Fund independent directors generally have two potential protections against liabilities to which they may be subject by reason of their service as directors:
- fund indemnification; and
- directors and officers (D&O) insurance (which in the fund industry, is often coupled with “errors and omissions” (E&O) insurance).
Fund indemnification generally allows independent directors to be paid from fund assets for legal expenses and other financial liabilities they may incur as defendants or non-party witnesses in fund-related regulatory investigations, regulatory proceedings and/or civil litigation. D&O insurance generally affords a second line of potential protection for fund independent directors against such liabilities. Although funds are not legally required to purchase D&O or E&O insurance, most funds do.
Independent director liability (IDL) insurance is another type of insurance that some fund groups purchase. IDL insurance is a stand-alone insurance coverage that affords liability protection solely to independent directors, and is designed to supplement the liability protections afforded to them by fund indemnification and D&O/E&O insurance.
Third Party Resources
Below are links to additional resources created, published, and maintained by other organizations. They are merely a sample of additional resources for fund directors. IDC does not control, cannot guarantee, and is not responsible for their accuracy, timeliness, or continued availability. These links are provided solely as a service to fund directors and should not be construed as indicating in any way that IDC endorses either the content provided or the third-party providers of any such content.