For purposes of other posts on this blog, professional liability insurance coverages are defined as follows:
Errors & Omissions – Sometimes referred to generically as E&O or Professional Liability, Errors & Omissions coverage is designed to protect a professional from financial loss that can result from a lawsuit for professional negligence. Policies have been developed that are specifically constructed for the type of organization being coverage, such as doctors, lawyers, insurance agents, technology developers and investment professionals. E&O policies do not typically include coverage for Cyber Risk exposures.
Cyber Risk Insurance – Sometimes referred to as data breach, network security or privacy insurance, Cyber Risk insurance can protect an organization from data breach, loss of money and ransomware incidents. Some policies include business interruption costs related to cyber losses such as ransomware. Because policy forms are not consistent and enhanced coverage is available from specialty insurance markets, utilizing an expert with access to these markets is critical in ensuring you get the best protection.
Directors & Officers – Also called D&O or Management Liability, Directors & Officers insurance protects the directors and officers of corporations and other entities, and often the entity itself, against legal judgments and related expenses resulting from allegations of wrongful acts committed in their individual capacity as directors and officers. Policies have been developed that are more specifically constructed for the type of organization being coverage. The primary segments are public company D&O, private company D&O and non-profit D&O. Many D&O policies include coverage for employment practices liability (EPL) as well, but it is sometimes preferable to cover EPL exposures separately. D&O policies typically do not include professional liability (E&O) coverage, as that is expected to be covered separately.
Employment Practices Insurance – Also called EPL, Employment Practices Liability insurance protects an organization and its employees from legal judgments and related expenses resulting from allegations of wrongful acts committed in the employment realm. The primary exposures are wrongful employment (termination), sexual harassment and discrimination. EPL is often included in D&O policies for private companies and non-profits.
These insurance coverages are critical protections for startup companies, and startups should understand the nuances, often by relying on an expert, to ensure they are properly covered.
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