$2M Professional Liability (E&O) Insurance for Loss Control Consultants

For loss control consultants asked by an insurer, industrial client or agency to carry $2M, the clause usually means $2M per claim and $2M aggregate, which a $1M/$2M policy often does not meet.

What does a $2M requirement mean for loss control consultants?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your survey, report or safety advice caused a client a financial loss. A $2M clause might read like this:

• Each claim and aggregate: the most the policy pays for one claim, and for all claims in one policy year. This clause asks for $2M on both.
• $1M/$2M is not $2M/$2M. A certificate of insurance (one-page proof of coverage) may show "$2M," often the aggregate only. See Professional Liability limits explained.
• 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).

Who asks loss control consultants for $2M?

$1M is the more common ask (see $1M for loss control consultants). $2M tends to show up when the client or the locations you visit are larger:

• Insurers and large brokers that hire outside firms for underwriting surveys, often under a vendor agreement.
• Manufacturers and distributors with several plants, hiring safety audits.
• Energy and utility companies using outside safety consultants at plants, pipelines or field sites.
• Construction companies on larger projects.
• Government agencies and groups of public bodies that share insurance (public entity pools), where the limit is often set in the RFP (request for proposal).

For larger requests, see $3M for loss control consultants.

How is $2M built?

Many loss control and safety consulting firms buy Miscellaneous Professional Liability, a form made for service businesses without their own policy type. If a licensed engineer on your team stamps designs or calculations, that work usually needs Architects and Engineers (A&E) Professional Liability.

At $2M, the limit is often one primary policy (the policy that pays first) written at $2M/$2M. Some clients accept a $1M primary policy plus a $1M excess layer (a second policy that pays after the first is used up). The excess should follow form, meaning it uses the primary policy's terms. Confirm with the client that this meets the clause. A commercial umbrella almost never covers 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. At $2M, expect questions like:

• Your services, such as underwriting surveys, risk assessments, OSHA compliance audits, training and incident investigation, and the share of revenue from each.
• How much work comes from insurers versus direct clients.
• The types of locations you survey, such as plants, warehouses, energy sites or construction sites.
• Whether you only make recommendations, or also certify compliance or act as an onsite safety manager.
• Staff credentials, how many field consultants you use (including independent contractors), and who reviews reports.
• Your contract terms, prior claims or known incidents, and your current policy with its retroactive date.

What affects the cost?

• Service mix. Onsite safety management and construction site work usually cost more to cover than surveys and training.
• Locations and industries. Heavy industrial sites can mean larger losses.
• Revenue and volume. More surveys and bigger contracts usually cost more.
• Claims history and controls. Prior claims can raise the price. Underwriters may also ask how your reports are reviewed.
• Retention and defense terms. A higher retention (the amount you pay on each claim before the policy pays, like a deductible) usually lowers the premium. Many Professional Liability policies pay defense costs inside the limit, so legal fees can reduce the $2M available. Defense costs outside the limit usually cost more.

Frequently asked questions

Do I need $2M Professional Liability as a loss control consultant?

You need it if your contract says so, and insurers and large industrial clients often do. Here is a hypothetical example. An insurer writes a warehouse based on your survey, which said the sprinklers were in good order. A fire later spreads, and the insurer claims your report missed impaired valves. Defense costs, repairs and lost income add up quickly, which is why some clients ask for $2M. Whether a policy responds depends on how it treats property damage (see the note above).

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

Usually not if the clause says $2M per claim. It is enough only if the clause asks for $1M per claim. If it asks for $2M per claim, you need $2M/$2M. Send Morrow the clause and your policy to request new quotes, keeping prior acts coverage (coverage for work done before the new policy starts) where the market allows. Report any known incidents to your current carrier before switching.

Does Professional Liability cover the indemnity clause in an insurer's vendor agreement?

Often only in part. An indemnity clause is a promise to pay for the client's losses if something goes wrong. Many Professional Liability policies exclude liability you take on by contract beyond what you would owe anyway.

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.