$2M Professional Liability (E&O) Insurance for ISO and Quality System Consultants

For ISO and quality system consultants: a $2M requirement means your contract asks you to carry a Professional Liability (E&O) policy with a $2M limit.

What does a $2M requirement mean for ISO and quality system consultants?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your advice cost a client money. A $2M clause may read like this:

• Per claim: the most the policy pays for one claim. Here, $2M.
• Aggregate: the most the policy pays for all claims in one policy year. Here, also $2M.
• Claims-made: Professional Liability almost always covers claims made while the policy is active, for work done on or after the retroactive date (the earliest work date the policy covers).

Who asks ISO and quality system consultants for $2M?

Many contracts for this work ask for $1M (see $1M for ISO and quality system consultants). $2M sometimes shows up when a failed audit or a missed defect could cost a client a lot:

• Aerospace and defense manufacturers hiring you for AS9100 work.
• Medical device companies building or fixing an ISO 13485 system.
• Automotive suppliers working toward IATF 16949.
• Large manufacturers sending you to audit their suppliers, often under a vendor MSA (master service agreement).
• Prime consulting firms that pass their $2M requirement down to you.

How is $2M built?

Most $2M requirements are met two ways: one primary policy (the policy that pays first) at $2M/$2M, or a $1M primary plus $1M of excess (a second policy that pays after the first is used up). Excess should follow form, meaning it uses the primary policy's terms. If a client asks for $3M instead, that is rarely found online. Morrow can help you find it (see $3M for ISO and quality system consultants).

ISO consultants are often written on Miscellaneous Professional Liability, a general form for advice work. If you also consult on ISO 27001 or set up software, Technology E&O may fit better (see Technology E&O vs Miscellaneous E&O).

What will underwriters ask for?

An underwriter is the insurer's person who decides whether to offer coverage. They often ask about:

• Which standards you work on (ISO 9001, 13485, AS9100, IATF 16949, 14001, 27001), and revenue share.
• Whether you only advise or also sign records or approve releases.
• Whether you audit suppliers for clients, and how audit reports are reviewed.
• Whether you promise clients they will pass certification. Policies often do not cover a promise of a result.
• Subcontract auditors you use, loss runs (a report of past claims) and your retroactive date.

What affects the cost?

• Type of work and client size. Medical device, aerospace and supplier audit work for large clients may cost more to insure than ISO 9001 training, because possible losses can be larger.
• How the $2M is built. A higher per claim limit and defense outside the limit often add cost.
• Controls. Written scopes, client sign-offs and a clear audit report review may help.
• Retention and claims history. The retention (what you pay on each claim before the policy pays, like a deductible) and past claims both affect price.

Frequently asked questions

How could a claim against an ISO consultant reach $2M?

A claim can reach $2M when one mistake spreads across a large client's operations. Two hypothetical examples: a supplier audit misses a process problem, and the client blames you for a parts recall. Or procedures you wrote leave out a required control. Whether either is covered depends on the policy's exclusions.

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

Usually not. A $1M/$2M policy pays up to $1M per claim, so it may not meet a clause asking for $2M per claim. If you carry $1M today, request new quotes through Morrow, either a new primary at $2M or a $1M primary plus follow-form excess. A commercial umbrella (extra liability cover that sits over other policies) almost never covers Professional Liability, so it will not fill the gap. When Morrow requests quotes, it can ask that your retroactive date and prior acts coverage (cover for past work) be kept where the market allows. Report any known incidents to your current carrier before you switch. See limits explained.

Can my client be added as additional insured on my Professional Liability?

Not automatically. An additional insured is another party the policy protects. Clients usually cannot be added on Professional Liability, but some policies allow a limited version, usually only for the client's liability arising from your services and sometimes for a fee. Others do not offer it. It depends on the carrier and the policy wording, so do not assume either way. Additional insured status on General Liability covers premises exposures, such as plant visits, not professional errors. If your contract requires it, send it to Morrow to review.

Do I need to keep coverage after the project ends?

Often, yes. Many clauses, like the sample above, ask you to keep coverage for a set time after the work ends, here three years. Check your contract for the exact period, and keep your retroactive date if you switch.

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.