Directors and Officers (D&O) Insurance provides for financial protection in the event of a claim alleging a wrongful act in a managerial or supervisory role of the director, or an officer in the organisation.
D&O liability insurance policy has the following three critical coverages called as “Insuring agreements”
- Protection for directors and officers when the company cannot indemnify for the losses suffered by the director/officer
- Reimbursement of the expenses the insured (company that purchased the policy) when they decide to pay for the losses suffered by its directors and officers
- Covers the insured (company that purchased the insurance) when they are face a suit along with its directors and officers
The policy provides coverage caused by “Wrongful Acts” which is defined as below:
“Wrongful Act” means;
any actual or alleged misrepresentation, misstatement, misleading statement, error, omis- sion, defamation, negligence, breach of warranty of authority or breach of duty
The definition of “Wrongful Act” and “Insuring agreements” will be the primary difference between the D&O liability insurance and an E&O policy.
Errors & Omissions insurance protects businesses providing professional services to their clients against any legal liability.
Similarly to D&O, the definition of “Wrongful Act” needs to be understood to discover what claims would trigger coverage under this insurance policy:
This policy covers any act, error, omission, neglect, or breach of duty committed in the rendering of your professional services.
Errors and Omissions is defined as : Any error, mis-statement, act, omission, neglect, or breach of duty committed, attempted or allegedly committed or attempted, by the company buying this policy, or a person on behalf of the company, solely in the performance of Professional Services.
Like the case of the D&O policy, the E&O policy does cover decisions, mistakes and advice, but only those decisions, errors, mistakes or advice that were given to clients to whom the company is rendering a professional service.
The difference between both these insurance can be difficult to comprehend. But by understanding the definition of “Wrongful Acts” to reviewing the insuring agreement, companies can make out the difference.
Getting an expert guidance to sort through these policies is critical. PlanCover have been providing expert guidance and support for companies purchasing these insurance policies. If you need a professional advice and support in structuring commercial insurances including health and liability insurance policies, PlanCover is the best place to visit.
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