$1M Professional Liability (E&O) Insurance for Premium Auditors

If a carrier or audit firm asks you, as a premium auditor, for $1M in Professional Liability (E&O), your policy needs a $1M limit for each claim. The agreement may also set a yearly total.

What does a $1M requirement mean for premium auditors?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work caused someone a financial loss. For a premium auditor, that usually means an audit a carrier or policyholder says was wrong. A clause in an audit services agreement might read:

• Each claim: the most the policy pays for one claim. Here, $1M.
• Aggregate: the yearly cap for all claims. Here, $2M. A $1M/$1M policy falls short.
• Claims-made: the policy covers claims made and reported while it is active, for work done on or after the retroactive date (the earliest work date the policy covers).
• Services described: the policy should cover premium audit work by name or by a clear description. A vague description can invite a coverage dispute.

Who asks premium auditors for $1M?

• Insurance carriers that hire audit firms to audit workers' compensation, general liability or auto policies.
• Audit management firms that send field and virtual audits to independent auditors.
• Groups of businesses that insure their own risks together (self-insured groups and pools) and audit member payrolls.
• Third-party administrators (outside claims handlers for insurers) that add premium audit or loss control work.

$1M is a common ask, but agreements vary. Some ask for $2M, so check your own agreement. See $2M Professional Liability for premium auditors to compare. For a wider view of limits, see Professional Liability limits explained.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no extra layers on top. Premium auditors often buy a Miscellaneous Professional Liability form, made for service businesses without their own policy type. If you also adjust claims or sell insurance, tell the underwriter, because adjusters and agents often buy dedicated E&O programs.

A commercial umbrella almost never covers Professional Liability (see Does a commercial umbrella cover Professional Liability?). Additional insured status (listing a client on your policy) is usually not available on Professional Liability. When a carrier does offer it, it is often narrower than on general liability, such as limited to the client's liability arising from your services. If your agreement asks for it, send Morrow the wording to review.

Some audit firms also ask for a certificate of insurance, a one-page summary showing you carry the coverage.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. For premium auditors, they often ask:

• Which audits you do (field, virtual, phone or mail) and which lines (workers' compensation, general liability, auto).
• Revenue, audit volume, and how much comes from your largest client.
• Other services, such as loss control surveys, claims adjusting or payroll review.
• Whether you use independent subcontract auditors, and whether they carry their own Professional Liability.
• Your review process before reports go out, and how you store policyholder payroll records.
• Prior claims, anything that could become a claim, and your current policy and retroactive date.

What affects the cost?

• Services mix. Adjusting or consulting work can change the rating.
• Revenue and audit volume. More audits mean more chances for error.
• Subcontractors. Outside auditors without their own coverage can raise the price.
• Claims history. Prior claims can raise the price or narrow options.
• Aggregate, retention and defense terms. $1M/$2M usually costs more than $1M/$1M. A higher retention (the amount you pay on each claim before the policy pays, like a deductible) usually lowers the premium. Defense terms can also change the price. See what drives Professional Liability cost.

Frequently asked questions

Do I need $1M Professional Liability as a premium auditor?

Often, if your audit agreement says so. $1M is a common ask in this field, but the agreement sets the number, so read its insurance section.

Is $1M/$1M enough if my audit agreement says $1M/$2M?

No, a $1M/$1M policy does not meet a $1M/$2M clause. Morrow can request quotes for a $1M/$2M policy and ask for your retroactive date and prior acts coverage (coverage for work done before the new policy starts) to carry over where the market allows. Keep your current policy until the new one starts. Report anything that could become a claim to your current carrier before that policy ends.

What happens if I stop doing audits or retire?

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 audits. It usually must be bought soon after the policy ends.

What claims could a premium auditor face?

Here are hypothetical examples. A carrier says an auditor put a roofing crew's payroll in a lower-rated class, so the carrier lost premium. A policyholder says an auditor counted payroll for insured subcontractors, and the business paid too much. An audit firm says late reports hurt its client contract. The policy may pay your defense on a covered claim.

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.