$2M Professional Liability (E&O) Insurance for Owner's Representatives

For owner's representatives whose developer, REIT or lender requires $2M, Professional Liability (E&O) usually means a policy that pays up to $2M per claim and $2M in total for the year.

What does a $2M requirement mean for owner's representatives?

Professional Liability (E&O, short for Errors and Omissions) can help when a client says your advice cost them money. In an owner's rep agreement, a $2M clause might read like this:

• Per claim and aggregate: the most the policy pays for one claim, and for all claims in a policy year.
• 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). See how the retroactive date works.
• Tail period: the clause may require coverage to stay in place for years after the project ends. Check how long.

Who asks owner's representatives for $2M?

Smaller renovations and fit-outs often stay at $1M (see $1M for owner's representatives). $2M tends to come from:

• Developers on ground-up multifamily, mixed-use, lab or hotel projects.
• REITs (companies that own income-producing property) and institutional owners running capital programs across a portfolio.
• Construction lenders, whose loan terms often set insurance requirements for the borrower's consultants.
• Universities, hospitals and public owners, where the limit is often written into the bid request.

How is $2M built?

At $2M, the limit is usually one primary policy (the policy that pays first) at $2M/$2M. Sometimes it is a $1M primary plus a $1M excess layer (a second policy that pays after the first is used up) that follows form, meaning it uses the primary's terms. If the clause does not say whether layers can stack, confirm with the client that primary plus follow-form excess meets it.

Owner's reps often buy a construction or project management professional form. If your firm has licensed architects or engineers who design or stamp work, you may need A&E (architects and engineers) professional liability instead. These forms at $2M are often placed through a broker. Morrow can help you find them.

A commercial umbrella almost never covers Professional Liability (see does an umbrella cover Professional Liability?). Owners and lenders usually cannot be named as an additional insured (a party with direct rights under your policy) on Professional Liability. A certificate of insurance (a one-page proof of coverage) does not give those rights either, so check what your contract accepts. Many policies pay defense costs inside the limit, so legal bills can shrink the $2M.

Large ground-up projects or lender terms may ask for more than $2M. See $3M for owner's representatives. Limits of $3M and above are rarely found online and usually need a broker. Morrow can help you find them.

What will underwriters ask for?

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

• Your services and revenue from each: development management, budgeting, design and bid management, payment request review, scheduling and closeout.
• Whether you sign contracts, approve change orders (written changes to price or scope) or release payments in the owner's name, and who has final sign-off.
• The construction value of your largest projects, your fee on each, and project types such as condos, healthcare or labs.
• Your standard agreement: the level of care you promise, who pays if something goes wrong (the indemnity clause) and any limit on your liability.
• Subconsultants (outside firms you hire to help on a project), prior claims, loss runs (a report of past claims), and your current policy with its retroactive date.

What affects the cost?

• Project size and type. Bigger budgets and condos, healthcare or labs usually cost more than office fit-outs.
• Authority over money. Approving payments and change orders for the owner may raise the price.
• Mix of services. Design, at-risk or self-performed work usually adds exposure.
• Claims history and contracts. Clean history and clear written scopes usually help.
• Limit, retention and defense terms. A higher limit usually costs more. A higher retention (the amount you pay per claim, like a deductible) usually lowers premium. Defense outside the limit usually adds cost.

Frequently asked questions

I carry $1M as an owner's representative. How do I get $2M Professional Liability?

Request new quotes for a $2M policy through Morrow. Morrow can request quotes that keep your retroactive date and prior acts coverage (cover for work done before the policy starts) where the market allows. Report any known incident to your current carrier before you switch.

Does the contractor's insurance cover me as an owner's representative?

Usually not. The contractor's general liability policy (it pays for injury and property damage claims) usually does not cover your advice to the owner. You may be named on the contractor's general liability, but that does not replace your own Professional Liability.

How long do I need to keep Professional Liability after a project ends?

Follow your agreement, which often asks for several years after completion. Renew with the same retroactive date or, if you close, buy a tail (an extended reporting period for 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.