The Essential Guide To Errors & Omissions Insurance For Board Of Directors

Being a board of director can come with some liability - and with that comes the need for errors and omissions insurance. This comprehensive guide will explain what errors and omissions insurance is, why it's important, how to get it, and how to make sure you're properly covered. Read on to learn more about how to protect yourself and your board of directors from potential legal repercussions!

What is Errors and Omissions Insurance?

If you serve on a board of directors, you may be held liable for any errors or omissions that you make while performing your duties. To protect yourself from financial damages, you should consider purchasing errors and omissions insurance (E&O insurance).

E&O insurance is a type of professional liability insurance that can cover the costs of defending against and settling lawsuits alleging that you made mistakes or failed to perform your duties as a board member. E&O insurance can also help cover the cost of any damages that are awarded to the plaintiff in such a lawsuit.

While E&O insurance is not required by law, it is generally recommended for all board members. The cost of an E&O policy will vary depending on the coverage you choose and the size and scope of your organization.

Why Do the Board of Directors Need Errors and Omissions Insurance?

As a board member, you can be held personally liable for damages arising from any wrongful act that you commit in your capacity as a director. This includes errors, omissions, or other negligent acts.

Without errors and omissions insurance, you could be left footing the bill for any legal settlements or judgments against you. This type of insurance can help protect your personal assets in the event that you are sued for your actions as a board member.

While your company may have some form of directors and officers liability insurance, this may not cover all of the potential risks that you face as a board member. In addition, many companies require their board members to carry their own personal errors and omissions insurance policy.

If you are sued for wrongful acts committed as a board member, having errors and omissions insurance can help defray the costs of legal defense and any resulting settlements or judgments against you. Even if you are ultimately cleared of any wrongdoing, the costs associated with defending yourself can be significant.

Types of E&O Insurance

There are numerous types of E&O insurance policies available on the market, and the type of policy you choose will depend on the specific needs of your organization. The most common types of E&O insurance policies are:

1. General Liability Insurance: This type of policy provides coverage for any bodily injury or property damage that occurs as a result of your organization's negligence.

2. Professional Liability Insurance: Also known as malpractice insurance, this type of policy protects your organization from claims arising out of professional negligence.

3. Directors & Officers Liability Insurance: This type of policy protects your organization's directors and officers from personal financial losses in the event that they are sued for wrongful decisions or actions while in their corporate roles.

4. Product Liability Insurance: If your organization manufactures or sells products, this type of policy will protect you from claims arising out of injuries or damages caused by those products.

5. Cyber Liability Insurance: This relatively new type of policy provides protection for your organization against claims arising from data breaches, cyber attacks, and other online risks.

Benefits of Having E&O Insurance

As a board member, you want to do everything you can to protect the organization you represent. One way to do this is by carrying errors and omissions (E&O) insurance.

E&O insurance provides protection in the event that you are sued for something you did or failed to do in your capacity as a board member. It can help cover the costs of legal defense, settlements, and damages.

There are many benefits of carrying E&O insurance, including:

1. Peace of mind: Knowing you have E&O insurance can give you peace of mind in knowing that you are protected in the event of a lawsuit.

2. Financial protection: E&O insurance can help cover the costs associated with a lawsuit, including legal defense fees, settlements, and damages.

3. Protection of your reputation: In the event of a lawsuit, your E&O insurance can help protect your reputation by helping to pay for damage control efforts, such as public relations campaigns.

4. Continuity of operations: If a lawsuit results in a settlement or judgment against you, E&O insurance can help ensure that the organization you represent can continue its operations despite the financial impact.

How to Get E&O Coverage as a Board Member

As a board member, you may be held liable for damages resulting from any errors or omissions that you make while performing your duties. To protect yourself from these potential liabilities, you should consider purchasing errors and omissions (E&O) insurance.

E&O insurance is designed to protect individuals and organizations from financial losses that may arise from errors or omissions in the performance of their professional duties. This type of insurance can help cover the costs of legal defense, settlements, and judgments against the policyholder.

There are a few things to keep in mind when shopping for E&O insurance as a board member:

- Make sure the policy covers directors and officers (D&O) liability. Many E&O policies exclude D&O coverage, so this is an important consideration.

- Consider the limits of coverage. Some policies may have low limits that may not be adequate to cover the potential liabilities of a board member.

- Choose a policy with a broad definition of "error or omission." This will provide more protection in the event of a claim.

- Make sure the insurer is reputable and has experience insuring board members. This will give you peace of mind knowing that you're properly protected.

Tips for Choosing the Right E&O Coverage

As a board member, you are fiduciarily responsible for the organization and can be held liable for errors or omissions in your decision-making. That’s why it’s important to have the right errors and omissions (E&O) insurance in place.

When choosing E&O coverage, there are a few things to keep in mind:

- Make sure the policy covers the full scope of your work as a board member.

- Consider the size of the organization and your potential liability.

- Choose a policy with ample limits and coverage for your needs.

- Make sure the insurer is reputable and has experience insuring board members.

Conclusion

We hope this guide has been helpful in outlining the benefits of errors and omissions insurance for the board of directors. With E&O coverage, your organization can be protected from any potential legal claims related to decisions made by its officers or directors. This can provide a sense of security and peace of mind that you’re doing all you can to protect your assets, reputation and employees. By having an E&O policy in place, organizations are able to devote more time and effort into achieving their goals without worrying about costly mistakes or legal issues down the line.