$2M Professional Liability (E&O) Insurance for Independent Insurance Adjusters

If you are an independent adjuster and your carrier, TPA or firm requires $2M, a $2M/$2M Professional Liability (E&O) policy usually meets the clause. A $1M/$2M policy usually does not.

What does a $2M requirement mean for independent insurance adjusters?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your adjusting work caused someone a financial loss. A $2M clause might read like this:

• Per claim: the most the policy pays for one claim. Here, $2M.
• Aggregate: the most it pays for all claims in one policy year. Here, also $2M.
• The common mix-up: $1M/$2M and $2M/$2M look alike on paper. Only the second pays $2M on one claim. See Professional Liability limits explained.
• Claims-made: almost all Professional Liability pays only for claims made while the policy is active, and only for work after the retroactive date. That is why the clause asks you to keep coverage after your last file closes.

Who asks independent insurance adjusters for $2M?

For many adjusters, $1M is a common ask (see $1M for independent adjusters). $2M usually comes up when files are bigger or the client carries more risk:

• Carriers sending commercial property, large-loss or complex liability files to outside adjusters.
• National adjusting firms that pass a carrier's higher limit down to their 1099 adjusters.
• Third-party administrators (TPAs, companies that handle claims for insurers or self-insured groups).
• Some self-insured employers, public entities and risk pools that hire adjusters directly.

Some accounts ask for more (see $3M for independent adjusters).

How is $2M built?

Most often, $2M is one primary policy (the policy that pays first) at $2M/$2M. Sometimes it is a $1M primary plus a $1M excess layer, an extra policy that pays once the primary is used up. Excess should follow form, meaning it uses the primary's terms. Confirm with the client that primary plus follow-form excess meets the clause. A commercial umbrella almost never covers Professional Liability (see Does a commercial umbrella cover Professional Liability?).

Adjusters usually buy a policy written for adjusting services, sometimes called Miscellaneous Professional Liability (a general form for service firms). Check that it names every service you perform. Public adjusters, who work for policyholders, usually need a different program. Clients usually cannot be added as an additional insured (a party listed on your policy). Many clients accept a certificate of insurance (a one-page proof of your policy) instead, but check your contract.

What will underwriters ask for?

An underwriter decides whether to offer coverage and on what terms. At $2M, expect questions about file size:

• Lines you handle and revenue from each, including large-loss and commercial work.
• Your largest recent files, typical reserves (money set aside to pay a claim) and settlement authority (power to approve payments).
• Your clients, and whether you ever act as a public adjuster.
• Employees versus 1099 adjusters, and how you verify adjuster licenses.
• File review, supervisor sign-off and how you store evidence.
• Loss runs (a report of past claims), possible claims, and your current policy and retroactive date.

What affects the cost?

• Size and type of files. Large commercial and liability files may cost more to insure than routine work.
• Authority and volume. Higher authority and more files mean more chances for error.
• Controls. Written review steps and adjuster license verification for 1099 or subcontract adjusters may help.
• Claims history. Prior claims may raise the price or cap the limit offered.
• Structure and terms. How the limit is split between a primary policy and excess can change cost. A higher retention (what you pay on each claim before the policy pays) may lower premium. Defense costs outside the limit may add cost.

Frequently asked questions

I'm an independent adjuster with $1M today. How do I get $2M Professional Liability?

Send Morrow your current policy and the insurance section of your agreement so Morrow can request quotes for a $2M policy. Keep your current policy until the new one starts. Report anything that could become a claim to your current carrier before it ends.

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

Usually not. A $1M/$2M policy pays at most $1M on one claim, so it may not meet a clause that asks for $2M per claim. A $2M/$2M policy usually does. Check whether the clause says per claim, in the aggregate or both.

Does the indemnity clause in my agreement matter?

Yes. Many carrier and TPA agreements ask you to indemnify (repay) the client for losses tied to your work. Some policies do not cover liability you take on only by signing a contract (a contractual liability exclusion), so read that wording closely. Send the agreement to Morrow with your policy and Morrow can review both.

Do I still need $2M Professional Liability as an adjuster if I stop taking files?

Often yes for a while, because a claim first made after your policy ends is generally not covered. An extended reporting period (a "tail") adds time to report claims on old files.

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.