Directors & Officers vs. Errors & Omissions Insurance: What’s the Difference?

No matter your business’s size, industry, and standard practices, it’s always important to make sure that you have insurance coverage for every possible exposure and then some. When it comes to protecting your business from claims of malpractice or improperly performed services, you might think that an Errors & Omissions policy is the best one. However, this policy doesn’t cover all of the possible claims you might face, making a Directors & Officers policy necessary to fill in the gaps. On the surface, these two policies sound identical: they protect your business from claims of wrongful acts. This is true, but read on to learn the nuances of the two policies and how they differ in the protection they offer.

Directors & Officers (D&O)

Directors & officers insurance, also referred to as management liability insurance, is a policy that protects the executive management team of a business from allegations against their management decisions. Note that this policy solely applies to the business’s decision makers, and protects them from personal liability in the event of claims about their management practices.

Claims that would be covered by D&O insurance include:

  • Negligent acts
  • Employment practices suits
  • Unfair business practices
  • Conflicts of interest
  • Mismanagement of funds
  • Release of non-public information
  • Investment decisions

Errors & Omissions (E&O)

Errors & omissions insurance, also referred to as professional liability insurance, is designed to protect your business against allegations that you have failed to provide professional services, or provided them in a way that has caused financial damage or other negative consequences to a client. Where D&O insurance is designed to protect the company’s directors and officers, E&O provides protection for any representative of the business and the business itself. D&O mainly covers decisions made by management, but E&O is generally applicable to individuals who provide goods and services directly to clients.

Claims that would be covered by E&O insurance include:

  • Financial damage to a client
  • Design flaws (with negative consequences for clients or tenants)
  • Negligence (omissions)
  • Malpractice

 

About Axis Insurance Services

At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.

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