Professional Liability Insurance or Errors & Omission (E&O)
What is Errors & Omissions Insurance?
E&O is a form of professional liability insurance that helps protect professional advice and service. It protects individuals and companies from bearing the full cost of defending against a negligence claim made by a client, and damages awarded in such a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder.
In the financial industry, lawsuits happen, regardless of how baseless the claims may be. Clients may try to sue an advisor or broker after an investment goes sour, even if the risks were well-known and within the guidelines established by the client. In these cases, even if a court or arbitration panel finds in favor of a broker or investment advisor, the legal fees can be very high, and E&O insurance is vital in these situations.
Who should purchase E&O Insurance?
- Doctors (medical, dental, psychological, chiropractic)
- Investment firms (financial advisors, hedge funds, venture capitalist firms, investment bankers, banks)
- Insurance Agents
What is Directors and Officer’s Liability Insurance?
D&O Insurance is business liability insurance written to protect the Directors and Officers of for-profit businesses, privately held firms (such as hedge fund and investment firms), not-for-profit organizations, and educational institutions.
D&O Insurance can reimburse a customer for losses or advancement of defense costs in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers. Such coverage can extend to defense costs arising out of criminal and regulatory investigations/trials as well; in fact, often civil and criminal actions are brought against directors/officers simultaneously. Intentional illegal acts, however, are typically not covered under D&O policies.