Top 10 GPL Insurance Exclusions Fund Managers Miss

And What to Do About Them Before the Claim Hits

When GPs finally read their GPL policy, it’s often in the middle of a crisis - an SEC subpoena, a letter from an LP, or a board seat that just turned adversarial.

The problem? GPL policies are designed to reduce insurance carrier exposure to the highest risk claims. This leaves them riddled with exclusions that only become obvious once it’s too late.

In this guide, we break down the 10 most common GPL exclusions we see in claim disputes, underwriting meetings, and postmortems - and how to fix them.

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1. LP Lawsuits Blocked by Insured vs. Insured Language In GPL

The risk: Some policies define limited partners (LPs) as insureds, which can invalidate coverage for LP-initiated claims - even when those claims allege fiduciary breach or fund mismanagement.

What to do: Carve back claims brought “in the capacity of an investor or limited partner.” This ensures LP disputes don’t get bounced on a technicality.

2. Regulatory Inquiries That Aren’t ‘Formal’ Enough

The risk: Many policies won’t respond to an SEC or DOJ inquiry unless it’s labeled a “formal investigation.” That means early subpoenas, requests for testimony, or even staff letters may not trigger coverage.

What to do: Ensure your policy includes pre-claim inquiries, subpoenas, and informal investigations in the definition of “Claim” - and confirm Side A and C respond without ambiguity.

3. Professional Services Exclusion That Voids E&O Coverage

The risk: Vague exclusions for “advisory” or “professional services” can be interpreted to exclude private investment activities - the core function of a GP.

What to do: Negotiate E&O language that affirmatively covers fund-level services, including oversight, capital deployment, and portfolio management.

4. Outside Capacity Gaps for Board or Dual-Hat Roles

The risk: If a manager is serving on a portfolio company board, or wearing dual hats (GP + advisor), coverage may be denied for acting “outside insured capacity.”

What to do: Define “insured capacity” to include all relevant roles, and confirm that ODL coverage responds properly - especially when indemnification is unavailable.

5. Contractual Liability Exclusions That Bar Side Letter Claims

The risk: Many LP disputes stem from side letters, co-invest agreements, or allocation promises- all contractual in nature. Some policies exclude these claims entirely.

What to do: Carve back “liability that would have existed in the absence of a contract” to keep side letter and LPA-based claims covered.

6. Prior Knowledge and Prior Acts Clauses That Are Too Broad

The risk: If any insured “knew or should have known” about a potential issue - no matter how informal or internal- coverage can be voided.

What to do: Narrow this language by clarifying what constitutes knowledge, requiring actual awareness, and tying exclusions to a specific prior acts date.

7. Bankruptcy Exclusions That Undermine ODL

The risk: Portfolio company insolvencies often lead to board-level litigation. Some GPL policies exclude claims brought in bankruptcy, rendering ODL worthless when it’s needed most.

What to do: Ensure ODL coverage includes claims brought by creditors or trustees, and removes blanket bankruptcy exclusions tied to portco financial status.

8. Cyber and Privacy Exclusions That Eliminate Real Risk

The risk: If LP data is breached, or phishing leads to a wire fraud or disclosure issue, some policies exclude it outright under “cyber risk” language.

What to do: Carve back for network security, privacy liability, and data breaches tied to fund operations - or purchase coordinated Cyber coverage with aligned definitions.

9. Shared Limits That Quietly Erode Fund Protection

The risk: GPL coverage is sometimes stacked within a shared tower alongside D&O or other lines. If a portco burns through the limits, there’s nothing left for the fund.

What to do:  Separate GPL and D&O towers - or clearly disclose when limits are shared, and track burn rates during active litigation.

10. EPL Sublimits That Disappear Fast in Management Company Claims

The risk: Wrongful termination, harassment, and retaliation claims at the management company often trigger the EPL portion of GPL. But it’s frequently limited to $250k or $500k.

What to do: Negotiate standalone EPL coverage or require a minimum $1M shared sublimit with a clear defense allocation strategy.

📩 Want to Know If Your GPL Policy Has These Gaps? We audit GPL policies line-by-line, then show you exactly where your risk lies.

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Upward Risk Management

Upward Risk Management was founded by a former claims attorney to bring sharper, litigation-aware insurance strategy to private equity and venture capital firms.

We specialize in structuring fund-level coverage that holds up when it’s tested - whether by LPs, regulators, or collapsing portfolio companies.

With deep expertise in policy language, exclusion traps, and negotiation strategy, we don’t just place coverage - we protect decision-makers.

If you want a second opinion on your GPL program, we’ll audit it line by line.

Learn more about GPL insurance and how it protects your fund