$2M Professional Liability (E&O) Insurance for Equipment Appraisers

For equipment appraisers whose lender or leasing company wants $2M in Professional Liability (E&O), the requirement usually means $2M per claim, so a $1M/$2M policy often falls short.

What does a $2M requirement mean for equipment appraisers?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work caused a client a financial loss. For an appraiser, that often means someone says a value was wrong. A $2M clause in a lender's appraiser agreement might read:

• Per claim: the most the policy pays for any one claim. Here, $2M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, also $2M. See limits explained.
• Claims-made: the policy covers claims made and reported while it is active, for work done on or after the retroactive date (the earliest date of work the policy covers).
• Years after the report: some lender clauses, like this sample, ask for coverage to stay in place for a set number of years after the final report, because a value may be questioned after a loan defaults.

Who asks equipment appraisers for $2M?

A $1M limit is a common request for equipment appraisers. A $2M request usually shows up when the dollars behind your report get bigger:

• Asset-based lenders and banks on larger credit lines secured by machinery and fleets.
• Equipment finance and leasing companies with large residual value work (what equipment is worth when a lease ends).
• Banks and lenders in large contested collateral valuations or bankruptcy matters, where your value may be challenged in court.

If a lender wants more than $2M, see $3M for equipment appraisers. $3M and above often needs a broker. Morrow can help you find it.

How is $2M built?

At $2M, the limit is often one primary policy (the policy that pays first) written at $2M/$2M. Equipment appraisers usually buy a Miscellaneous Professional Liability form. Real estate appraisal is usually written on a separate form, so tell the underwriter if you do both.

Some firms reach $2M with a $1M primary policy plus a $1M excess layer (a second policy that pays after the first is used up). The excess layer should follow form, meaning it uses the primary policy's terms. Confirm with the client that primary plus follow-form excess meets the clause.

A commercial umbrella almost never covers Professional Liability (see umbrella and Professional Liability). Additional insured status (listing a client on your policy) is usually not available. If your contract asks for it, send the wording so Morrow can review it. A certificate of insurance shows your coverage but gives the holder no rights under the policy.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. At $2M, they often look closely at:

• Your revenue split by purpose: lending, leasing, sales, insurance, tax and litigation.
• The largest loan, deal or portfolio your reports have supported.
• Which value you report: fair market value (price in a normal sale), orderly liquidation value (OLV, price over a reasonable sale time) or forced liquidation value (FLV, price in a rushed auction).
• How often you inspect in person versus desktop work, and how you confirm asset ownership.
• Engagement letters, reliance language (who may rely on the report) and prior claims.

What affects the cost?

• Type of work. Collateral and bankruptcy work may cost more than tax work.
• Size of assignments and how the limit is built. Bigger loans mean bigger possible losses. One $2M primary may price differently than primary plus excess.
• Claims history. Past claims can raise the price.
• Retention and defense terms. A higher retention (what you pay on each claim before the policy pays, like a deductible) often lowers the premium. Defense outside the limit may add cost.

Frequently asked questions

What kinds of claims could reach $2M for an equipment appraiser?

Claims that reach $2M usually involve a large loan or sale built on one of your values. Hypothetical examples: a lender advances a credit line on your forced liquidation value for a plant, the borrower fails, and the auction brings far less. A buyer pays for a trucking company based on your fleet values, then finds several units were leased or worn out.

My lender asks for $2M and I have $1M today. What should I do?

Request new quotes through Morrow for a $2M/$2M policy, or a $1M primary plus a $1M follow-form excess layer. Morrow can ask carriers to keep your retroactive date and prior acts coverage (coverage for work done before the new policy starts) where the market allows. Keep your current policy until the new one starts. Report anything that could become a claim to your current carrier first.

My certificate shows $1M/$2M. Is that $2M?

Usually not. On a $1M/$2M policy, $1M is the most paid for any one claim and $2M is the most for the whole year. If your contract says $2M per claim, send both to Morrow to review.

Do I still need coverage if I stop doing appraisals?

Often yes, for claims about past work. A claim first made after a claims-made policy ends is generally not covered. An extended reporting period (a "tail") covers claims first made during the extra period for earlier 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.