D&O or E&O: Why Your Business May Need Both

Today more than an ever, a business finds itself exposed to liability claims from all angles. With the cost of litigation and possible settlements rising every year, choosing a plan of total insurance protection is very important to the future financial health of the company.

Whether to add directors and officers insurance v professional indemnity protection can be a difficult question to answer. After all, the two policies are both designed to provide protection against claims of wrongful acts and negligence committed on behalf of the company.

A Key Distinction

Directors and officers insurance (D&O) protects executive leaders (including board members) from claims of negligence and mismanagement. This policy is set up to protect against liability claims regarding the following:

  • Investment choices
  • Negligence
  • Perceived conflict of interest
  • Funds mismanagement
  • Privacy violations
  • Employment practices

Professional indemnity, also known as errors and omissions (E&O), covers employees with direct contact with customers from allegations of negligence or malpractice. Other common claims addressed by this policy include:

  • Poor advice
  • Privacy violations
  • Financial damages due to poor decisions
  • Copyright infringement
  • Violation of good faith

The Bottomline

When considering the question of directors and officers insurance v professional indemnity, it is important to examine your company’s structure. If your business has both an executive board as well as employees, adding both policies will help provide total protection against the risk of litigation.