance

Insurance coverage is an important safety net for independent directors and some are beginning to wonder whether recent credit market weaknesses might leave them vulnerable. "[Directors have] gone from collecting a pay check to being worried about every decision the management team makes and whether it will bite them in the butt," said Ira Cohen, an independent consultant.

Liability insurance is designed to cover directors if a lawsuit or a regulatory investigation is brought against them. Fund Directions spoke with insurance representatives who have been in the industry for more than 15 years to find out what directors should know about their policies.

Policies:

D&O and E&O Insurance: covers funds, officers and directors. It can also cover the investment advisor and service providers such as transfer agents, underwriters, etc. When purchasing the policy, the fund can decide to cover any and all of these parties depending on how they evaluate the risks of the fund.

Independent Director Liability (IDL) Insurance: designed to provide extra coverage if they choose to purchase it. This sits on top of the basic liability policy.

Price:

There is no standard price for liability insurance. Costs depend on many things, such as the size of the company, past loss history and the scope of coverage desired.

Picking A ...

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Taking A Look At Liability Insurance