$1M Professional Liability (E&O) Insurance for IT Staffing Firms

For IT staffing firms with a client contract that requires $1M: Professional Liability (E&O) pays up to $1M toward a covered claim that your staffing or project work caused a client loss.

What does a $1M requirement mean for IT staffing firms?

E&O (Errors and Omissions) covers claims that a mistake in your services cost a client money. For an IT staffing firm, that can mean a contractor who lacked the skills you described. A typical clause looks like this:

• Per claim: the most the policy pays for any one claim. Here, $1M.
• Aggregate: the yearly total for all claims. A $1M/$1M policy does not meet a clause that asks for a $2M aggregate. A $1M/$2M policy usually meets a clause that asks for either $1M/$1M or $1M/$2M.
• Claims-made: the policy covers claims first made while it is active, for work done after the retroactive date (the earliest work date covered). Professional Liability is almost always written this way.

Who asks IT staffing firms for $1M?

Common sources of $1M requirements:

• Employers hiring contract developers or help desk staff through your firm.
• Managed service programs (MSPs, where a third party runs a client's staffing vendors). They often pass the client's insurance rules down to you.
• Larger IT firms that hire you as a subcontractor.
• Hospitals and health systems.
• State and local agencies, and some federal solicitations or prime contractors.

A $2M limit doubles the most one policy pays on a claim. Banks, large enterprises and big vendor programs often ask for it. See $2M for IT staffing firms.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first). Excess layers (extra policies that sit on top) are rarely needed at this size. Firms that only place contractors often buy Miscellaneous Professional Liability, a form made for service businesses. Firms that also deliver project work under a statement of work (SOW, a written scope for a project) usually need Technology E&O instead. See Technology E&O vs. Miscellaneous E&O.

When you review a policy, check that it names the services you really sell and does not exclude work done by contractors you place. Check the retroactive date too. Also look for a contractual liability exclusion (a carve-out for promises you made in a contract). Clients usually are not added as an additional insured (a client named on your policy as covered) automatically. Some policies can add one for liability arising from your services, so ask when you request quotes. A certificate of insurance (a one-page proof of your coverage) does not make a client an additional insured.

What will underwriters ask for?

An underwriter (the insurer's person who decides whether to offer coverage) usually asks an IT staffing firm about:

• Your revenue split between contract staffing, contract-to-hire, direct hire and SOW or project work.
• The roles you place, such as developers, security engineers or help desk staff.
• Whether placed workers are W-2 employees, 1099 contractors or corp-to-corp subcontractors (contractors who work through their own companies).
• Who directs the work, and whether contractors can reach client systems or data.
• Your screening steps, such as background checks and skills testing.
• Your client agreements, prior claims, and your current policy and retroactive date.

What affects the cost?

• Staffing vs. project work. SOW work usually costs more to insure than staffing only.
• Roles and data access. Roles with wide system access usually carry more risk than help desk roles.
• Revenue and headcount. More contractors on assignment mean more chances for a claim.
• Claims history. Prior claims can raise the price or narrow options.
• Aggregate, retention and defense terms. $1M/$2M usually costs more than $1M/$1M. A higher retention (what you pay on each claim before the policy pays) usually lowers the premium.

Frequently asked questions

Do I need $1M Professional Liability as an IT staffing firm?

Often yes, if your client contract lists a Professional Liability requirement; check the insurance section for the limit. Two hypothetical examples: a firm places a database administrator whose resume listed skills he did not have, a backup fails, and the client says the lost data cost it money. Or a SOW project slips by months, and the client says it lost sales. Even if you did nothing wrong, a covered claim may include help with defense costs, depending on the policy wording.

Do I need Cyber coverage too as an IT staffing firm?

It depends on your contract, but many IT clients ask for Cyber coverage (insurance for data breaches and system attacks) because contractors work inside their systems. Check your agreement's insurance section. Some policies combine the two. See Professional Liability vs. Cyber.

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

Usually not, because a $1M/$1M policy does not meet a clause that asks for a $2M aggregate. 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. Have the new policy start by the date the contract requires, and keep your current policy in force until then. Report anything that could become a claim to your current insurer before that policy ends.

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.