Two major forms of insurance for businesses are Directors & Officers (D&O) insurance and Professional Liability (Errors & Omissions) Insurance. Both types of policies protect businesses and business owners but in different capacities and different ways.
1) D&O insurance applies to the directors and officers of public companies who can be held liable for their decisions. Lawsuits may come from a number of sources including: employees, shareholders, investors, competitors, suppliers, customers and lenders. D&O policies provide directors and officers a company financial protection if they are sued in conjunction with the performance of their duties with the company. D&O claims come in the form of alleged financial damage. As neither general liability nor professional liability policies provide such protection, a Directors and Officers Policy is the only back stop for this type of claim or suit.
D&O is available from a number of carriers, but we recommend you look for carriers/policies that that have the following.
A highly rated carrier with experience in D&O and a good record of claims handling.
Coverage for the entity and individual directors and officers.
Provides coverage for Punitive Damages where insurable by law.
A risk management helpline (HR consultation)
Separate limits for Management Liability and EPLI
Reasonable rates and deductibles
2) E&O/Professional liability insurance applicable to businesses that offer professional advice or render services. Clients may come forward with claims of negligence or claims that a company made an error or omission in a service they provided or failed to provide and they suffered a financial loss. E&O insurance protects professionals such as doctors, lawyers, dentists and accountants as well as service providers such as consultants, home health care providers, fitness trainers, beauticians and many others. E&O insurance provides for defense and payment for these claims and helps companies avoid the full cost of potential lawsuits. As a small business owner, professional liability insurance is extremely beneficial to consider and for many business classes can be combined with general liability saving the business money and simplifying claims handling and billing.
