Wrongful Act

What Does Wrongful Act Mean?

A wrongful act refers to any error or breach of conduct covered under professional liability insurance, which offers financial protection to the officers and directors of an insured company against liabilities arising from alleged wrongful actions.

In addition to errors and breaches of conduct, wrongful acts include breaches of duty, negligence, misstatements, omissions, or any action leading to a claim against the individual or the company. However, wrongful acts explicitly exclude offenses such as theft, libel, slander, and dishonesty.

The definition of a wrongful act is narrower than what gets covered under a general liability insurance policy, which deals with bodily injury and property damage to third parties rather than management decisions or professional errors.

Insuranceopedia Explains Wrongful Act

An example of a professional liability policy covering wrongful acts is a Directors and Officers (D&O) insurance policy. D&O insurance is designed to protect an insured company and its officers from the financial consequences of legal actions brought against the company or its directors and officers for alleged wrongful acts committed in their official capacities. These policies typically cover legal expenses incurred during such proceedings.

Companies often pair D&O coverage with broader professional liability insurance so that wrongful acts committed by employees outside the boardroom are also covered under the same risk management program.