E&O is short for Errors and Omissions insurance and D&O is short for Directors and Officers insurance. Many companies in certain industries, such as insurance and real estate, require employees to carry either one or both types of insurance.
The purpose of E&O insurance is to protect a party from legal responsibility due to unintentional errors, omissions and mistakes made during the course of a business transaction. E&O insurance often protects both the representative of a company, as well as the company itself.
The purpose of D&O insurance is to protect the directors and officers of a company, not the employees or representatives, from liability due to the decisions they have to make and actions they have to take in the course of carrying out their job duties. Common types of these decisions include business and investment decisions and the decision-making regarding corporate benefits and policies.
Most E&O and D&O insurance covers the cost of the person’s defense should a lawsuit arise. If the judge finds in favor of the plaintiff, both insurances cover the cost of the damages awarded. E&O and D&O insurance does not offer coverage if the representative or the company made any errors intentionally, or purposely gave misleading information. Finally, both types of insurances do not usually cover any punitive damages awarded to a plaintiff in the case of a lawsuit.
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