$2M Professional Liability (E&O) Insurance for Premium Auditors

For premium auditors, a $2M requirement means your Professional Liability (E&O) policy must pay up to $2M per claim, and a $1M/$2M policy often falls short.

What does a $2M requirement mean for premium auditors?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your work caused someone a financial loss. A $2M clause might read like this:

• Per claim: the most the policy pays for one claim. Here, $2M.
• Aggregate: the most it pays for all claims in one policy year. Here, also $2M.
• Certificate check: the certificate of insurance should show the per claim limit your agreement asks for. See Professional Liability limits explained.
• Claims-made: almost all Professional Liability covers claims made while the policy is active, for work on or after the retroactive date (the earliest date of work covered).

Who asks premium auditors for $2M?

For many premium auditors, $1M is a common ask (see $1M for premium auditors). $2M tends to show up when audited premiums are large or a client passes its own requirement down:

• Examples include large carriers sending out audits on big commercial accounts.
• Audit management firms that hold a $2M requirement from a carrier and pass it on to every subcontract auditor.
• Program administrators running construction, staffing or trucking programs, where payroll and class codes drive large premiums.

How is $2M built?

A $2M limit is often one primary policy (the policy that pays first) at $2M/$2M. It can also be a $1M primary plus a $1M excess layer, an extra policy that pays after the primary is used up. The excess should follow form, meaning it uses the primary's terms.

Confirm with the client that primary plus follow-form excess meets the clause. A commercial umbrella almost never covers Professional Liability (see Does a commercial umbrella cover Professional Liability?).

Premium auditors may be placed on a Miscellaneous Professional Liability form (a general form for service businesses) or an insurance-services E&O form. Additional insured status (a named extra party on your policy) is not automatic. Some carriers can add a client, usually only for claims arising from your professional services, and others do not. Ask before you sign a contract that requires it. A certificate of insurance shows your coverage but adds no one to the policy.

What will underwriters ask for?

An underwriter decides whether to offer coverage and on what terms. At $2M, expect questions like these:

• Lines you audit (workers' compensation, general liability, auto) and the share of revenue from each.
• The size of the largest accounts you audit, and whether any are multi-state or construction accounts.
• Whether you only gather records or also choose class codes and final exposure figures.
• Employees versus subcontract auditors, their training, and whether they carry their own Professional Liability.
• Your review steps before a report goes to the carrier, and how you protect payroll and tax records.
• Other services, prior claims, anything that could become a claim, and your current policy and retroactive date.

What affects the cost?

• Account size and lines. Large construction and multi-state audits usually carry more risk than small ones.
• Audit volume and subcontractors. More audits, and outside auditors without their own coverage, mean more chances for an error.
• Quality control. Written review steps and documented class code decisions may help.
• Claims history. Prior claims can raise the price or cap the limit offered.
• Structure and terms. A higher retention (what you pay on each claim before the policy pays) usually lowers premium. Defense outside the limit often adds cost.

Frequently asked questions

Do I need $2M Professional Liability as a premium auditor?

Only if your carrier or audit firm agreement requires it. $1M is a common starting point, and $2M often comes from large carriers, big accounts or multi-state programs. Check the insurance section of your agreement for the per claim limit.

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

Often not. Only your agreement's wording can say for sure, so check the per claim number. If it falls short, request new quotes through Morrow for a $2M/$2M policy, or a $1M primary plus follow-form excess. Morrow can ask for quotes that keep your retroactive date and prior acts coverage (cover for past audits) where the market allows. Keep your current policy active until the new one starts. Report anything that could become a claim to your current carrier first.

Does my policy cover my subcontract auditors?

It depends on the wording. Some policies cover work done on your behalf by independent contractors. Others do not. Many audit firms also ask each subcontractor to carry their own Professional Liability.

What happens to my coverage if I stop doing audits?

A claim first made after your policy ends is generally not covered. An extended reporting period (a "tail") adds time to report claims about past audits. Ask about it before the policy ends.

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.