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D&O and E&O Insurance: What’s the Difference?

D&O and E&O Insurance: What’s the Difference?

D&O and E&O Insurance: What’s the Difference?

On the surface, it can be tough to tell the difference between directors & officers (D&O) and errors & omissions (E&O) insurance. Both policies, at their core, are designed to safeguard a business against losses from claims of negligent or malicious acts. However, this does not mean that the two policies are interchangeable. That is a common misconception, but the two policies each have distinct areas that they cover, and to go without one or both would leave a business with a wide coverage gap.

Directors & Officers Insurance

Directors & officers insurance is a form of liability insurance that specifically covers an organization’s directors and officers (hence the name) for claims made against them while they were serving on a board of directors or in an officer or manager capacity. This policy is geared towards individuals, though some policies may also cover the legal fees and additional costs incurred as a result of a suit against a director or officer. Unlike a typical E&O or malpractice policy, D&O is specifically designed to address a claim against executive level individuals. Other employees, on the other hand, would not be covered by this policy, which leads us to our second policy.

Errors & Omissions Insurance

Errors & omissions insurance is a form of professional liability insurance (insurance protecting professionals against claims made by clients) that protects businesses as well as their individual employees against claims made by clients for negligence, malicious actions, or inadequate work. E&O coverage can also be referred to as malpractice insurance, as (as its name implies) it provides coverage for those who have done something that they should not have (an error) or neglected to perform a necessary service (omission). Unlike D&O insurance, this coverage will extend throughout a company to cover all employees or individuals working on the company’s behalf rather than solely the upper management. E&O insurance frequently will also provide protection to a representative of a company, so volunteers and contractors would be included in this coverage.

To call E&O a synonym for professional liability or malpractice insurance, however, would not be completely accurate. The two terms are frequently used as such, but instead, E&O is just one type of insurance that falls under the professional liability framework. E&O would cover professionals in the event that they commit an error or an omission, but D&O insurance or employment practices liability insurance would be necessary in the event that a claim is brought against one of the business’s executives or if there is a claim of misconduct within the company itself.

About Axis Insurance Services

Axis Insurance Services specializes in providing employers with EPLI coverage and would be happy to discuss this must-have protection with you, particularly critical in today’s litigious environment. Just give us a call at (201) 847-9175.

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Blogged on: January 31, 2018 by Mike Smith
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