After you buy a business-to-business (B2B) services company, check first that its professional liability policy describes the services you actually sell and reaches claims about the seller's past work. Then check three more areas: cyber coverage and the insurance terms in your master service agreements, your exposure when staff work at client sites, and protection for client money and property against theft and fraud. This checklist is for searchers, Small Business Administration (SBA) loan buyers and holding companies that just closed on an outsourced, consulting or tech-enabled services firm.
The short answer
- Professional liability covers clients' financial losses from your mistakes, but only for the services the policy defines. If you add services after closing, ask the carrier to update the definition in writing before you sell them.
- It is usually claims-made, so the retroactive date decides whether the seller's past engagements stay covered. In an asset purchase, covering them is the new carrier's underwriting decision.
- Master service agreements often require specific limits, cyber coverage, additional insured status and notice of a change in control. Check them before your largest client asks.
- Staff at client sites create general liability and workers' comp exposures, plus the risk of damaging or stealing client property.
- If you touch client money, read the crime policy for client funds, funds transfer fraud and social engineering terms.
Which kind of B2B services firm did you buy?
"B2B services" covers very different businesses, and the insurance that matters most depends on what your people actually do. Find your firm in the table, then read the sections that follow with those lines in mind. Many firms fit more than one row.
| If you bought | Check first |
|---|---|
| Consulting and advisory | Professional liability and the liability caps in client contracts |
| Outsourced back office (payroll, bookkeeping, billing) | Crime coverage for client funds, cyber and professional liability |
| On-site or field services at client facilities | General liability, workers' comp by state and client property in your care |
| Staffing or embedded teams | Workers' comp, client contract requirements and third-party employment practices coverage |
| Tech-enabled services | Professional liability plus cyber; see the vertical software checklist |
Does the professional liability policy match the services you sell?
Read the definition of professional services before anything else. Professional liability, also called errors and omissions (E&O), covers claims that your work caused a client a financial loss: a missed filing deadline, a flawed analysis, a botched data migration. But it usually covers only the services the policy describes. If the seller's policy says "marketing consulting" and your team now runs paid media budgets, a claim about the media spend may fall outside it.
New owners often add services in year one to grow revenue. Each new line should go to the carrier before it goes to clients. Also check:
- Retroactive date. Most professional liability policies are claims-made, covering claims first made during the policy period about work after the retroactive date (the earliest date of work the policy covers). In an asset purchase into a new company, a new policy may start that date at closing. The seller's engagements are then covered only if the new carrier agrees to cover the predecessor's prior acts, which is an underwriting decision. The seller's tail (extra time after its policy ends to report claims about past work) usually protects the seller's company, not automatically yours, so the indemnity in the purchase agreement matters too.
- Change in control. In a stock purchase the policy may continue, but some forms stop covering new work after a sale or require prompt notice.
- Exclusions. Fee disputes, return of fees, promises of results made in proposals and contractual liability are common exclusions.
A hypothetical example. A buyer acquires a marketing analytics firm whose policy covers "marketing research, analytics and consulting". In month four the firm starts managing clients' ad budgets. A setup error sends $300,000 of a client's spend to the wrong campaigns, and the client demands repayment. The carrier questions coverage because media buying is not in the policy's definition. While the carrier and client argue, the buyer sets aside cash it had earmarked for its first-year debt service cushion. Telling the carrier when the service launched, and getting the definition updated in writing if it agreed, could have avoided the dispute. The numbers are illustrative.
See the professional liability review and prior acts and tail coverage.
Do you need cyber coverage if clients own the data?
Usually yes. Services firms hold client files, credentials, payroll data and system access. If your systems are breached, you may owe notification and response costs under state data breach laws and under your contracts, and clients may claim their own losses. A cyber policy can cover breach response, extortion, your lost income from an outage and liability to clients and the people whose data was exposed, depending on its terms.
Professional liability and cyber often have gaps between them: many professional liability policies exclude data breaches, and many cyber policies exclude claims about the quality of your services. Ask your broker to confirm how a breach caused by an employee's mistake in client work would be handled. Carriers usually ask about multi-factor authentication, backups and how staff access client systems. See the cyber review and cyber risk during an IT migration.
What do your client contracts require?
Most B2B revenue sits under master service agreements, and those carry insurance terms. Large clients' procurement teams also check certificates at renewal. Pull your top 10 agreements and compare them with your policies.
| Contract term | What it usually asks | What to check |
|---|---|---|
| Insurance limits | Minimum professional liability, cyber, general liability and umbrella limits | Current limits against each client's minimum |
| Additional insured | The client added to your general liability and sometimes auto | Blanket additional insured endorsement and its wording |
| Waiver of subrogation and primary wording | Your policy pays first, without pursuing the client | Endorsements on the general liability and workers' comp |
| Indemnity and limitation of liability | You defend the client; your liability capped at fees, with carve-outs | Whether the policy covers liability you take on by contract |
| Crime or fidelity coverage | Coverage for theft of client money or property by your staff | Client property coverage in the crime policy |
| Change of control and assignment | Notice or consent after a sale | A question for deal counsel; it also decides which entity must be insured |
See checking customer contracts against your policies and additional insured, waiver and primary wording for new owners.
What changes when your people work at client sites?
On-site staff bring physical exposures that a desk-based services firm can overlook:
- Injury and damage at the client's premises. General liability covers bodily injury and property damage to others, subject to exclusions such as damage to property in your care, custody or control. If staff handle client equipment, ask how that exclusion applies.
- Employee injuries. Workers' comp pays benefits under the laws of the states listed on the policy, and covers other states only as its other states section allows. Check that every state where staff work regularly is listed. Rules vary by state, and North Dakota, Ohio, Washington and Wyoming require coverage from a state fund, which a private policy cannot provide. If clients direct your staff day to day, some contracts ask for an alternate employer endorsement on your workers' comp, which extends your coverage to the client; ask your broker whether your agreements require it.
- Theft of client property. A crime policy can cover employee theft of client money or property, but often only if that coverage is included. Some clients require it.
- Driving. Staff driving their own cars to clients create a hired and non-owned auto exposure. See hired and non-owned auto.
- Harassment claims from client staff. Employment practices liability insurance (EPLI) covers claims by your employees and, with third-party coverage, may cover claims by clients' employees. See the employment practices liability review.
How should you protect client funds and payments?
If your firm processes payroll, pays bills, collects receivables or holds client money, crime insurance matters more than almost any other line. Read three parts of the crime policy:
- Client funds. Some crime policies cover only your own money unless coverage for client property is added. In the 2022 Insurance Services Office (ISO) crime forms, employee theft of clients' property is one part of the fidelity insuring agreement. That part applies only if a limit for it is shown on the declarations, so check your actual form.
- Funds transfer fraud. This covers a fraudulent instruction to a bank that appears to come from you but was sent without your knowledge.
- Social engineering. If an employee is tricked into sending money, many policies cover it only under a separate agreement, often with a lower sublimit than the rest of the crime policy, and some exclude it.
Controls matter as much as limits: call-back verification on a known number for any bank detail change, dual approval for payments over a threshold, and separation between people who set up payees and people who release funds. See funds transfer fraud for new owners and the crime insurance review.
What belongs on my first-month checklist?
| Check | Why it matters in B2B services | Ask for |
|---|---|---|
| Professional liability | Core client loss claims | Policy, services definition, retroactive date, change in control terms |
| Cyber | Client data and system access | Policy, application, controls, gap with professional liability |
| Top client contracts | Limits, endorsements and indemnities | Largest 10 agreements and certificates on file |
| Crime | Client funds, payroll and payment fraud | Client property coverage, social engineering sublimit |
| General liability and workers' comp | Staff at client sites in several states | States listed, care custody or control wording |
| Employment practices | Integration changes and third-party claims | Policy, third-party coverage, retroactive date |
If the firm is a managed IT provider or serves healthcare clients, the managed IT services checklist and the healthcare services checklist go deeper. A Morrow review can compare your policies with your services and client agreements and request quotes where it makes sense.
Keep reading
- New Owner Review: Professional Liability (Errors and Omissions)
- How to Check Your Customer Contracts Against Your Policies
- Funds Transfer Fraud: Why New Owners Are a Favorite Target
- New Owner Review: Commercial Crime and Employee Theft
- Just Bought a Vertical Software Company? Your Insurance Review Checklist
- All guides for new business owners
Frequently asked questions
Does general liability cover mistakes in our client work?
Usually not. General liability covers bodily injury, property damage and some personal injury claims. Claims that your advice or work caused a client a financial loss belong to professional liability, also called errors and omissions.
We are adding a new service line. Do I need to tell the insurer?
Usually yes, and ideally before you sell it. Professional liability usually covers only the services the policy describes. Send the carrier a short description of the new service and ask it to confirm in writing that the definition includes it.
Does crime insurance cover client money an employee steals?
It can, if the policy includes coverage for client property. Some crime policies cover only your own money. Check the wording, the limit and any conditions, and compare them with what your client contracts require.
Do I need workers' comp in every state where my staff visit clients?
Rules vary by state, and short visits are treated differently from regular work. List every state where employees work regularly and ask your broker to confirm each is properly covered on the policy.
A client wants to be added as an additional insured. Which policies does that apply to?
Usually general liability, and sometimes auto and umbrella. Professional liability and cyber policies generally do not add clients as additional insureds. Read the contract and ask your broker which endorsements meet it.
References
- IRMI: Need To Know: Major Changes to the ISO Commercial Crime Program
- The D&O Diary: Voluntary Parting Exclusion Precludes Coverage for Social Engineering Fraud Loss
- IRMI: Retroactive date (definition)
- IRMI: Additional insured (definition)
- NCCI: Workers Compensation and Employers Liability Insurance Policy WC 00 00 00 C (carrier-hosted copy)
Just bought a business? Get your insurance reviewed.
Send Morrow the declarations pages, loss runs and key contracts you inherited. Morrow can review them against the business you bought, flag gaps and request quotes where it makes sense. Any new terms depend on carrier underwriting.
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This article is general information, not legal, tax or financial advice, and not a coverage determination. Coverage depends on the actual policy wording, carrier underwriting, your purchase agreement and your contracts. Ask your attorney and accountant about deal and legal questions.