Do 1099 Independent Contractors Need Their Own Professional Liability (E&O)?

Yes, in many cases, clients and staffing firms ask 1099 contractors to carry their own Professional Liability (E&O). This guide is for contractors who just got that request.

What does a Professional Liability requirement mean for a 1099 contractor?

Professional Liability (E&O, for Errors & Omissions) can help pay for claims that allege your work or advice caused a client to lose money. A contractor agreement often says something like this:

• "At its own expense": you buy the policy in your own name or your business's name.
• "Per claim": the most the policy pays for one claim. "Aggregate": the most it pays for all claims in a policy year.
• "Certificate of insurance": a one-page summary of your coverage that you send as proof.

Who asks 1099 contractors for Professional Liability?

• Staffing and consulting firms that place 1099 contractors with clients
• Large companies with vendor onboarding rules, often set in a master services agreement (the main contract that sets terms for ongoing work)
• Tech, finance, healthcare and government clients, and prime contractors (the main company that hires others on a public project)

Does my client's policy cover me as a 1099 contractor?

Usually not. A company's Professional Liability policy protects that company and, in many cases, its employees. A 1099 contractor is usually not an employee, so you are often not covered by it. Even if it does reach some contractors, you would share one limit with the client and its staff.

Many agreements include an indemnity clause, a promise to pay the client's losses caused by your work. Your policy may not cover every promise you make in a contract.

How do 1099 contractors meet a Professional Liability requirement?

Many solo contractors buy one primary policy (the main policy) at the required limit. A $1M limit is the most common requirement, including from many staffing firms. Some larger enterprise, finance, healthcare and government-related clients ask for $2M or more, which leaves more room if one claim is large. See $2M Professional Liability and Professional Liability for solo freelancers.

The form should fit your work:

• Consultants: Miscellaneous Professional Liability, a general form for advice and services.
• IT, software and data work: Technology E&O, often paired with Cyber coverage for data breaches. See Technology E&O vs Miscellaneous E&O.
• Nurses and clinicians: healthcare professional liability (medical malpractice), written for your license type.
• Engineers and architects: A&E (architects and engineers) Professional Liability.

Professional Liability is almost always claims-made. It covers claims made while the policy is active, for work done on or after the retroactive date (the earliest work date the policy covers). See claims-made vs occurrence.

Already have a policy but need a higher limit? Send Morrow your current policy. We can request new quotes, usually for a new primary policy at that limit.

Excess layers (extra policies on top of your primary) are sometimes an option. They should follow form, meaning they match the primary's terms. Where the market allows, keep your retroactive date and prior acts coverage (coverage for past work). Report any known incident to your current carrier before you switch.

What will underwriters ask for?

Underwriters (the insurance company staff who review and price your application) usually ask for:

• A description of your services and the industries you work in
• Your revenue (or expected revenue if you are new)
• Your training, licenses and experience
• How your written contracts handle risk, such as caps on what you owe a client (limitation of liability) and promises to cover a client's losses (indemnity)
• Past claims or known incidents, plus your current policy if you have one

What affects the cost?

• The type of work you do and its risk
• Your revenue and your clients' project sizes
• The limit you need
• Your retention, the amount you pay on a claim before the policy pays, similar to a deductible
• Your claims history and time in business

Frequently asked questions

Can my client be added as an additional insured on my policy?

Usually not. An additional insured is another party named as covered on your policy. Some policies may name a client in a limited way, but many do not, and it usually reaches only the client's liability from your services. It is not the same as General Liability additional insured status. A client's own claim against you is normally a third-party claim your policy can cover, subject to exclusions. Naming the client as an insured can trigger the insured versus insured exclusion, which can bar claims between two parties on one policy. Send Morrow the contract requirement and we can review it.

I work through an LLC. Does the LLC protect me from a client claim?

Not fully. An LLC may help separate business and personal assets, but it does not pay claims. A client can still bring a claim against your business, and sometimes against you personally. Ask a lawyer about your situation.

What happens to my coverage when I stop contracting?

A claim made after your policy ends may not be covered, because coverage is claims-made. You can often buy tail coverage, extra time to report claims for past work.

Do I need a separate policy for each client?

Usually not. One policy can often cover work for all of your clients, if its limits and terms meet each agreement. Claims from all clients share one aggregate limit.

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.