$1M Professional Liability (E&O) Insurance for Legal Support and Document Service Firms

For paralegals, court reporters, e-discovery and records firms: a $1M requirement means your policy pays up to $1M per covered claim. Here is how to check yours.

What does a $1M requirement mean for legal support firms?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your work caused a client a financial loss. Think of a missed filing deadline or a transcript error. A typical clause looks like this:

• Per 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 would not meet this clause. A $1M/$2M policy may meet this clause, and may also meet a $1M/$1M clause. Check the rest of your contract too, such as how long coverage must stay in force.
• Claims-made: Professional Liability almost always 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).
• "Covering the services": the policy should list the work you really do. Work left off the application may not be covered.

For more on how limits are written, see Professional Liability limits explained.

Who asks legal support firms for $1M?

You may see $1M from:

• Law firms hiring contract paralegals, court reporters or litigation support vendors.
• Corporate legal departments bringing in e-discovery, document review or contract support help.
• Government agencies buying court reporting, transcription or records services.
• Hospitals, insurers and banks hiring records management or record retrieval companies.

Large data projects or government contracts may ask for $2M instead. The difference is more room per claim, which matters when defense costs use up the limit. See $2M Professional Liability for legal support firms. Working alone? See $1M Professional Liability for independent paralegals.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers (extra policies stacked above it). Many firms in this group buy Miscellaneous Professional Liability, a form for service businesses with no policy type of their own. Attorneys need lawyers professional liability instead.

E-discovery and records vendors that host client data often add Technology E&O (coverage for errors in technology services) and Cyber (coverage for data breach and system costs).

A commercial umbrella almost never covers Professional Liability. Clients usually cannot be added as an additional insured (a party listed on your policy for protection under it). Some policies may allow it in a limited form, usually covering only the client's liability arising from your work, so check before you agree to a contract that requires it. Many clients accept a certificate of insurance, a one-page proof that you carry the coverage.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. At $1M, they usually ask for:

• Each service you offer, such as court reporting, e-discovery or records storage, with a rough share of revenue. Say if you offer any immigration-related help, because it can change the terms offered.
• Past and projected revenue, your largest clients and typical job size.
• How you track deadlines, check work and use subcontractors.
• What client data you handle, how you store it, and your security steps.
• Prior claims, anything that could become a claim, and your current policy and retroactive date.

What affects the cost?

• Type of work. E-discovery may cost more than transcription or supervised paralegal work. Policies for non-attorneys often exclude the unauthorized practice of law (UPL, services only an attorney may give). Check your policy wording before you offer anything that looks like legal advice.
• Who you serve. Working directly for the public, without an attorney in between, often raises risk.
• Data volume. Hosting large amounts of sensitive records can mean bigger losses.
• Claims history. Prior claims can raise the price or narrow options.
• Aggregate and retention. $1M/$2M usually costs more than $1M/$1M. A higher retention (the amount you pay on each claim before the policy pays, similar to a deductible) usually lowers the premium.

Frequently asked questions

Does a law firm's malpractice policy cover me as an outside legal support vendor with a $1M requirement?

Usually not if you are an outside vendor or contractor. A firm's policy is written for the firm and its staff, but the policy wording controls, so do not assume you are covered.

Do I need Cyber if I already have $1M Professional Liability for e-discovery or records work?

Often, if you store or process client files. Many Professional Liability policies limit or exclude data breach costs, such as notifying people and restoring systems. Cyber is built for those costs.

My policy is $1M/$1M but the contract asks for $1M/$2M. What now?

Ask Morrow to request quotes for a new $1M/$2M policy. Morrow can ask carriers to 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 in force until the new one starts so there is no gap. Report anything that could become a claim to your current carrier 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.