If your energy audit contract asks for $3M in Professional Liability (E&O), you can often meet it with one $3M policy or a smaller policy plus an excess layer.
The short answer
- If your contract requires $3M, you need $3M in Professional Liability (E&O) limits, usually met by one $3M primary policy or a $1M or $2M primary plus follow-form excess.
- Excess is a second policy that pays after the first one's limit is used up, and follow form means it uses the first policy's terms. $3M can be on the high end for energy auditors, since many audit contracts ask for less.
- $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 energy auditors?
Professional Liability (E&O, short for Errors and Omissions) is designed to respond to claims that your advice or reports caused a client a financial loss, subject to the policy terms. For energy auditors, that means your findings, savings estimates or payback figures. A $3M clause may read like this:
Illustrative contract wording
Consultant shall maintain Professional Liability insurance covering the energy audit and assessment services under this Agreement, with limits of not less than $3,000,000 per claim and $3,000,000 in the annual aggregate. If written on a claims-made basis, coverage shall be maintained for three (3) years after final report delivery. Limits may be satisfied by a combination of primary and excess policies.
Illustrative example only. Your contract's wording controls.
- Per claim and aggregate: the most paid for one claim, and for all claims in one policy year. Here, $3M / $3M.
- Claims-made: Professional Liability almost always covers claims made and reported while the policy is active, for work on or after the retroactive date (the earliest date of work the policy covers).
- After the report: in this example, the clause asks you to keep coverage in force for three years. Your contract may differ.
- Layers allowed: the last sentence lets you stack policies. If yours does not, confirm with the client that primary plus follow-form excess meets the clause.
Who asks energy auditors for $3M?
Single buildings and smaller owners usually ask for $1M ($1M for energy auditors) or $2M ($2M for energy auditors). $3M tends to appear when a lot of money rides on your numbers:
- Real estate investment trusts (REITs) and large institutional owners (companies that own many buildings) with one master audit agreement.
- Lenders who size a large energy upgrade loan on your savings estimates.
- Developers planning deep retrofits across several properties.
- Utility and public efficiency programs, or the firms that run them.
- Engineering firms and energy service companies that pass their own higher limits down to you as a subcontractor.
How is $3M built?
A primary policy pays first. An excess policy pays only after the primary limit is used up. "$2M xs $1M" means a $2M layer that sits above the first $1M.
Example A: single policy
Example B: two layers
Example C: two layers
The excess should follow form: it adopts the primary policy's terms. Every layer should share the same retroactive date, policy period and named insured (the business the policy covers). Many energy auditors buy a general consulting Professional Liability form. If licensed engineers seal reports or design upgrades, you may need architects and engineers (A&E) Professional Liability instead. A commercial umbrella almost never covers Professional Liability (see why).
Good to know
Defense costs can shrink the limit. Many Professional Liability policies pay defense costs inside the limit. Confirm each layer treats defense the same way.
What will underwriters ask for?
An underwriter decides whether to offer coverage. Expect questions about:
- Your audit levels (walkthrough, detailed or investment-grade, meaning deep enough for a lender to rely on), plus benchmarking (comparing energy use to similar buildings), modeling and rebate work.
- The contract: the client, the number of buildings and the size of the upgrades or loan tied to your report.
- Whether you guarantee or warrant savings or performance, or only estimate them with written assumptions.
- Whether you design, specify or oversee upgrades, and whether licensed engineers review or seal reports.
- Loss runs (a report of past claims), any known incidents, and your current policy with its retroactive date.
What affects the cost?
- Type of work. Investment-grade audits and design work usually cost more to insure than walkthrough audits.
- Project and portfolio size. Larger upgrade budgets and loans mean bigger possible losses.
- How the $3M is built. Excess is often priced lower per $1M, but this varies.
- Savings promises and claims history. Professional Liability often limits or excludes guarantees or warranties of savings. Underwriters may decline or change terms if your contract promises results. Past claims also matter.
- Retention and defense terms. Retention works like a deductible. A higher one usually lowers premium.
Frequently asked questions
What kind of claim could reach $3M for an energy auditor?
A claim that a savings estimate was wrong, with a lot of money riding on it, can reach this size. In one hypothetical case, a lender sizes a loan for upgrades across a dozen buildings on your savings estimates. Savings fall short, and the owner and lender say your model overstated them.
I carry $1M or $2M today. How do I get to $3M?
Request new quotes through Morrow for a new $3M primary policy or for excess layers. We can ask carriers to keep your retroactive date and prior acts coverage (coverage for past work done before the new policy starts) where the market allows. Report anything that could become a claim to your current carrier before that policy ends.
Can my client be added as an additional insured?
Usually not. An additional insured is a person added to your policy so it protects them too. Many clients accept a certificate of insurance (one-page proof of coverage) listing every layer with its policy number, limit and period. Your contract controls.
Looking for $3M in Professional Liability? Morrow can help.
Send us the insurance requirement from your contract and your current policy, if you have one. Morrow can review both and request quotes for a $3M primary policy or a primary and excess structure, keeping your retroactive date where the market allows.
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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.