“Wrongful acts” can refer to the acts done by professionals in various capacities and wrongful act liability insurance can come in the form of various insurance policies including Directors and Officers (D&O) insurance, Errors and Omissions / Professional Liability (E&O) insurance and Employment Practices Liability (EPL) insurance. While a wrongful act can be similar among these three types of policies, they may have slightly different meanings, applications and can refer to different acts depending on the policy referenced. Let’s take a closer look at wrongful act liability insurance in the context of each of the policies above.
Wrongful Acts – a Broad Definition
In general terms, a ‘wrongful act’ can be described as an act, error or omission that results in a breach of conduct, duty or civil statute that results in harm to a third party. That harm is usually (but not exclusively) financial and does not include injury, death or property damage in the context of insurance liability as they would be covered by a Commercial General Liability insurance policy.
Wrongful Act Liability Insurance Coverages
Wrongful act liability insurance will usually indemnify an insured person or entity for the following expenses:
- Lawyer’s fees
- Defence costs and can include time spent in court or at hearings
- Out-of-court settlements
- Awards for damages
A few issues that are important to note:
- Wrongful act liability insurance does not cover intentional criminal acts.
- Directors and officers of private, public and non-profit organizations can be held personally liable for wrongful acts.
- An allegation of a wrongful act can be almost as costly as an actual wrongful act, making wrongful act insurance coverage necessary for many professionals, employers, directors and officers.
For professionals such as consultants, engineers and lawyers, wrongful acts liability would be covered by an E&O/Professional Liability policy and include actions, errors and omissions that result in client losses.
While Employment Practices Liability and Directors and Officers insurance are similar, there may be gaps in coverage for employers who are also directors and officers. In general, wrongful acts liability coverage in an EPL policy focuses on (among other acts):
- Wrongful demotion, dismissal, discharge or termination of employment
- Breach of oral or written employment contract
- Discrimination, harassment and employment-related wrongful infliction of emotional distress
- Vicarious liability for intentional acts
- Employment-related misrepresentation
- Employment-related libel, slander, humiliation, defamation or invasion of privacy
- Wrongful deprivation of a career opportunity and negligent evaluation
In a Directors and Officers insurance policy, wrongful acts liability insurance concentrates on the following wrongful acts (this is not an exhaustive list):
- Breach of duty
- Errors in judgement
- Misstatements and misleading statements
- Acts or omissions leading to harm or loss
- Conflicts of interest
- Workplace harassment and wrongful dismissal (depending on the wording of an existing EPL policy)
- Acting contrary to the organization’s policies and procedures
Don’t let a single wrongful act unravel everything you and your organization have worked hard to accomplish. Align yourself with Wrongful Act Liability Insurance prepared by a commercial insurance specialist at ALIGNED.
If you would like more information on wrongful act liability insurance, contact an ALIGNED advocate. If you would like a free quote on wrongful act liability insurance in minutes, you can get started right away by using our free online tool.
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