You’ve heard the abbreviations of E&O and D&O Insurance policies and you may assume they are similar but wonder what the differences are. In this video and post, I’ll explain what each policy is and how they are actually entirely different from each other.
So let’s start off by answering the question of what each of these policies covers:
What is D&O or Directors & Officers Liability Insurance?
D&O as it’s commonly called is a business insurance policy that protects the leadership of a company (public or private) from lawsuits alleging some form of a wrongful act, which broadly can be considered mismanagement of the company.
What is E&O or Errors & Omissions Liability Insurance?
E&O is a totally different and separate business insurance policy intended to protect the company or entity from claims and lawsuits also alleging a wrongful act.
Wrongful acts in this policy focus on errors, mistakes, omissions, and failures in the course of performing professional services.
How are these policies similar?
Both policies are written on a claims-made basis, both policy structures are similar. and both respond to claims alleging a wrongful act.
How are D&O and E&O insurance policies different?
While the structure of the policies is similar where they differ is:
- Who is insured. In a D&O policy, the individuals who lead the company are the primary insureds. The entity itself is also insured but is limited. In an E&O policy, the insured is the entity or company.
- The focus of the Wrongful Acts coverage trigger – in D&O wrongful acts focus on errors, misleading statements, neglect, breach of duty, and omissions by the company leaders while carrying out their duties as a company leader. In E&O wrongful acts focus on acts, errors, and omissions in the course of performing the “professional services” as defined in the policy, such as providing engineering services, accounting services, etc.
- When you look at who the policy is intending to protect and for what types of claims it’s easier to see that these two policies are very different.
Do you need both E&O and D&O insurance?
Like a lot of insurance questions, the answer is, it depends! But I can tell you that specifically in the financial services world, such as hedge funds, private equity, venture capital, and investment advisors these two policy types are often combined into one policy form to protect a firm or fund from allegations and claims arising from either risk.
Here’s the key to understanding.
If your company provides professional services to others you likely need E&O insurance. I did a video on this subject which you can view here:
If your firm is in a controlled industry, has investors, or is in an industry often targeted for management litigation, you likely need D&O Insurance. You can see more about that here:
How do you get D&O and/or E&O insurance?
That’s simple. You contact an independent insurance broker who is well versed in both policy forms and who has access to a broad swath of the insurance marketplace – someone like me – who focuses on these two lines of business rather than a broker that just “dabbles” in management and professional liability insurance on occasion.
Because these policies are complex in nature and need to be tailored to fit your needs, it’s much better to work with a specialist rather than a generalist.
Here’s the bottom line.
If you’re looking for a team of dedicated professionals to work for you on your business insurance,
I’d love an opportunity to speak with you. Reach out and let’s connect.
Thanks!
