One of the common difficulties faced by company executives is understanding the difference between Directors & Officers Liability Insurance Coverage and Errors & Omissions Insurance Coverage.
A common misconception is that Directors and Officer Liability Insurance Policy and Errors & Omissions Insurance cover the same thing. However, this is not true, and both insurance policies have completely different coverages.
It is crucial to understand the difference between Directors and Officers Liability Insurance Policy and Errors and Omissions Insurance Policy.
Overlooking the difference in coverages might be very expensive for your organization when a lawsuit arises, and you find out that your organization is not covered by the Policy.
What is a Directors and Officers Liability Insurance Policy?
A Directors and Officers Liability Insurance Policy is a type of insurance policy which reimburses the Insured for any wrongful act committed by Directors and Officers during the Policy Period.
A Directors and Officers Liability Insurance Policy is also known as D&O Liability Insurance Policy or Management Liability Insurance Policy.
A Wrongful Act in a D&O Insurance Policy is defined as follows:
“Wrongful Act” means any act or omission, including but not limited to any error, misstatement, misleading statement, neglect, libel, slander, breach of trust, breach of warranty of authority or breach of duty committed, by an Insured Person, individually or otherwise, in his Insured Capacity, or any matter claimed against such Insured Person solely by reason of his serving in such Insured Capacity.
Essentially, a D&O Liability Insurance Policy covers the Directors and Officers of an Organisation for decisions taken by them in their managerial capacity which go wrong.
Common D&O Insurance Claims include:
- Conflicts of Interest
- Financial Misstatement
- Mismanagement of Funds
- Breach of Fiduciary Duty
What is an Errors and Omissions Insurance Policy?
An Errors and Omissions Insurance Liability Insurance Policy is a type of Insurance Policy which covers the Insured party for any type of loss arising from the Insured Party’s Professional Services. An Errors & Omissions Insurance Policy is also known as Professional Indemnity Insurance Policy.
The typical Insuring Agreement of an Errors & Omissions Insurance Policy reads as follows:
The Insurance Company agrees to pay Loss for which Insured becomes obligated to pay because of liability imposed by law or assumed in an Insured Contract, by reason of any Financial Injury arising out of the failure
- of Insured Product to perform the function or to serve the purpose intended, due to defect, deficiency, inadequacy or dangerous condition in Insured product; or
- ii. to perform Insured’s Service, in accordance with the terms and conditions of a contract or agreement;
which is caused by a Wrongful Act to which coverage applies and a claim for the same is first made against the Insured during the Policy Period and notified to the Company during the Policy Period or applicable extended reporting period. No cover is provided under this contract for serial Losses if the first such Loss occurred before the retroactive date.
A Wrongful Act in an Errors & Omissions Insurance Policy is defined as follows:
“Wrongful Act” means any error, unintentional omission or negligent act including all related wrongful acts and all series of continuous, repeated or related wrongful acts.
As you can see, the definition of a Wrongful Act in an Errors & Omissions Insurance Policy is completely different from the definition of a Wrongful Act in a Directors and Officers Liability Insurance Policy.
Common Errors & Omissions Insurance Claims include:
- Breach of Privacy
- Breach of Confidentiality
- IPR Infringement
- Breach of Contract
- Defamation, Libel and Slander
What is the Difference between Directors and Officers Liability Insurance Policy vs Errors & Omissions Insurance Policy?
The first difference between the Directors and Officers Liability Insurance Policy in India and Errors & Omissions Insurance Policy starts with the Insuring Agreement itself
As you can see, the Insuring Agreement (Coverages) and the Trigger for a Claim in a D&O Insurance Policy are completely different from the Insuring Agreement and the Trigger for a Claim in an E&O Insurance Policy.
In short, a D&O Liability Insurance Policy covers the Insured for a wrongful act committed by the Insured in their managerial or supervisory capacity while an E&O Insurance Policy focuses on protecting the Insured against allegations of inadequate or negligent professional services.
Also, D&O Insurance Policy covers decisions made by the management for the business while E&O Insurance Policy covers professionals who directly provide services to the clients.
Final Takeaway
A D&O Liability Insurance Policy is complicated. The experts at Qian can help you in constructing a comprehensive D&O Liability Insurance Policy which covers the exposures of your Directors and Officers.
Qian has tieups with top D&O Insurance Providers in India and is an experienced D&O Insurance Broker with experience of serving multiple clients for their Directors and Officers Liability Insurance requirements over the years.
Qian assures you of availing comprehensive D&O Liability Insurance Policy Coverage and would make sure that the Insured is also aware of the exclusions in a Directors and Officers Liability Insurance Policy to avoid unwanted surprises later on. We also assure you of a reasonable cost for D&O Liability Insurance Policy.
If you wish to purchase a Directors and Officers Liability Insurance Policy, email us at insurance@qian.co.in or call us on 022-22044989.
We would be glad to help!
- Directors and Officers Liability Insurance
- A must have for your organisation
- What is a Directors and Officers Liability Insurance Policy?
- What is a Wrongful Act in a D&O Liability Insurance Policy?
- What are the Duties of Directors and Officers?
- What does a Directors and Officers Liability Insurance Policy Cover?
- Who are the potential claimants under a Directors and Officers Liability Insurance Policy?
- What are the Key Features of a Directors and Officers Liability Insurance Policy?
- What are the Add-On Covers available under a D&O Liability Insurance Policy?
- What is the need for a Directors and Officers Liability Insurance Policy?
- What are the coverages under a Directors and Officers Liability Insurance Policy?
- What is Side A Cover under a Directors and Officers Liability Insurance Policy?
- What is Side B Cover under a Directors and Officers Liability Insurance Policy?
- What is Side C Cover under a Directors and Officers Liability Insurance Policy?
- What are the exclusions under a Directors and Officers Liability Insurance Policy?
- What is the average cost of a Directors and Officers Liability Insurance Policy?
- Get Best Quotes for Director and Officers Liability Insurance Policy