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What’s the Difference Between D&O Insurance and E&O Insurance?

I was asked in a meeting today, what’s the Difference Between D&O Insurance and E&O Insurance?

D&O (Directors and Officers) insurance and E&O (Errors and Omissions) insurance are two different types of insurance policies that provide protection to businesses and individuals in different ways.

D&O insurance is designed to protect directors and officers of a company from personal financial loss resulting from claims of wrongful acts committed in their capacity as directors and officers.

This type of insurance covers claims related to breach of fiduciary duty, negligence, misrepresentation, and other similar acts that can lead to legal action against directors and officers.

D&O insurance does not cover claims related to bodily injury, property damage, or other types of liability. These types of claims fall mostly under General Liability insurance.

Here’s a real-life claims scenario for Directors & Officers Liability:

A plaintiff filed a complaint against their competitor alleging that a former employee, now working for the competition, engaged in unauthorized use of confidential and proprietary information and committed other acts of unfair competition. As a result, the plaintiff alleges it has suffered an irreparable and immediate injury. In addition, the plaintiff alleges that the defendant has possession of its confidential information and intellectual property. The plaintiff asserts causes of action for misappropriation of trade secrets, confidential information, and unfair competition. Total Defense Cost and settlement exceeded $450,000.

On the other hand, E&O insurance is designed to protect businesses and professionals from claims of negligence or mistakes in their professional services or advice.

This type of insurance covers claims related to errors, omissions, or other mistakes made by professionals in the course of their work that result in financial harm to their clients.

Very often, it is not the result of a mistake, but rather a displeasure with the outcome that gives rise to an E&O claim. Even frivolous lawsuits will incur defense costs!

E&O insurance is commonly purchased by professionals such as lawyers, accountants, doctors, and consultants that provide a service to others for a fee.

Here’s a real-life claims scenario for Errors & Omissions Liability:

A software developer sold timekeeping software to a company. After removing all previous timekeeping clocks and installing software, the customer discovered it did not function properly. It failed to correctly apply the hourly and overtime rate of pay resulting in over and underpaid employees and the need to replace the original time clocks. The company sued the provider of the software for damages and expenses resulting in $550,000.

In summary, D&O insurance is focused on protecting directors and officers from personal liability, while E&O insurance is focused on protecting businesses and professionals from liability arising from professional services or advice.

If there’s one thing I can emphasize about each of these coverages, even frivolous lawsuits will incur defense costs! No matter if you were in the right on a given matter but were sued by a third party for alleged wrongdoing, you must hire attorneys to defend these allegations. This is most often the biggest cost when it comes to a claim and an insurance policy is intended to defend you for actual or alleged wrongdoing.

My Interview with Candy Messer on The Different Types of Insurance To Protect Your Business

Thank you to Candy Messer from Affordable Bookkeeping and Payroll Services for interviewing me on the topic of “The Different Types of Insurance To Protect Your Business” Some of the key items we discussed are:

  • Tailoring Insurance Coverage for each unique business
  • Commercial General Liability Insurance
  • Workers Compensation Insurance
  • Errors & Omissions (Professional Liability) Insurance
  • Do home based businesses need a business insurance policy?
  • Is business insurance required by law?
  • Insurance for contractual requirements and lease agreements
  • Employment Practices Liability Insurance
  • The difference between Commercial General Liability and Errors & Omissions Insurance
  • Cyber Liability / Data Breach Insurance
  • How much does business insurance cost?
  • Ways you can keep your insurance costs down
  • Negotiating premiums with Carrier underwriters

Check out our interview together here:

Thanks for watching


Radio Interview: The Different Types of Insurance To Protect Your Business

I hope you’ll catch my radio interview hosted by Candy Messer of Affordable Bookkeeping & Payroll. We discuss all things Business Insurance and Risk Management. From General Liability for a home based business to Cyber Liability and Employment Practices Liability for small to middle market companies. You can catch our interview HERE. Also, link included below.

Topics include: General Liability Insurance, Errors & Omissions Insurance, Cyber Liability Insurance, Businssowners Insurance policies, Employment Practices Liability, Workers Compensation, Risk Management.


Insurance for Accountants, CPA’s and Bookkeepers

Accountants, CPA’s, Bookkeepers, Tax Preparers, and other financial services professionals work with a lot of sensitive, personal financial information which can expose them to high levels of risk. And that’s in addition to the every day risks they face – like damage to their place of business or business-related records, etc.

The Hartford is a great insurance carrier for Accountants, CPA’s & Bookkeepers and other financial professionals. They offer a product which bundles General Liability, Professional Liability (Errors & Omissions), Data Breach, Property, and Business Income into a single package policy at a really reasonable price.

Whether you’re a sole practitioner, or partner at a large accounting firm, you should consider The Hartford for your business insurance if you don’t have a policy with them already.

Contact me if you would like to see what The Hartford can offer. I am an appointed broker who can help you out with a quote for this.


Professional Liability vs General Liability Insurance For Technology, Computer & IT Services

I’m working on an insurance policy renewal for a Technology, Computer & IT Services based small business. This is for their Professional Liability / Errors & Omissions insurance coverage.

The insured wants to know the advantages of keeping this E&O insurance policy and the coverage differences compared to General Liability insurance.

Here’s a nice two-minute explanation from The Hartford to address this exact question:

If you ask me, all Technology, Computer and/or IT Services based businesses should carry both professional liability (E&O) and General Liability to protect their risk exposures, without question.

Your clients can sue you for a wrongful act in providing professional services, which can be the result of an act, error or omission; very often, it is not the result of a mistake, but rather displeasure with the outcome, and even frivolous lawsuits will incur defense costs

The best part is that both coverages can often be packaged into a single policy together.


Travelers Insurance: Insuring Technology Companies

Travelers Insurance Company has joined the ranks of other major carriers such as The Hartford in writing coverage for technology companies. Travelers Global Technology President Ronda Wescott and Chief Underwriting Officer Mike Thoma provide their perspective:

If you have a Life Science or Software and Information Technology Company and would like a review of your current insurance portfolio, feel free to contact me anytime. I can help market your coverage’s with all the major carriers specializing in this sector.

Some of the most common insurance coverage’s important to the Life Science or Software and Information Technology industry are:

  • Property
  • Commercial General Liability
  • Professional Liability (Errors & Omissions)
  • Workers’ Compensation
  • Commercial Automobile
  • Commercial Umbrella/ Excess Liability
  • Cyber Liability & First Party Data Privacy Expense
  • Directors and Officers Liability (D&O)
  • Employment Practices Liability
  • Fiduciary Liability
  • Crime
  • Kidnap and Ransom
  • Group Medical Insurance
  • Group Life and Disability


The Ins and Outs of Small Business Insurance

Being an entrepreneur makes you the boss, but along with getting to choose your own hours, location, and business plan, it also means that you’re responsible for a lot of other things like commercial/business insurance. There’s a lot more to business insurance than getting the lowest business insurance quotes. It means understanding your business’s unique needs and the potential hazards that can threaten its success.

This brief video from the Insurance Information Institute touches on the ins and outs of small business insurance, including coverage for:

Credit: Insurance Information Institute


Professional Liability Insurance Coverage For Technology Businesses

Every business has unique risks that can seriously harm an organization’s operations if not properly protected against. As a business utilizing technology to produce and deliver products and/or services, it’s important to recognize and take precautions against risks that your Commercial General Liability insurance coverage does not include.

Technology Professional Liability insurance coverage, also referred to as Tech Errors and Omissions (E&O) insurance, is essential for companies using technology because it addresses a lack of protection in Commercial General Liability policies, which typically do not cover claims of third-party financial harm.

Who needs Tech E&O Coverage?

Not only technology industry businesses have technology-related risks. Most companies today utilize technology in some part of providing a service or product and need to take the necessary precautions. To ensure your company is covering all bases, a full risk management assessment is needed.

What does Tech E&O cover?

Tech E&O insurance  manages risks, resulting from providing a product or service to a third party, that are not covered by a Commercial General Liability insurance policy. Specifically, Tech E&O insurance protects your business in the event that a third party suffers a financial loss due to your product or service not performing as it was intended or expected, including the event of an error or omission committed by your company. These insurance policies also cover defense costs in the event of litigation.

Tech E&O coverage would apply in the following situations:

  • A mistake was made and an error in the code of a website or program your company produced isn’t found before it is implemented. A third party depends on this product or service to operate its business and its operations are stalled due to the error, causing them a financial loss.
  • A part your company produces is installed in a piece of equipment. After a short amount of time, the component simply stops working, causing the equipment to fail to work, but otherwise not damaging anything or hurting anyone. The third party that relies on this equipment for its business has to stop operations and suffers a financial loss.
  • An employee of your company recommends that a client make an adjustment to its network. The client follows the advice and its network crashes as a result, causing a time and financial loss for its operations.

In all of these cases, Commercial General Liability insurance coverage would not cover a claim or any costs of litigation because of the presence of an error and the lack of resulting physical damage to the third party’s property.

Contact me anytime to learn more about protecting yourself with a comprehensive professional liability insurance policy.

Credit: Zywave

Lawyers Professional Liability Insurance – Guest Blog

Harold Mayhack

This is a guest blog from Harold Mayhack, a colleague here at ISU/The Olson Duncan Agency. Harold received his Bachelor of Arts in Business Administration from the University of Strathclyde in Glasgow, Scotland in 1985. He spent several years underwriting lawyer’s professional liability insurance before becoming an insurance broker specializing in the insurance needs of law firms. For the past twenty years Harold has worked with local law firms; assisting with all of their insurance and risk management needs. He has presented to law firm groups and members of the Association of Legal Administrators and has been published in legal administrators’ newsletters. He is a member, and former local steering committee member, of the Professional Liability Underwriting Society; the Insurance Brokers & Agents Association and the ISU Network.

This is the first of several blogs that will focus on the pricing mechanisms for lawyers’ professional liability insurance; from the basics to some more subjective items underwriters take into consideration. Essentially, we are going to review the application as it impacts the final cost of your insurance with the hope that you will know the impact of your answers and what information you can provide to help underwriters offer their best pricing; they really do want to write your law firm’s insurance. We will also touch on a few questions that can qualify or disqualify your firm from some of the ‘preferred’ programs.

The first, and I believe the most important, consideration for law firms to consider when you complete your applications is the attitude brought to the process; why are you doing this? The application is your opportunity to tell the story of your law firm; why should an underwriter want to insure you and why should they offer you the best pricing they have available? Many of the applications we see include the basic answers but no additional details; especially for mid to large size firms, firms with higher hazard areas of practice or claims, the subjective picture we paint can be as important as the objective answers in the application. Why are you different? Every principal or firm administrator I meet is very proud of their firm; yet that often does not come across in their application. This is the information we want to provide to underwriters.

We will include this ‘attitude’ consideration in each of the sections that follow. Some things to keep in mind are; you started your firm for a reason, let’s explain that reason. You hired your attorneys and non attorney staff for a reason, let’s explain that. You manage your firm and its’ structure the way you do for a reason, again let’s explain that. If you have claims let’s explain why. Yes, this takes some time but it pays dividends in the number of insurance offers you receive and the premiums and terms of insurance you will have to consider.

Beginning with the basics, APPLICANT INFORMATION; your firm’s name, is it correct in the application? Most of the lawyers’ professional liability insurance policies available state; ‘we shall pay on behalf of the insured’. Insured is typically defined as the Named Insured, which will be listed on the policy’s Declarations page. This seems obvious but it is not unusual to see the Named Insured listed incorrectly. This becomes more important as we look at the definition of insured which will typically insure principals, employed attorneys, attorneys ‘of counsel’ and independent contractors among others and will include the limitation ‘for legal services on behalf of the Named Insured’.

Also requested in APPLICANT INFORMATION, your contact information; address, phone number, contact name, email and often year established. Most importantly, this is the information the insurance company will use to issue legal notices they are required to mail directly including; notices of non renewal, coverage changes among others. However, they also impact your premium. Most insurance companies have some form of territory rating; metropolitan areas like Los Angeles or San Francisco are often rated with a higher premium than outlying areas. Your year established is used as one factor along with your insurance history in the consideration of prior acts coverage. This date should be the establishment date of the earliest entity to which the current Named Insured is the majority successor in interest to ensure the policy will include the necessary prior acts coverage.

The next few blogs on pricing lawyers professional liability insurance will take us through the remaining application questions and several of the key supplemental applications. If you have any questions about any of the issues raised here please feel free to call me at any time. I would also appreciate any comments or feedback you would like to share.

Harold Mayhack

Technology Errors and Omissions Liability Insurance

Technology Errors and Omissions insurance, also referred to as professional liability, protects IT based businesses against claims for programming errors, software performance, or the failure to perform the work as promised in a contract.

More formally explained, it protects technology companies if they are faced with the two most common forms of liability risks:

  1. claims for “malpractice” in which companies are sued for failing to maintain accepted standards of care as a technology professional or company, and
  2. breach of contract claims for failing to perform contracted services in a timely manner and within the contractual terms.

To paint a picture of an actual claim scenario, consider this:

Your design team spent numerous hours creating a website they felt met the client’s needs perfectly. But weeks after the site launched, you learn that a member of your team accidentally deleted critical content on the site. This created a liability exposure for your client who sues you for restitution. Just when you think things can’t get worse, you learn that your general liability insurance will not cover your employee’s error.

How will you pay for damages to your client – and the legal expenses related to the lawsuit? Either of the types of errors and omissions allegations outlined above can tie up company funds, personnel and focus for years; and IT based businesses are especially prone to high dollar lawsuits.

Don’t be fooled, however. Technology Errors and Omissions insurance coverage is NOT provided by a commercial general liability policy. IT consultants and companies who have general liability without professional liability (Errors or Omissions) coverage are taking a serious risk. It’s the same concept as a doctor practicing medicine without malpractice insurance.

All Types of IT Firms Need Errors and Omissions Insurance:

From massive software giants to individual consultants writing programs or servicing computers out of their homes, all are equally at risk for E&O liability suits. Here are some more examples of the types of businesses that need this coverage:

Software and computer-related services

  • Prepackaged or custom software developers
  • Website designers
  • Computer consultants
  • Systems integrators

Electronics manufacturing

  • Electronic components
  • Consumer electronics
  • Computers
  • Communications equipment

Telecommunications & connectivity services

  • Long distance telecommunications carriers
  • Internet/Application Service Providers
  • Web site hosting

Technology Errors & Omissions insurance is a technical and specialized line of insurance. If your business is in need of this coverage, be certain the insurance agent you’re reaching out to is knowledgeable on the subject and understands ins and outs of these policy forms!


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