Hedge Fund Liability Insurance -- Tricks You Might Not Know

Hedge Fund Liability Insurance -- Tricks You Might Not Know

Hedge fund liability is a huge topic right now in financial circles. With the legal community hovering over hedge fund managers waiting for the slightest mis-step, and clients suing hedge fund managers left and right with little provocation, there is literally a whole new world of liability out there for hedge fund managers.

Things to Watch Out For

One of the worst things that can happen to you in the financial industry is to get caught unawares. There is nothing quite as horrible as that sinking feeling when an investment goes badly, or you realize that something you thought you had sewed up is actually falling apart. In these cases, hedge fund liability insurance is supposed to serve as your safety net. But even your insurance policy can let you down, if you don't have a good one. There are several tricks that you might not know to watch out for when it comes to choosing your hedge fund liability insurance policy.

First, you absolutely must double and triple-check your policy for exceptions and limitations. Though the underwriter may play down the built-in limitations, this could seriously leave you in the lurch if a situation comes up in which you are not covered. This is becoming an increasingly common practice especially in terms of exclusions when it comes to coverage of unjust enrichment and wrongful action suits. While you might have been able to get away with a limited coverage policy for such cases in the past, these specific kinds of suits are the new vogue for those suing financial managers. This is because new legal precedents are being set in such areas, many of which are very detrimental to hedge fund managers.

Additionally, some policies are written so that they only pay out upon final adjudication. Well, as anyone who has worked in the legal world knows, even the smallest trials can take literally years to go to court, putting a continual financial and personal strain on your company until by the time the case is over, it doesn't matter if you actually won or lost, since you've spent so much money getting to the decision that you're virtually done anyway.

Finally, you have to remember to keep covering yourself even in everyday areas. No hedge fund manager should operate without basic property, employee, and travel insurance. As they say, the devil is in the details, and it only takes one detail to entangle your company in a long, drawn-out lawsuit.

All of this may sound intimidating. With so many risks and liabilities, you might be wondering if it's even possible to fully protect yourself and your company. However, with some careful shopping around, knowledgeable buying, and an appropriate combination of past and present coverage strategies, you can be prepared for the worst with your hedge fund liability insurance policy.

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