What is the difference between D&O and E&O insurance?

D&O and E&O answer two different questions. D&O asks: did the people running the company make a wrongful management or governance decision? E&O asks: did the company make a professional error in the service or work it delivered? A useful test is who is bringing the claim and what they are angry about - a D&O claim typically comes from an investor, shareholder, regulator, or (sometimes) an employee alleging mismanagement; an E&O claim comes from a customer or client alleging the work was done negligently.

They are separate policies because they cover separate exposures, and a company can face one without the other. A pre-revenue startup with no product or clients still needs D&O the moment it takes investor money; a services firm with no outside investors still needs E&O the moment it does client work.

Directors and officers liability protects the individuals who serve as directors and officers - and, through its entity coverage, the company itself - against claims of wrongful acts in managing the business: breach of fiduciary duty, misrepresentation, failure of oversight, and disclosure failures. In life sciences it becomes mandatory at the term sheet, because outside investors require it, and it steps up sharply at IPO or SPAC readiness when securities-disclosure exposure enters the picture.

The classic life sciences D&O claim is an investor or shareholder alleging the board or executives overstated clinical trial results, mischaracterized a regulatory pathway, or failed to disclose a safety signal - a claim about how the company was governed and what it told the market, not about a defective product.

Errors and omissions - professional liability - responds to claims that the company's professional services or work product failed and caused a client financial harm. It is the core line for service businesses in the sector: a CRO whose data management error compromises a study, a CDMO's service scope beyond pure manufacturing, a consulting or regulatory-affairs firm whose advice proves wrong, or a software-as-a-medical-device operator whose product is delivered as a service. Technology E&O and professional liability blur together for digital health and SaMD companies.

The classic life sciences E&O claim is a client - a sponsor, a provider, another company - alleging the service they paid for was performed negligently and cost them money. It is about the work, not the management of the company.

Because a life sciences company is usually both a managed enterprise (with investors and a board) and a deliverer of work or product (to clients or the market), it commonly needs D&O and E&O at the same time - they do not overlap, and a claim that falls outside one may fall inside the other. A CRO, for example, needs D&O for its governance and E&O for its study-conduct services.

Products liability is a third, separate line that neither D&O nor E&O covers: it responds to third-party bodily injury or property damage caused by a physical product - a marketed drug, biologic, or device. A company that manages itself (D&O), performs professional work (E&O), and sells a product (products liability) can need all three, and the most common coverage mistake is assuming one of them answers a claim that actually belongs to another.