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

A $1M Professional Liability (E&O) requirement means your policy pays up to $1M for a covered claim, so nonprofit consultants should match both the per-claim and aggregate numbers to the contract.

What does a $1M requirement mean for nonprofit consultants?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your advice or services caused a client a financial loss. A nonprofit consulting agreement clause often reads 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, also $1M. A $1M/$1M policy could meet the limit part of this sample clause.
• Claims-made: the policy covers claims made and reported while it is active, for work on or after the retroactive date (the earliest date of work the policy covers). The clause also asks for two years of coverage after the work ends, and your own agreement's wording controls.

If a clause asked for a $2M aggregate, you would need a policy with at least that aggregate. Some carriers offer $1M/$2M. Others only write the aggregate equal to the per-claim limit, so you may need $2M/$2M. See Professional Liability (E&O) limits explained.

Who asks nonprofit consultants for $1M?

You will often see $1M from:

• Nonprofits hiring fundraising help or a capital campaign (a large fundraising drive).
• Private foundations. A nonprofit may pass a funder's insurance terms down to the consultants it hires.
• Nonprofits spending government grant money, where the agency's terms pass down to the people it hires.
• Fiscal sponsors (groups that hold funds for smaller nonprofits) and nonprofit networks hiring for member groups.

Some large institutions and funders ask for $2M, which needs a higher limit than $1M (see $2M Professional Liability for nonprofit consultants). Small community groups may ask for none.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first). Excess layers (extra policies on top) are not usually needed. Nonprofit consultants usually buy Miscellaneous Professional Liability, a form for advice firms that have no policy type of their own. If a client later asks for $2M, that may be a higher primary limit or primary plus follow-form excess (an extra policy that follows the primary's terms), so confirm with the client which the clause allows.

A commercial umbrella almost never covers Professional Liability (see Does a commercial umbrella cover Professional Liability?). Clients usually cannot be added as additional insured (listed on your policy) either. A certificate of insurance (a one-page summary of your coverage) is what most clients accept instead.

What will underwriters ask for?

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

• Which services you provide (such as fundraising counsel, grant writing or board training), and the share of revenue from each.
• Whether you only advise, or also ask donors for gifts or handle donated funds.
• Whether you do financial work, such as budgets or interim finance roles.
• Your typical project size, and any capital campaign work or feasibility studies (tests of whether a fundraising goal is realistic).
• Whether your written agreement promises any fundraising result.
• Revenue, prior claims, known incidents and your retroactive date.

What affects the cost?

• Service mix. Financial and executive search work usually costs more to insure than board training.
• Revenue and project size. Bigger campaigns mean bigger losses.
• Contract terms. Promised results or broad indemnity (a promise to cover the client's losses) can raise risk.
• Claims history. Prior claims can raise the price or narrow options.
• Aggregate and retention. A higher aggregate, where offered, usually costs more than $1M/$1M. A higher retention (the amount you pay on each claim, like a deductible) usually lowers the premium.

For more, see what drives Professional Liability cost.

Frequently asked questions

What kinds of claims could a nonprofit consultant face?

Claims usually say your advice or work caused a financial loss. Hypothetical examples: A grant application you prepared goes in after the deadline, and the client loses the funding. A feasibility study sets a campaign goal the client later calls far too high, and it wants its fees back. Fee refunds are often excluded, but the policy usually pays your defense on a covered claim.

Does Professional Liability cover a campaign that misses its goal?

Not always. Many policies exclude promised results, so a claim over a guaranteed dollar amount may not be covered. A contractual liability exclusion (a policy term that removes coverage for duties you take on only by contract) can also limit coverage.

Is $1M/$1M enough if my nonprofit contract asks for a $2M aggregate?

No, not if the clause asks for a $2M aggregate. Request new quotes for a policy with at least that aggregate. Some carriers offer $1M/$2M, and others may require $2M/$2M. Morrow can request quotes for you and ask carriers to keep your retroactive date and prior acts coverage (coverage for work you did before the new policy starts) where the market allows. Keep your current policy in force until the new one starts, and report anything that could become a claim to your current carrier first.

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.