$2M Professional Liability (E&O) Insurance for Energy Auditors

For energy audit firms told to carry $2M: it usually means $2M per claim and $2M total per policy year, so a $1M/$2M policy may not meet the clause.

What does a $2M requirement mean for energy auditors?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your advice or reports caused a client a financial loss. For energy auditors, that usually means your findings or savings estimates. A typical clause looks like this:

• Per claim: the most the policy pays for one claim. Here, $2M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, also $2M. See Professional Liability limits explained.
• Claims-made: Professional Liability almost always covers claims made and reported while the policy is active, for work done on or after the retroactive date (the earliest date of work the policy covers).
• After the report: the clause asks you to keep coverage for three years after you deliver the final report.

Who asks energy auditors for $2M?

Smaller owners and single-building jobs may ask for $1M (see $1M Professional Liability for energy auditors). $2M tends to come up when the money riding on your report is larger:

• REITs and large property owners hiring you to audit a whole portfolio.
• Lenders using your savings estimates to size an energy upgrade loan.
• Utility or public efficiency programs and the firms that run them, which often set one standard for every auditor.
• Engineering firms or energy service companies that subcontract audit work to you and pass their own requirements down.

How is $2M built?

Often, $2M is one primary policy (the policy that pays first) with a $2M/$2M limit. It can also be a $1M primary plus a $1M excess layer (a second policy that pays after the first is used up). Excess should follow form, meaning it uses the same terms as the primary. Confirm with the client that primary plus follow-form excess meets the clause. If a contract asks for more than $2M, see $3M Professional Liability for energy auditors. Limits of $3M and above are rarely found online and often need a broker. Morrow can help you find them.

Energy auditors often buy a miscellaneous Professional Liability form for service firms. If licensed engineers seal reports or design upgrades, you may need architects and engineers (A&E) coverage instead. A commercial umbrella (an extra liability policy above your general liability) almost never covers Professional Liability. Clients usually cannot be added as additional insured (a party that gets coverage under your policy). Check what your contract requires.

What will underwriters ask energy auditors for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. For energy auditors, they often ask about:

• Your services: walkthrough audits, detailed audits, investment-grade audits, benchmarking, or rebate and incentive paperwork, with a rough share of revenue for each.
• Whether you ever guarantee savings, or only estimate them with written assumptions.
• Whether you design, specify or oversee the installation of upgrades, or only recommend them.
• Staff credentials, any licensed engineers, and your report review process before delivery.
• Your standard contract, prior claims, possible claims, and your current policy and retroactive date.

What affects the cost of $2M Professional Liability?

• Type of work. Investment-grade audits and design work usually cost more to insure than walkthrough audits.
• Revenue and project size. Larger portfolios and bigger upgrade budgets mean bigger possible losses.
• Savings promises. Guaranteed savings or performance terms in your contracts may raise the price or limit options.
• Claims history. Past claims can raise the price or narrow the choices.
• Policy terms. The per claim limit, aggregate, retention (the amount you pay on each claim before the policy pays) and how defense costs are handled all change the price.

Frequently asked questions

Do I need $2M Professional Liability as an energy auditor?

Often yes, if your contract sets $2M per claim, because the clause controls what you must carry. In one hypothetical case, an owner spends heavily on new equipment based on your savings estimate. The savings fall short, and the owner says your report overstated them. The policy may pay defense costs on a covered claim, subject to its wording and limit.

Is $1M/$2M enough if my contract says $2M per claim?

Usually not, because $1M/$2M pays $1M per claim and the clause asks for $2M per claim, so you may need $2M/$2M. If you carry $1M today, keep your current policy until the new one starts. Report anything that could become a claim to your current carrier before it ends. Morrow can request quotes for a new $2M policy and ask that your retroactive date and prior acts coverage (coverage for work done before the new policy starts) carry over where the market allows.

Does Professional Liability cover energy savings I promised?

Often not. Many policies exclude guarantees and promised results. Stating savings as estimates with written assumptions may help.

What happens if I stop doing audits and a claim comes later?

A claim made after your policy ends is generally not covered, because coverage is claims-made. An extended reporting period (a "tail") gives you more time to report claims about past work.

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.