E&O, EPLI, and D&O Insurances Explained

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Commercial general liability policies generally exclude errors and omissions insurance, employment practices liability insurance, and directors and officers coverages. What are these coverages and are they really needed?

In today’s litigious world, business owners are at a greater risk for more claims to be brought against them. Some business owners believe that a commercial general liability policy protects them from all risks; however, there are many coverages that are limited or excluded in a CGL policy.

Most CGL policies do not cover cyber legal liability, employment practices liability, errors and omissions, directors and officers, and commercial auto.

Depending on the policy, your agency can endorse your policy to include these extra coverages. Or, for higher limits, sometimes a separate policy should be written.

So let’s take a look at a few of these coverages and examine which businesses would need them.

Let’s start with a scenario. A hairstylist has a client in her chair and forgot to set a time on a hair-dyeing treatment and damages the client’s hair. Is there coverage?

Not in the CGL policy. That stylist needs a professional liability policy — another term for it is an errors and omissions policy. This type of policy is for any business that provides a service or provides advice. It’s to protect the business owner from being held responsible for a service that she/he failed to provide or when the service did not provide the promised results.

This E&O coverage is common for lawyers, architects, insurance agents, and doctors (called malpractice), but this coverage is expanding in the industry to contractors, electricians — even a yoga instructor may want to consider having E&O coverage.

Bottom line is, if you provide a service, more than likely you need this coverage.

Another exposure that business owners can be confronted with is an employment practice liability lawsuit. A business owner would find coverage in an employment practice liability insurance endorsement or separate policy.

EPLI provides coverage to the business owner for any claims made against the owner by any employee, potential employee, or former employee for allegations of some type of employment-related issues, e.g., discrimination, sexual harassment, or wrongful termination.

If you have employees or had employees, you need EPLI to protect you. Otherwise, there would be coverage on a CGL policy.

Lastly, directors and officers (D&O) insurance has made its way lately in the spotlight with the #Metoo movement.

Let’s take the idea of a sexual harassment allegation noted above. Did your business have coverage from the claim? What about the directors of the business? Did the board investigate the claims?

Like the E&O and EPLI coverages, endorsing a policy or having a separate policy provides the business owner with an attorney to defend the business owner and, if found to be liable, may pay up to the limits of the policy.

For these three types of insurance coverages, the main thought to take away is that most likely your commercial general liability policy will exclude E&O, EPLI, and D&O. Can your business take the chance and risk not being covered?

Please note: Always check with your insurance agent for coverages and if your insurance carrier provides the specific coverages applicable to your business.

Terri Edwards is principal at Stone and Edwards Insurance Agency, a family-run business since 1981. She is committed to excellence in customer service while providing full protection for clients’ auto, home, flood, or business needs in central Pennsylvania and beyond. Visit www.stoneandedwards.com.

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