$5M Professional Liability (E&O) Insurance for Regulatory Compliance Consultants

For regulatory compliance consultants whose client requires $5M, the limit is often built as a $1M or $2M primary policy plus excess layers that follow its terms.

What does a $5M requirement mean for regulatory compliance consultants?

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

• Per claim and aggregate: $5M for one claim, and $5M for all claims in a policy year. See how limits work.
• Five years after termination: Professional Liability is almost always claims-made. That means it pays only for claims first made while the policy is active. So you usually need to renew every layer for the full period. Each layer should keep the same retroactive date (the earliest date of work covered). Or you can buy a tail, an extended reporting period that lets you report claims after the policy ends.
• Follow form: an excess layer that uses the same terms as the primary policy. Many contracts allow primary plus excess layers.
• Hypothetical claim: an error repeats in your FDA quality-system submissions for many plants, and the client seeks its losses from you.

Who asks regulatory compliance consultants for $5M?

Many compliance contracts ask for $1M, $2M or $3M. A $3M requirement is often met with a primary policy plus one excess layer. At $5M the clause often calls for a larger primary or added layers. You see $5M when one error could hit a very large business:

• Drug and medical device makers running a program to fix compliance gaps across many plants.
• Refineries, chemical plants and utilities needing permits and emissions reporting across many sites.
• Some federal or state bids that may set one limit for every contractor.

Compliance consultants often buy Miscellaneous Professional Liability, a form for advisers who do not fit a named profession. It fits general regulatory, quality and training work. Environmental permitting and emissions work often needs an environmental consultants form with pollution coverage, because Miscellaneous forms often exclude pollution or bodily injury.

How is $5M built?

A primary policy pays first. An excess policy sits above it. "$3M xs $2M" means a $3M layer above the first $2M.

All layers should follow form and share the same retroactive date, policy period and named insured (the business the policy covers). Confirm with your client that primary plus follow-form excess meets the clause. A commercial umbrella almost never covers Professional Liability (see why).

What will underwriters ask for?

Underwriters are the people at an insurance company who decide whether to offer coverage and on what terms. Each layer's underwriter may review your firm. Expect questions like these:

• Revenue by rule area, such as drug and device, environmental or workplace safety.
• Whether you run a client's program, speak to regulators for it, or sign and certify submissions.
• The $5M contract and engagement (sites, length, fee), plus your standard terms, including any limitation of liability clause (a cap on what you owe a client).
• Loss runs (a report of past claims) for three to five years, and your current policy.

What affects the cost?

• Type of work. Drug, device and environmental programs usually cost more than training.
• Role and size. Running a program, speaking to regulators for a client, or multi-site work usually raises the risk.
• Number of layers. The primary layer usually costs the most per $1M. Excess layers usually cost less.
• Claims history and retention. Past claims can raise price. A higher retention (what you pay on each claim, like a deductible) usually lowers it.

Frequently asked questions

Do I need $5M Professional Liability as a regulatory compliance consultant?

Only if your contract requires it. Very large regulated clients on big or multi-site programs sometimes require $5M, and requirements vary by client and contract. Whether a small firm can get $5M depends on its underwriting profile, so approval is not certain. At $5M a small firm usually needs a broker. Morrow can help you find it.

Is $3M enough if my contract says $5M?

Usually not. If your contract says $5M in total, $3M leaves a $2M gap, so check your clause. An excess layer over the primary often fills the gap.

Can my client be added as an additional insured on my Professional Liability?

Usually not. Most Professional Liability policies do not add clients as additional insureds, though some may add one for liability arising from your services. Many clients ask for a certificate of insurance (a summary of your coverage) that lists every layer with its policy number, limit and policy period.

I already have Professional Liability. How do I get to $5M?

Request new quotes through Morrow, for a new primary policy at a higher limit or for excess layers over a new primary. Morrow can request quotes that aim to keep your retroactive date and prior acts coverage (coverage for past work done before the new policy starts) where the market allows.

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.