If your business is in the market for insurance, it’s important to know what kind you’re going to need. Most business owners understand that they need insurance to protect themselves and their operations, but they're a little less clear on which policies they need and what each policy does.
Professional liability insurance and management liability insurance are two forms of coverage that are important for business owners, but while their names may sound similar they are by no means interchangeable. Learn about the difference between professional liability and management liability insurance, and consider carefully what your business needs.
If your business provides professional services or advice to other businesses or individuals and can be held liable for something that happens because of it, then it might be good to purchase professional liability insurance coverage. This insurance will cover your business in the event of a lawsuit, to a certain extent. It is common to also call this insurance policy errors & omissions (E&O) insurance. These terms do refer to the same basic product, but it's important to remember that different industries have different names for their coverage (such as malpractice insurance for doctors and attorneys).
Courtesy of the Insurance Information Institute, here are some examples of claims that are not covered by general liability but are covered by professional liability:
There are two types of professional liability policies to be aware of: claims-made and occurrence. Professional liability is not included in an in-home business policy or a business owners policy (BOP).
Management liability, also known as directors and officers’ insurance, includes extra coverage for the individual directors or officers of a business for their official company actions. Long story short, it’s coverage for your managers. That’s the big difference between it and professional liability. If your manager is in legal trouble for something that they did on behalf of the company, then management liability will keep them covered. There’s multiple management liability package policies that one can purchase, according to the International Risk Management Institute (IRMI). With D&O coverage comes employment practices liability insurance (EPL), fiduciary liability insurance and special crime insurance. Special crime insurance includes kidnap, ransom, and extortion exposures.
The big difference between management liability and professional liability is who they cover. Professional liability is needed for professionals like accountants, engineers, graphic designers and more. Some states require a business owners to have E&O insurance in order to conduct business, such as in the case of physicians. Management liability, as its name says, covers the business's management, not all of its employees. That’s the biggest difference between E&O and D&O; it’s all in who they are effectively covering.
At Axis Insurance Services, we aim to help our customers identify their exposures and protect themselves. Founded in 1999, we offer insurance programs to a wide variety of professionals and industries including attorneys, real estate, healthcare, architects, and more, and also have a wholesale division. We pride ourselves on offering flexible insurance coverage tailored specifically to each customer’s needs. To learn more about our solutions, contact us at (201) 847-9175 to speak with one of our professionals.