$10M Professional Liability (E&O) Insurance for Construction Managers

Construction managers asked by a large owner or lender for $10M in Professional Liability (E&O) usually reach it with a primary policy plus follow-form excess layers.

What does a $10M requirement mean for construction managers?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your services caused a client a financial loss. A $10M clause may read like this:

• Per claim and aggregate: the most paid for one claim, and for all claims in a year.
• Claims-made, for five years after: the policy pays only for claims first made while it is active. You would usually renew every layer and keep the same retroactive date (the earliest date of work covered).
• Primary and excess allowed: if your clause is silent, confirm with the client that primary plus follow-form excess meets it.

Who asks construction managers for $10M?

Many requests run $1M to $3M, some $5M. $10M reflects project size, not your firm. It tends to come from:

• Real estate investment trusts (REITs) and pension fund owners building large office, lab or multifamily projects.
• Some construction lenders, often through the owner's agreement, that rely on your review of payment requests (draws) before they release money.
• Developers of high-rise condo or mixed-use towers.
• Hospitals, universities and transit owners.
• Large construction management firms passing their limit down to you.

How is $10M built?

A primary policy pays first. Each excess layer pays only after the layers below it are used up. "$5M xs $5M" means a $5M layer above the first $5M. A commercial umbrella almost never adds to Professional Liability. See why umbrellas fall short.

Compared with $5M, which a primary plus one or two excess layers often meets, $10M usually adds layers and more underwriting of the specific project.

Each excess layer should follow form, meaning it uses the primary policy's terms. If one layer adds an exclusion, a claim could stop partway up. Many policies pay legal defense costs inside the limit, so lawyer fees reduce what is left to pay a claim. See defense costs inside or outside limits.

An agency construction manager advises the owner. An at-risk construction manager signs the trade contracts and takes on cost and schedule risk, so it often needs broader coverage. Firms that also design may need A&E (architects and engineers) coverage.

What will underwriters ask for?

Underwriters (the insurer's decision makers) may review:

• Your mix of agency and at-risk work, and any self-performed trades.
• The project needing $10M: type, value, schedule, delivery method and any condo, healthcare or public work.
• Whether you approve payment requests, certify work or approve scope changes for the owner or lender.
• The owner agreement, including standard of care (the level of skill you promise), indemnity (your promise to cover the client's losses) and any contractual liability wording.
• Fees by service, five years of loss runs (reports of past claims), any incidents and your current policy.

What affects the cost?

• Delivery method. At-risk and self-performed work usually add exposure.
• Project type and size. Condos, healthcare and very large budgets usually cost more.
• Tower shape. The primary layer often carries much of the cost.
• Contract terms and claims history. Broad indemnity or past claims can raise the price or shrink the limit offered.
• Retention and defense terms. A retention is what you pay per claim before the policy pays, like a deductible. A higher one usually lowers premium.

Frequently asked questions

What could a $10M claim look like for a construction manager?

Hypothetical example: a lender says your payment request review let it fund work never done. Cover usually needs a negligent professional act, and many policies exclude guaranteed prices, guaranteed schedules and cost overruns, so check the wording. General liability usually does not cover these financial losses.

I am a construction manager with $2M of Professional Liability. How do I get to $10M?

You can keep your $2M primary and add follow-form excess above it (if the excess carriers accept it), replace the primary with a higher-limit one, or rebuild the tower. Morrow can request quotes for any of these and ask carriers to keep your retroactive date and prior acts coverage (coverage for work done before the new policy starts) where the market allows. Report known incidents to your current carrier before you change coverage.

Can the owner be added as an additional insured on my construction manager Professional Liability?

Usually not. Additional insured status (coverage for the client under your policy) is not automatic on Professional Liability. Some carriers may offer it for your services only, and every layer would need to match. Check whether your contract accepts a certificate of insurance (a one-page proof of coverage) listing every layer instead.

Do I need Professional Liability after my construction management project ends?

Usually yes. A claim first made after your policy ends is generally not covered. Keep renewing each layer, or buy an extended reporting period (a "tail").

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.