Customs brokers asked by an importer for $3M in Professional Liability (E&O) can often meet it with one $3M primary policy or a smaller primary plus excess.
The short answer
- A $3M requirement means your Professional Liability (E&O) must pay up to $3M per claim and in total, and it usually comes from one large importer with heavy duty exposure.
- It may be built as one $3M primary policy, or a smaller primary plus excess layers. A $2M primary plus $1M excess is a common split.
- $3M is rarely available online and is usually placed by a broker. Morrow can help you find it.
What does a $3M requirement mean for customs brokers?
Professional Liability (E&O, short for Errors and Omissions) covers claims that your mistake cost a client money, such as a wrong tariff code or a missed filing. A $3M clause might read:
Illustrative contract wording
Customs Broker shall maintain Professional Liability (Errors and Omissions) insurance covering customs brokerage and compliance services, with limits of not less than $3,000,000 per claim and in the aggregate. If claims-made, the retroactive date shall be no later than the start of services, and coverage shall continue for three (3) years after this Agreement ends.
Illustrative example only. Your contract's wording controls.
- Per claim and aggregate: the most the policy pays for one claim, and for all claims in a policy year.
- Claims-made: the policy covers claims made and reported while it is active, for work on or after the retroactive date (the earliest work date covered).
- Three years after: you would usually keep renewing every layer, with the same retroactive date.
- Silent on layers: this clause does not say whether primary plus excess is allowed. Confirm with the client that primary plus follow-form excess meets the clause.
Who asks customs brokers for $3M?
Many customs brokers are asked for $1M or $2M (see $2M for customs brokers). $3M is a step up because one importer's entry errors could cost more than a $2M limit pays, and it may need a primary plus excess layer. It often comes from:
- National retailers and large importers with high entry volume.
- Importers of goods under special tariffs or antidumping orders (extra duties on goods priced unfairly low), where one error repeats across many entries.
- Manufacturers with drawback (refunds of duties on goods later re-exported) or foreign trade zone (duty-deferral site) programs that you manage.
- Forwarders and carriers that pass their own limits down to you.
For larger requests, see $5M for customs brokers.
How is $3M built?
A primary policy pays first. An excess policy pays only after the primary limit is used up. "$1M xs $2M" means a $1M layer above the first $2M.
Example A: one policy
Example B: two layers
Example C: three layers
The excess should follow form, using the primary policy's terms. Every layer should share the same retroactive date and period. A $1M primary may need more than one excess layer,, depending on the market. A commercial umbrella almost never covers Professional Liability (see umbrellas and Professional Liability).
Your Professional Liability is separate from customs bonds. A bond backs what is owed to the government, not a client's loss from your error.
If you also broker freight, clients may ask for contingent cargo and contingent auto liability (cover for loads a hired carrier damages or crashes). These are separate coverages.
Good to know
Defense costs can shrink the limit. Many policies pay defense costs inside the limit, so a long dispute could use part of the $3M. See defense inside or outside the limit.
What will underwriters ask for?
- The contract and the goods you clear for the client.
- Revenue by service: entry filing, classification advice, drawback, trade zone work and forwarding.
- Yearly entry count, entered value, and your largest client's revenue share.
- Your review steps before filing and how you check client data.
- Loss runs (a report listing past claims), penalty notices, and your current policy.
What affects the cost?
- Duty exposure. High-duty or regulated goods usually cost more.
- Client size and volume. One very large importer or high entry volume usually raises price.
- How the $3M is built. The primary layer usually costs the most per $1M. Excess usually costs less per $1M.
- Controls and claims history. A second filing review may help. Past claims can raise price.
- Retention and defense terms. Retention, like a deductible, usually lowers premium when higher.
Frequently asked questions
What kind of claim could reach $3M for a customs broker?
It can, when one error repeats across many entries. Hypothetical example: A broker enters a retailer's product line without antidumping deposits for two years. A review later finds the goods fall within an antidumping order's scope. The importer must pay the back duties plus interest, and shipments are delayed. It blames the broker. The duties are often not covered, but the importer's resulting losses and your defense costs may be.
My customs broker policy is $1M. How do I get to $3M?
Request new quotes through Morrow. Options may include a new $3M primary policy or a primary plus excess. When Morrow requests quotes, it can ask for your current retroactive date and for cover of work done before the new policy starts (called prior acts coverage), where the market allows. Report any known incident to your current carrier before switching.
Can my client be added as an additional insured?
Usually not. Professional Liability protects you against claims from clients, so naming one does not fit. Some importers accept a certificate of insurance listing every layer, with policy numbers, limits and periods.
Does Professional Liability pay customs penalties or duties?
It depends on the wording. Many policies limit or exclude fines and penalties. Duties and fees the importer owed anyway are often excluded. A client's claim for its own losses from your error, such as interest, delays and rework, may be covered. Ask how each quote treats fines, penalties and duties.
Looking for $3M in Professional Liability? Morrow can help.
Send us your contract's insurance requirement and your current policy. Morrow can review both and request quotes for a $3M primary policy or primary plus excess.
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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.