$3M Professional Liability (E&O) Insurance for Equipment Appraisers

Equipment appraisers whose lender or contract asks for $3M can build it as one $3M policy or as a lower primary policy plus an excess layer.

What does a $3M requirement mean for equipment appraisers?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work caused a client, or someone who relied on your report, a financial loss. For an equipment appraiser, that usually means a value was too high, too low, or missed key facts. A $3M clause might read:

• Per claim and aggregate: the most paid for one claim, and for all claims in a policy year.
• 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). Each layer should carry the same retroactive date, and you should keep that date at renewal.
• Stacking: this clause does not say whether excess counts. Confirm with the client that primary plus follow-form excess meets it.

Who asks equipment appraisers for $3M?

Equipment appraisers are often asked for $1M or $2M. A $3M ask may be less common. A lender may step up from $2M to $3M when one collateral report supports a larger facility.

• Larger banks and asset-based lenders on big lines or term loans backed by plant equipment.
• Syndicated deals, where several lenders rely on one appraisal.
• Equipment finance and leasing companies valuing large fleets or the resale value of leased equipment.

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 above the first $1M.

Example A can be hard to find, and it often needs a broker. Morrow can help you find it. A lower primary with follow-form excess (Examples B and C) is another way the limit is built, where excess is available.

Equipment appraisers are often placed on a Miscellaneous Professional Liability form (a general form for firms without a specialty form).

The excess should follow form. A claim from a lender relying on your report is then covered, or excluded, on the same terms in every layer. Each layer should share the retroactive date, policy period and named insured (the business the policy covers).

Many policies pay defense costs inside the limit. That means legal fees use up the same dollars as a settlement. See defense costs inside or outside the limit.

What will underwriters ask for?

Expect these topics:

• Revenue split by purpose: loan collateral, leasing, deals, litigation, bankruptcy, insurance and tax.
• Your largest assignments, the deal size behind them, and how many parties rely on each report.
• Value types you report, such as orderly liquidation value (OLV), forced liquidation value (FLV) and fair market value.
• How you confirm the equipment exists, who owns it, and whether any of it is leased or pledged elsewhere.
• Whether you also run auctions or sell equipment you have valued.
• Engagement letters, report review steps and five years of loss runs (a report of past claims).

What affects the cost?

• Type of work. Collateral and bankruptcy work may cost more to insure than tax work.
• Size of what you value. Bigger loans mean bigger possible losses.
• How the $3M is built. The primary layer may cost the most per $1M of limit. Excess may be priced lower.
• Claims history. Past claims can limit offers and raise prices.
• Retention. This works like a deductible. A higher one usually lowers premium.

Frequently asked questions

Do I need $3M Professional Liability as an equipment appraiser?

That is usually driven by a contract or lender requirement, so check the insurance clause in your agreement. Two hypothetical claims: a borrower fails, the equipment sells far below your forced liquidation value, and a lender group blames your report. Or a buyer alleges the equipment list you relied on was wrong. Your report's assumptions and limiting conditions may come up in a dispute.

Can an equipment appraiser get from $1M to $3M?

Often yes, through new quotes. Request them through Morrow, either for a $3M primary where a carrier offers one, or for follow-form excess above a primary. Morrow can request quotes that keep your retroactive date and prior acts coverage (coverage for past work done before the new policy starts) where the market allows. Report any known incident to your current carrier before you switch.

Can my lender be added as an additional insured?

Usually not. Additional insured status is uncommon on Professional Liability, and carriers usually decline it. A lender may also be a party relying on your report, so it could be a claimant, not a co-insured. Some lenders may accept a certificate of insurance (a one-page proof of coverage) instead, but check what your contract requires.

How long does it take to get $3M in place?

It depends on the carrier and on how complete your file is. Send the contract requirement and your current policy first. Loss runs, a sample report and a sample engagement letter help too.

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.