$1M Professional Liability (E&O) Insurance for Records Management Companies

A $1M Professional Liability (E&O) limit is a common contract requirement for records management companies that store, scan or destroy client files for law firms, courts and corporate clients.

What does a $1M requirement mean for records management companies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services caused a client a financial loss. For a records company, that might be a misfiled box or records destroyed too early. A typical clause looks like this:

• Per 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 would not meet the limits in this sample clause. A $1M/$2M policy usually meets either limit wording, but your contract may have other requirements.
• Claims-made: Professional Liability is almost always claims-made, which means 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.
• Services named: your policy should describe storage, imaging and destruction.

Who asks records management companies for $1M?

A $1M requirement often comes from:

• Law firms that send closed files, case boxes or litigation documents to offsite storage.
• Corporate legal departments that use you for retention schedules and legal hold support (orders to keep records).
• Courts, counties and state agencies that contract out record storage or imaging.
• Hospitals and clinics that hire you for chart storage or release of information (sending records to people who request them).

Larger clients, data hosting or e-discovery work (finding and sharing digital records for lawsuits) may push the ask to $2M or more.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first). Some records companies buy a Miscellaneous Professional Liability form, made for service businesses without their own policy type. If you host scanned files, run a client portal or handle e-discovery data, Technology E&O (covers errors in tech services) and Cyber (covers data breaches) often fit better. See Technology E&O vs. Miscellaneous E&O.

A commercial umbrella almost never covers Professional Liability. Additional insured status (naming your client on your policy) is not automatic on Professional Liability. Some carriers may add a client, usually only for liability arising from your services, and others will not, so check what your contract requires.

What will underwriters ask for?

An underwriter is the person at the insurer who decides whether to offer coverage and on what terms. Records companies are usually asked about:

• Your services and the share of revenue from each, such as storage, scanning, shredding, release of information or data hosting.
• How you track records, such as barcodes, logs of who handled each box (chain of custody) and audits.
• How you get written client approval before destroying anything, how you handle legal holds, and whether you issue certificates of destruction.
• Who your clients are, such as law firms, healthcare and government, plus prior claims, subcontractors, and your current policy and retroactive date.

What affects the cost?

• Services. Release of information, data hosting and e-discovery work may cost more than plain box storage.
• Client mix and record type. Litigation files, medical charts and court records can mean larger losses.
• Controls and claims history. Strong tracking and destruction sign-off may help your terms. Prior claims can raise the price or narrow options.
• Limits, aggregate and retention. $1M/$2M usually costs more than $1M/$1M. A higher retention (the amount you pay on each claim before the policy pays) usually lowers the premium. Moving from $1M to $2M raises the per claim limit. See $2M for records management companies.

Frequently asked questions

Do I need $1M Professional Liability as a records management company?

Often yes, if a client contract asks for it. Check whether the clause says $1M/$1M or $1M/$2M, and whether it names storage, imaging and destruction. Morrow can review your contract and current policy.

What kinds of claims might a records management company face?

Here are hypothetical examples. A law firm says a box was not found in time and it missed a court deadline. A client says you shredded files under a legal hold. A hospital says a chart was indexed to the wrong patient file and it missed a records deadline.

Does Professional Liability cover boxes damaged in a fire or flood?

Often not. Physical damage to boxes is usually a property risk, and property or warehouse legal liability forms are often used for it. Some Miscellaneous E&O forms may also limit or exclude cover for client records in your care, so ask whether your policy wording addresses stored or destroyed records.

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

Usually not, if the clause asks for a $2M aggregate. Request new quotes for a $1M/$2M policy. When Morrow requests quotes, it can ask for your retroactive date to be kept, along with prior acts coverage (cover for work you did before the new policy starts), where the market allows. Keep your current policy in force until the new one starts. Report anything that could become a claim to your current carrier before that 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.