$1M Professional Liability (E&O) Insurance for Independent Insurance Adjusters

For independent insurance adjusters, a $1M requirement means your Professional Liability policy pays up to $1M for one claim from your adjusting work.

What does a $1M requirement mean for independent insurance adjusters?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your professional work caused someone a financial loss. A typical clause in a carrier or vendor agreement looks like this:

• Each claim: the most the policy pays for any one claim. Here, $1M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, $2M. A $1M/$1M policy does not meet this clause. A $1M/$2M policy would meet this sample clause.
• Claims-made: almost all Professional Liability is claims-made. It 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).
• Proof: clients usually accept a certificate of insurance (a one-page document that shows your coverage). Additional insured status (an extra party covered under your policy) is usually not available on Professional Liability. If your agreement asks for it, tell Morrow so the requirement can be reviewed against the policy wording.

See Professional Liability (E&O) limits explained.

Who asks independent insurance adjusters for $1M?

A $1M requirement may come from:

• Insurance carriers that send overflow files to outside adjusters.
• Independent adjusting firms that place contract adjusters (independent contractors paid on a 1099 form), including on catastrophe deployments.
• Third-party administrators (TPAs, companies that handle claims for others) working for carriers or self-insured employers (employers that pay their own claims).
• Self-insured businesses and public entities that hire adjusters directly.

Complex commercial work may ask for more. A $2M limit doubles the most the policy pays for one claim. See $2M Professional Liability for independent adjusters and $3M Professional Liability for independent adjusters.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers stacked on top. Adjusters usually buy a policy written for claims adjusting. Some buy a general (miscellaneous) Professional Liability form instead. Some of those forms may exclude insurance adjusting, so check the wording. Public adjusters, who represent policyholders instead of insurers, may need a different program.

Check two things in the policy. First, it should list claims adjusting as a covered service. Second, look at how the contractual liability exclusion is worded. This term can remove coverage for promises you made in a contract. Most policies have one. It should still cover liability you would have had without the contract. Promises to indemnify the client (repay its losses) beyond that may not be covered. A commercial umbrella almost never covers Professional Liability, so it usually cannot fill a gap (see Does a commercial umbrella cover Professional Liability?).

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage. For adjusters, they usually ask:

• Lines you handle (property, auto, liability, workers' comp) and the share of revenue from each.
• Field versus desk work, catastrophe deployments (storm response assignments), and any appraisal or umpire work (helping settle disputes over the amount of a loss).
• Number of adjusters, whether they are employees or contractors, and how you confirm licensing.
• Settlement authority levels and your file review steps.
• Revenue, prior claims, anything that could become a claim, and your current retroactive date.

What affects the cost?

• Type of files. Complex commercial, liability or large-loss property work usually costs more than routine auto or residential files.
• Revenue and file volume. More files mean more chances for a mistake.
• Contractor use and controls. Review steps and licensing checks can help.
• Claims history. Prior claims can raise cost or narrow options.
• Aggregate, retention and terms. A higher aggregate usually costs more. A higher retention (the amount you pay on each claim before the policy pays) usually lowers the premium. Defense outside the limit often adds cost.

Frequently asked questions

Do I need $1M Professional Liability as an independent insurance adjuster?

Often yes, if your carrier, firm or TPA agreement says so. Match both numbers.

Is $1M/$1M enough if my agreement says $1M/$2M?

Usually not. A $1M/$1M policy does not meet a clause that asks for $1M/$2M, so check your agreement's exact wording. Request new quotes for a $1M/$2M policy through Morrow. Morrow can ask for quotes that 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, and report anything that could become a claim to your current carrier before it ends.

Does the adjusting firm's policy cover me as a contract adjuster?

Often not. Many firms require each contractor to carry their own policy. Ask the firm in writing.

What kind of claim can an independent insurance adjuster face with $1M Professional Liability?

A claim usually says your file work caused a loss. Here is a hypothetical. An adjuster misses hail damage on part of a roof. The policyholder disputes the claim, and the carrier says the adjuster's error caused extra costs. Many policies may pay defense costs on a covered claim, even when the claim has no merit, after any retention. This depends on the policy wording.

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.