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.

Put simply, private equity sponsors must treat their professional liability insurance as a critical component of their operational risk management. Most private equity firms have some form of a professional liability program in place, typically in the form of a general partner liability — or “GPL” — policy. In some cases, however, fund sponsors purchase “one size fits all” form policies that are not sufficiently tailored to meet their evolving business needs or risks, particularly as litigation and regulatory activity in this area continues to increase.

Originally published in Law 360 – December 10, 2015.