$10M Professional Liability (E&O) Insurance for Property Managers, Inspectors and Real Estate Service Firms

Property managers, inspectors and real estate service firms asked for $10M by a large owner, lender or agency usually meet it with a primary policy plus follow-form excess layers.

What does a $10M requirement mean for property managers and inspectors?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your work cost a client money. A $10M clause might read:

• Per claim and aggregate: the most paid for one claim, and for all claims made during the policy period. This clause asks for $10M/$10M. See how limits are written.
• Claims-made: Professional Liability almost always covers claims made and reported while the policy is active. The retroactive date is the earliest work date covered.
• Owner and affiliates: one limit may cover many buildings or entities. Check that the primary policy covers every service named in your contract.
• Three years after: you would usually renew every layer for that period, or buy an extended reporting period (extra time to report claims after a policy ends), where offered.

Who asks property managers and inspectors for $10M?

Mostly a short list of clients:

• Large institutional owners, such as real estate investment trusts (REITs), hiring a manager for a multi-state portfolio.
• Developers hiring a construction manager or owner's representative for a very large project.
• Lenders and investors ordering inspections, environmental reviews or energy audits on major deals.
• Public agencies and housing authorities usually set a fixed minimum in the bid documents. It is occasionally $10M on very large contracts.

Compared with $5M, $10M usually adds layers. If your contract asks for less, see $5M or $3M for real estate service firms.

How is $10M built?

A primary policy pays first. Each excess layer pays only after the layers below it are used up. "$5M xs $5M" means a $5M layer that sits above the first $5M.

Each excess layer should follow form, meaning it uses the primary policy's terms. Layers usually share the same retroactive date, policy period and named insured (the business covered).

The policy form depends on the service. Property managers and agents usually buy real estate E&O. Inspectors usually buy inspector E&O. Construction management and engineering-type work often goes on A&E (architects and engineers) or construction manager forms. Environmental review work often goes on an environmental consultants form. Which form fits depends on the services you sell and how your contract describes them.

What might underwriters ask for?

• Each service you offer, and revenue from each.
• Your largest clients and the values of the buildings, loans or projects you work on.
• Whether you handle client money, sign leases or contracts for owners, or approve vendors. Inspectors: your report templates, scope limits and disclaimers.
• The contract requiring $10M and your standard agreement.
• Loss runs (a report of past claims), often for the last five years, plus your current policy and retroactive date.

What affects the cost?

• Type of work. Larger or harder-to-predict losses, such as in construction management, can cost more to insure.
• The primary layer. It usually costs the most per $1M of limit, because it is the most likely to pay.
• Claims history. Past claims can shrink the primary limit on offer, so you may need more layers.
• Retention and defense. Retention works like a deductible. Many Professional Liability policies pay defense costs inside the limit, so legal fees reduce what is left for a settlement. Defense spending may also use up part of the excess layers, depending on the wording.

Frequently asked questions

Do I need $10M Professional Liability as a property manager or inspector?

Only if your contract or client requires it. Send Morrow the clause so it can be read against your current policy.

Can I use my commercial umbrella to reach $10M?

Almost never. A commercial umbrella usually sits above General Liability and auto, not Professional Liability. You need excess Professional Liability layers. Read more on umbrellas.

I already have $1M or $2M. How do I get to $10M?

Request new quotes through Morrow for a primary policy and excess layers above it, keeping your retroactive date and prior acts coverage (cover for work done before the new policy starts) where the market allows. Report anything that could become a claim to your current carrier before you switch. Start early, because several policies may need to be lined up.

Can the owner or lender be added as an additional insured (a party given coverage under your policy)?

Usually not. Professional Liability policies typically do not let a client be added as an additional insured. A few policies allow limited status for liability that comes from your services, and only when a written contract requires it. At $10M the harder part is confirming that every layer treats it the same way. Some clients accept a certificate of insurance (a one-page summary of your coverage) listing every layer.

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.