$1M Professional Liability (E&O) Insurance for Owner's Representatives

For owner's representatives whose owner, developer or lender wants $1M in Professional Liability: it is the most the policy pays for one claim, and the contract may also set a yearly total.

What does a $1M requirement mean for owner's representatives?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your advice or services caused a client a financial loss. A typical clause looks like this:

• Each 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 does not meet this clause.
• Claims-made: the policy covers claims made and reported while it is active, for work done on or after the retroactive date (the earliest date of work the policy covers). See claims-made vs occurrence.
• After completion: problems often show up after move-in, so the clause asks you to keep coverage for years.

Who asks owner's representatives for $1M?

You will often see $1M from:

• Private owners and family investment companies (family offices) running a first renovation or a single new building.
• Smaller private property owners and investment companies hiring you for tenant build-outs (interior work for a new tenant), roof or HVAC replacements and similar upgrades.
• Developers on small and mid-sized projects, such as new buildings or conversions.
• Some construction lenders and condo associations managing repairs to outer walls, garages or roofs.

Larger or institutional owners, including real estate investment trusts (REITs), and their lenders often ask for more. At $2M, the limit for one claim doubles, and some clauses ask for $2M/$2M. See $2M Professional Liability for owner's representatives. If you also manage construction directly, see $1M Professional Liability for construction managers.

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). Owner's representatives who only advise often buy a form written for construction or project management services. If you hire trades directly or do some of the work yourself, you may need a contractors professional liability form. If your staff seal drawings, you may need A&E (architects and engineers) coverage.

Morrow can review your contract and current policy for common problems. Examples: a form that excludes construction-related services, a contractual liability exclusion (no cover for liability you take on by contract) that may clash with an indemnity clause (where you agree to cover the owner's losses), or a retroactive date that leaves out past projects.

A commercial umbrella almost never covers Professional Liability (see does an umbrella cover Professional Liability?). Adding an owner as an additional insured (a party listed as covered) on Professional Liability is often not available. When it is, it is usually narrow, limited to the owner's liability arising from your services. If your contract asks for it, confirm before you buy. A certificate of insurance (a one-page proof of coverage) shows you have a policy but usually gives the owner no rights under it.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. For owner's representatives, they usually ask about:

• Your services, such as budgeting, scheduling, contractor selection, review of payment requests and change orders (approved changes to the work and price), and closeout.
• Whether you sign contracts, approve payments or handle funds for the owner.
• Whether you hold trade contracts, self-perform work, or provide design services.
• Project types, such as offices, retail, multifamily, condos, healthcare or labs.
• Your fees, largest projects, prior or possible claims, and your current policy and retroactive date.

What affects the cost?

• Scope of authority. Approving payments or signing for the owner usually adds exposure compared with advice alone.
• Project mix. Condos, healthcare and labs usually cost more than simple office build-outs.
• Fees, project size and claims history. Larger projects and prior claims can raise the price or narrow your options.
• Policy terms. A higher aggregate usually costs more. A higher retention (the amount you pay per claim before the policy pays, like a deductible) usually lowers the premium.

Frequently asked questions

Do I need $1M Professional Liability as an owner's representative?

Often yes, if your contract or the owner's lender asks for it, so read the insurance section. Hypothetical example: you recommend paying a contractor for work not done, and the contractor walks off the job. The policy usually pays your defense on a covered claim.

Does general liability cover an owner's representative's mistakes?

Usually not. General liability covers bodily injury and property damage, not a financial loss caused by your advice or project management.

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

No, because the yearly total is lower than the clause asks. Request new quotes for a $1M/$2M policy through Morrow. Morrow can ask for your retroactive date to carry over (prior acts coverage), 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 first.

Do I need coverage after the project ends or my firm closes?

Often yes, if your contract asks for it. A claim first made after your policy ends is generally not covered. An extended reporting period (a "tail") gives you extra time to report claims about past work.

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.