For freight forwarders asked for $5M in Professional Liability (E&O) by a major shipper: you can carry it as one primary policy or as a smaller primary plus follow-form excess layers.
The short answer
- $5M in Professional Liability (E&O) means your policy or policies together must pay up to $5M for a client's claim that your forwarding mistake caused a loss.
- You may get one $5M primary policy, but many forwarders reach $5M with a smaller primary plus follow-form excess layers.
- $5M is very rare online. It almost always needs a broker who can request quotes from specialty markets (such as excess and surplus lines, which are carriers that write coverage standard carriers decline). Morrow can help you find it.
What does a $5M requirement mean for freight forwarders?
Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services cost a client money. A $5M clause might read like this:
Illustrative contract wording
Service Provider shall maintain Professional Liability (Errors and Omissions) insurance covering its freight forwarding and customs coordination services, with limits of not less than $5,000,000 per claim and $5,000,000 in the aggregate. Limits may be satisfied by primary and excess policies. Coverage shall be maintained for three (3) years after termination.
Illustrative example only. Actual contract wording varies.
- Per claim and aggregate: the most paid for one claim, and for all claims in the policy year (see how limits are written).
- Claims-made: Professional Liability almost always covers claims made and reported while the policy is active, for work after the retroactive date (earliest covered work date).
- Stacking allowed: this sample accepts primary plus excess. If yours is silent, confirm with the client that primary plus follow-form excess meets the clause.
Who asks freight forwarders for $5M?
Many forwarders are asked for $1M or $2M, and some for $3M. $5M is different. Compared with $3M, a $5M requirement more often needs two or three layers, and each excess carrier may review you. Common sources:
- Large retailers and importers with one master agreement
- Energy contractors moving project cargo such as turbines
- Pharmaceutical shippers with temperature-controlled freight
- Public agencies, where the limit is set in the bid
How is $5M built for a freight forwarder?
A primary policy pays first. An excess policy pays only after the layer below it is used up. "$3M xs $2M" means a $3M layer that sits above the first $2M.
Example A: single policy
Example B: two layers
Example C: three layers
Each excess layer should follow form, meaning it uses the primary policy's terms. Every layer should share the same retroactive date, the same policy period and the same named insured (the business the policy covers). A commercial umbrella almost never covers Professional Liability (see umbrellas and E&O). Clients usually cannot be added as an additional insured (a party the policy also protects), though this varies by carrier. Otherwise, many clients ask for a certificate of insurance (a one-page proof of coverage that gives the holder no rights under the policy) listing each layer. If your contract requires a certificate showing every layer, confirm with the client that this meets the clause.
Good to know
Defense costs count. Many Professional Liability policies pay defense costs inside the limit, so defense costs reduce the limit, starting with the primary layer and then any excess layers above it.
Professional Liability generally does not cover damaged cargo. Forwarders usually buy separate cargo legal liability coverage for goods in their care. A customs bond is a guarantee to customs authorities, not insurance for your mistakes.
What will underwriters ask for?
An underwriter decides whether to offer coverage and on what terms.
- Revenue, shipment counts by mode, and how much comes from the client asking for $5M.
- Your highest single shipment value and the goods you move.
- Whether you issue house bills of lading (your own shipping receipts for cargo), and how you control cargo release.
- Your standard terms of service (often called trading conditions), and whether the client contract makes you accept more liability than those terms allow.
- Three to five years of loss runs (a report of past claims), open incidents and your retroactive date.
What affects the cost?
- Services and goods. Project cargo and regulated exports usually cost more.
- Client concentration. One large client raises the possible size of a single claim.
- How the $5M is built. Each layer may be priced on its own, so a $5M tower can cost differently from one $5M policy. Carriers may also view the risk differently at each level.
- Claims history and retention. Past claims can limit offers. Retention (what you pay on each claim before the policy pays) works like a deductible.
Frequently asked questions
Do I need $5M Professional Liability as a freight forwarder?
Only if your client contract or bid requires it. Check whether the clause allows excess layers.
Can a small freight forwarding firm get $5M in Professional Liability?
Sometimes. It depends on revenue, shipment values, claims history and trading terms. Where $5M is available, it usually comes as a $1M or $2M primary plus excess. $5M usually needs a broker. Morrow can help you find it.
I have $2M Professional Liability as a freight forwarder. How do I get to $5M?
Request new quotes through Morrow, either a new $5M primary policy or excess layers above a primary. Morrow can ask carriers to keep your retroactive date and prior acts coverage (coverage for work done before the new policy started) where the market allows. Report anything that could become a claim to your current carrier before you switch.
What kind of claim could reach $5M for a freight forwarder?
A large lost-sales claim after a booking mistake could. Hypothetical example: a forwarder books dozens of containers on the wrong sailing, and the retailer claims a season of lost sales. Professional Liability generally excludes physical loss of or damage to cargo, which falls under separate cargo legal liability coverage.
Looking for $5M in Professional Liability? Morrow can help.
Send us the insurance requirement from your client contract and your current policy. Morrow can review both and request quotes for a $5M primary policy or a primary plus excess.
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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.