Does a Commercial Umbrella Policy Cover Professional Liability (E&O)?

No, a commercial umbrella almost never covers Professional Liability (E&O), so consultants and other service providers whose client wants a high E&O limit usually need a higher primary limit or an excess layer.

What does a commercial umbrella policy cover?

A commercial umbrella adds limit above your General Liability (injury and property damage claims), commercial auto and employers liability (injured employee lawsuits) policies, called the underlying policies. It usually does not sit over Professional Liability (E&O).

Many contracts ask for an umbrella and Professional Liability in the same clause. (E&O stands for Errors & Omissions.) Here is an example:

• What it does not sit over: Professional Liability, which covers claims that your work or advice cost a client money. Many umbrellas also have a professional services exclusion (wording that removes coverage).
• How limits are written: Professional Liability uses per claim (the most paid for one claim) and aggregate (the most paid for all claims in a policy year). See Professional Liability limits explained.
• What the last sentence of the clause means: an umbrella can help satisfy (a) and is itself (b). It rarely lets an umbrella count toward (c). Confirm with your client that primary plus follow-form excess Professional Liability meets the clause.

Who asks for high Professional Liability limits next to an umbrella?

Requirements often come from a vendor insurance schedule (a list of required coverages and limits). Umbrella and Professional Liability sit side by side, so the umbrella can look like it covers Professional Liability when it does not. Common sources:

• Large corporate clients and government agencies
• Healthcare systems and financial firms
• Prime contractors passing their client's terms down to subconsultants

Some also ask to be named additional insured on Professional Liability, which is usually not available. See additional insured and Professional Liability.

How can I meet a high Professional Liability requirement if I have an umbrella?

There are two common paths: a new primary Professional Liability policy at the full limit, or a smaller primary plus an excess Professional Liability layer. The excess layer pays after the primary limit is used up. It should follow form, meaning it uses the same terms as the policy below it. Professional Liability is almost always claims-made, so it covers claims first made while the policy is active (see claims-made vs occurrence). Non-tech consultants usually buy Miscellaneous Professional Liability, while IT and software consultants usually need Technology E&O, often sold together with cyber liability (coverage for data breaches and computer attacks).

The same logic applies at other limits: an umbrella does not turn a $1M or $2M Professional Liability policy into $5M. See $5M Professional Liability.

Already have a policy? Request new quotes for the limit you need: a new primary policy at the higher limit, or excess layers above your current one. Ask for quotes that keep your retroactive date (the earliest work date the policy covers) and prior acts coverage (coverage for work you did before the new policy starts) where the market allows. Keep your current policy until the new one starts. Report any known incidents to your current insurance company before it ends, since a new policy usually excludes matters you already knew about.

What will underwriters ask for?

Underwriters are the people at an insurance company who review applications. They usually want:

• An application with your services, revenue and largest clients
• The contract that sets the requirement and your standard client agreement
• Loss runs, which are reports showing your past claims
• Your current policy, including its retroactive date
• For an excess layer, a copy of the primary policy or its quote

What affects the cost?

• The services you provide and your revenue
• The total limit and how it is split into layers
• Your claims history
• Your retention, the amount you pay on a claim before the policy pays, similar to a deductible

Frequently asked questions

How can I tell from a certificate of insurance whether a high limit applies to Professional Liability?

Look for Professional Liability in its own row on the certificate, plus any excess Professional Liability row with its own policy number; the "Umbrella Liab" row usually does not apply to it. A certificate of insurance, the one-page summary of your coverage, does not change your coverage. Check the umbrella's exclusions to be sure.

Does an excess liability policy cover Professional Liability?

Usually not. Most excess liability policies sit over the same policies as an umbrella, so you generally need an excess layer written over your Professional Liability policy.

Can my client be added as additional insured on my Professional Liability policy?

Usually not. Professional Liability protects you against claims from clients, so adding a client as an insured does not fit how the coverage works. Check your contract to see what proof of coverage your client requires.

Is excess Professional Liability claims-made too?

Yes, in most cases. A follow-form layer usually uses the same claims-made trigger as the primary policy, covering claims made while the policy is active for work done on or after the retroactive date.

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.