Breaking Down the Difference Between D&O and E&O Insurance

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Whether it’s the result of an actively malicious action or an honest mistake, it is possible that every business will at some point have to deal with a lawsuit as a result of its business actions. In order to prevent a claim from causing devastating financial and reputational failure, every business should have the right insurance coverage. While there are two main policies that cover claims of negligence or improper conduct leading to losses—directors and officers (D&O) and errors and omissions (E&O) insurance—they are absolutely not interchangeable with one another, and going without one could leave a business exposed in the event of a claim.

Directors & Officers Insurance

Directors & officers insurance’s coverage is all in the name. D&O insurance specifically provides protection to directors, officers, or other company executives. If the allegations against the company can be traced back to actions of directors, officers, or other members of the upper management, then D&O insurance would be necessary.

These are some of the most common exclusions in D&O policies:

• Known Circumstances - A policy will not cover claims arising from negligent acts, errors, omissions, or injuries that occurred before the start date of the policy.
• Bodily Injury - Many policies do not cover costs and claims made for a bodily injury, though it may not apply in the case of corporate manslaughter or employment practices liability.

Errors & Omissions Insurance

Errors & omissions insurance, much like D&O, provides coverage for claims of malpractice, negligence or other improper operations leading to losses for clients, but this coverage extends to all other types of employees, and covers losses that are not covered under traditional liability insurance. In addition to salaried and hourly employees, subcontractors working on the business’s behalf would also be covered. A subset of professional liability insurance, errors & omissions insurance is generally customized to fit the insurance needs of individual industries.

It’s all in the name: E&O insurance covers losses incurred by errors and omissions. These are some of the most common exclusions in E&O policies:

• Malicious, dishonest, illegal, or criminal acts
• Services provided under the name of a different organization (that is not named in the policy)
• Damages against or on behalf of anyone insured on the policy (such as other employees within the business)
• Bodily harm
• Property damage

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