How to Get $5M Professional Liability (E&O) Insurance

For businesses whose contract requires $5M, Professional Liability (E&O) is usually reached with one $5M primary policy or a primary plus follow-form excess layers, called a tower.

What does a $5M Professional Liability requirement mean for your business?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work or advice caused a client a financial loss. A $5M clause often looks like this:

• Per claim and aggregate: the most paid for one claim, and for all claims in the policy year.
• Claims-made: Professional Liability is almost always claims-made. It covers claims made and reported while the policy is active, for work done on or after the retroactive date.
• Primary plus excess: the last sentence lets you stack policies. If your clause is silent, confirm with the client that this meets it.
• The right form: some fields buy a different policy. Tech firms usually buy Technology E&O, lawyers and doctors buy malpractice coverage, and architects and engineers buy A&E coverage.

Who asks for $5M in Professional Liability?

The limit reflects the client's exposure, not your firm's size. Many small firms are asked for less, so $5M is often the exception.

A small firm may still get a $5M request when its work touches a large client's money, patients or data. Examples are enterprise vendor agreements, bank or healthcare contracts, government programs and long master service agreements (MSAs). A $3M clause may sometimes be met with one primary policy. At $5M, one primary policy is often harder to find, so a primary plus follow-form excess layers is often used. See $3M Professional Liability for the step below. If a contract asks for more than $5M, see $10M Professional Liability.

How is $5M in Professional Liability built?

A primary policy pays first. An excess policy pays only after the layer below it is used up. "$3M xs $2M" means a $3M layer that sits above the first $2M.

A tower only works if the layers line up. Check three things:

• Same retroactive date. If the excess has a later retroactive date, older work may only be covered up to the primary limit. See retroactive dates explained.
• Same policy period. Every layer should start and end together. If one lapses, the layers above usually do not drop down.
• Follow form. The excess should adopt the primary policy's terms, so a claim the primary covers usually flows up the tower.

What will underwriters ask for?

An underwriter decides whether to offer coverage and on what terms. Requests often include:

• A completed application describing your services
• Revenue by type of work, and your largest clients and contract sizes
• The contract that requires $5M, plus your standard client agreement
• Three to five years of loss runs (a report listing past claims), and details on any incident
• Your current policy, showing its retroactive date and how defense costs are paid

What affects the cost?

• What you do and for whom. Work tied to money, health or data often costs more.
• Revenue and contract size. Larger engagements usually cost more.
• How the tower is built. The primary layer often costs the most per $1M of limit. Higher layers often cost less per $1M, but pricing varies.
• Claims history. Past claims can raise the price and limit what is offered.
• Retention and defense terms. Retention works like a deductible, and a higher one usually lowers premium. Defense outside the limit usually costs more.

Frequently asked questions

I already have $1M or $2M in Professional Liability. How do I get to $5M?

Ask Morrow to request new quotes for either a new $5M primary policy or excess layers above a primary, keeping your retroactive date and prior acts coverage (coverage for past work) where the market allows. Before you switch, report any known incidents to your current carrier, because a new policy usually excludes them.

Can my commercial umbrella cover the gap to $5M?

No, a commercial umbrella almost never covers Professional Liability, because it usually excludes professional services. You usually need a follow-form excess Professional Liability policy instead.

What proof of a $5M tower can I give my client?

Usually a certificate of insurance (a one-page summary of your coverage) that lists every layer, with its policy number, limit and dates. Additional insured status (being covered under your policy) is not automatic on Professional Liability, and many policies do not offer it. Some carriers may add a client, usually only for the client's liability arising from your services. Check the policy wording and your contract.

How long does it take to get $5M in Professional Liability (E&O)?

It often takes longer than a single policy, because each tower layer is underwritten. A complete application and loss runs usually help.

This article is general information, not legal advice or a coverage determination. Coverage depends on the actual policy wording, carrier underwriting and your contract terms.