$1M Professional Liability (E&O) Insurance for Loss Control Consultants

For loss control consultants, a $1M Professional Liability (E&O) requirement means your policy must pay up to $1M for a covered claim that your survey or risk report was wrong.

What does a $1M requirement mean for loss control consultants?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your professional work caused someone a loss. For a loss control consultant, that work is usually a site survey, a risk report or safety recommendations. A clause in an insurer's vendor agreement might read:

• Each claim: the most the policy pays for one claim. Here, $1M.
• Aggregate: the yearly total for all claims. Here, $2M. A $1M/$1M policy would fall short. A $1M/$2M policy meets either wording.
• Claims-made: Professional Liability is almost always written this way. The policy covers claims made and reported while it is active, for work on or after the retroactive date (the earliest date of work it covers). See claims-made vs. occurrence.
• Extended reporting period: extra time, often called "tail," to report claims about past work after a policy ends.

Who asks loss control consultants for $1M?

Contracts for this work often ask for $1M. You may see it from:

• Insurance carriers that send outside consultants to survey the businesses they insure.
• Program administrators and brokers that outsource underwriting surveys or risk reviews.
• Manufacturers and warehouses hiring property, fire or safety risk assessments.
• Construction and energy companies hiring site safety reviews or safety program audits.
• Public entities and risk pools hiring loss control services for their members.

Larger accounts, national programs and energy work may ask for $2M, because one missed hazard at a large site can lead to a larger loss. If a contract asks for $2M, a $1M policy will fall short. See $2M Professional Liability for loss control consultants.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first). Loss control firms often use a Miscellaneous Professional Liability form, made for service businesses without their own policy type. If you are a licensed engineer who signs engineering reports or designs, you may need an Architects and Engineers (A&E) Professional Liability form instead.

A commercial umbrella almost never covers Professional Liability (see does an umbrella cover Professional Liability?). Clients also usually cannot be added as an additional insured (a party that gets coverage under your policy) on Professional Liability.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. Expect questions like:

• Your services: underwriting surveys, property or fire risk reviews, safety program work, OSHA (workplace safety rules) compliance reviews, fleet safety or valuations.
• How much revenue comes from insurers versus businesses that hire you directly.
• The industries you survey, such as heavy manufacturing, chemical, construction, apartment buildings or energy.
• Whether you only report conditions, or also recommend fixes, design programs or certify compliance.
• Staff credentials, your report review process and any subcontracted surveyors.
• Written contracts and report disclaimers, prior claims, and your current policy and retroactive date.

What affects the cost?

• Service mix. Recommendations, program design and valuations usually carry more risk than basic condition surveys.
• Industries served. Surveys of high-hazard sites usually cost more to insure than offices or retail.
• Revenue and subcontractors. More surveys and more outside surveyors mean more chances for a claim.
• Claims history. Prior claims can raise the price or narrow your options.
• Policy terms. A $2M aggregate, a lower retention (the amount you pay on each claim before the policy pays) or defense outside the limit usually add cost.

Frequently asked questions

What kind of claim could a loss control consultant face?

A claim usually says your survey or report missed or misstated a hazard. Here are two hypothetical examples. A plant owner follows your fire safety recommendations, then has a fire and says your report missed a key hazard. Or an insurer says your survey misstated a building's construction, so it priced the risk wrong and paid a large claim. On a covered claim, the policy usually pays your defense, subject to your retention and policy terms.

Does my $1M limit include legal defense?

Often, yes. Many Professional Liability policies pay defense costs inside the limit, so legal bills reduce what is left to pay a settlement.

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

No, a $1M/$1M policy has half the yearly total the clause asks for. Morrow can request quotes for a $1M/$2M policy 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 that policy ends.

Does my policy cover the field surveyors I subcontract?

Maybe, it depends on the wording. Many policies cover work done on your behalf, but some limit coverage for independent contractors. Ask surveyors to carry their own coverage, and list them on your application.

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.