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Home > Blog > What is the Difference Between D&O Insurance and Professional Liability Insurance?
TUESDAY, MAY 26, 2020

What is the Difference Between D&O Insurance and Professional Liability Insurance?

business_insuranceBusiness insurance comes in many forms and policies. Directors and officers insurance (D&O) insurance is a common policy geared to protect a business’ board of directors and their officers. Professional liability insurance protects professionals in the face of claims. So what is the difference?

 

Who it Protects 

While both coverages deal with lawsuits against certain individuals, the individuals covered are different. D&O insurance specifically covers members on a board of directors and officers. Professional liability insurance, on the other hand, covers professionals (of nearly any position within a company) that offer specialized services. A director or officer does not have to be a specialist or a professional in order to be covered under D&O insurance. These same individuals would not, however, qualify for professional liability insurance.

 

Accidents Covered 

Professional liability insurance covers professional negligent acts that may result in injury or loss of money. For example, if a surgeon makes a mistake during surgery that leads to lasting damage and the need for more medical attention, those costs (as well as the possible lawsuit that follows) would be covered under professional liability insurance.

 

On the other hand, D&O insurance covers claims related to actions of a director or officer while working for the company or board. This insurance does not cover bodily injury or property damage.

 

Instead, it covers: 

  • Stock performance 

  • Mismanagement 

  • Misrepresentation 

  • Failing to follow laws or regulations of the board 

  • Employment practices (including claims concerning discrimination, sexual harassment and more) 

  • Cyber liability 

 

Who Files the Claims 

Professional liability insurance is geared specifically for claims filed by clients who have received a professional service from the policyholder.

 

Directors and officers, however, can be sued by a variety of third parties. These claims can come from investors, shareholders, creditors, employees, third parties, clients and others. While D&O insurance can cover clients who lost money due to the director’s or officer’s actions, the individual on the board is not providing a professional or specialized service, thus they would not be covered under professional liability insurance.

 

Many businesses choose to carry both of these insurance policies. Medical companies, for example, often have both a board of directors and specialized professionals that are equally at risk for a lawsuit. It’s important to consider the risks your employees face and invest in the correct type of insurance to protect them and the business. 

Posted 6:52 PM

Tags: business insurance, d&o insurance,
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1 Comments

Compton Michael said...
Hey there. Your blog really helped in understanding the differences between D&O insurance and professional liability insurance. Thanks for putting it up.
MONDAY, FEBRUARY 15 2021 9:06 AM

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