Those of you who attended the Great British Private Investor Summit will have heard the interview with Eloise Ellis of Lark Insurance and Michael Kofi-Sikah of Nexus Underwriting Ltd about how, in today’s increasingly litigious society, you cannot afford to be complacent about your personal exposures.

While most firms ensure that their directors have cover in place to protect their own assets against any claims brought against them, Lark has found that many Angel investors lack this level of protection in relation to their angel investments.  

Under certain circumstances, ligitants against a portfolio company can (and do) litigate against the company's shareholders if they believe this is where financial remedy can be obtained, even if the investors do not hold directorships with the company. One area where investors can expose themselves inadvertently is when they fund the costs of litigation, which can, in certain circimstances, make them a party to the suit. 

It's worth checking all insurance basics when doing due diligence.  As well as checking the right type of insurance is in place, check the limits of indemnity provided for in the cover and make sure that the company has disclosed all relevant information to the insurer.  If cover is too low, the costs of a defence, normally the bulk of a claim, may not be covered.  

Remember also to check that the company is not breaching any conditions of the insurance, as breaches or failures to disclose mean tht the insurer will be within their rights not to pay a claim.  

When it comes to D&O cover, one thing to look out for is disclosure of the previous history of the Director.  For example failure to disclose that a director has previously been involved with a company that went into liquidation would be grounds for the insurer not to pay out if a subsequent claim is made. 

Lark provides a free service to angels, company directors and company management teams to review insurances.  Please visit www.larkinsurance.co.uk/angels or contact Eloise Ellis: 020 7543 2823 [email protected] for more information.