$1M Professional Liability (E&O) Insurance for Software Developers

For software developers whose client contract asks for $1M: Professional Liability (E&O) pays up to $1M for a covered claim that a mistake in your work caused a client a financial loss.

What does a $1M requirement mean for software developers?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your work caused a client a financial loss. A typical clause reads:

• 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 falls short of this clause. Many Technology E&O policies carry one combined limit, so meeting $1M/$2M may take a $2M limit, or a form with separate per claim and aggregate limits, if a carrier offers one.
• Claims-made: Professional Liability almost always covers claims made and reported while the policy is active, for work on or after the retroactive date (the earliest date of work covered). The two-year requirement is often met by renewing with the same retroactive date or buying an extended reporting period (extra time to report claims after a policy ends).
• "Network security and privacy": this is Cyber coverage, which pays for data breaches and privacy claims. A plain E&O policy may not meet a clause that names it.

Who asks software developers for $1M?

You will often see $1M from:

• Small and mid-sized businesses hiring you to build a web app, mobile app or customer portal.
• Startups outsourcing an MVP (a first working version).
• Agencies and dev shops subcontracting coding or QA work to your firm.
• Companies connecting systems, such as a CRM or online store, through custom code.
• Small clinics buying software that touches patient data. Larger health systems often ask for higher limits.

Enterprise MSAs (master service agreements) often ask for higher Technology E&O and Cyber limits, such as $2M, $3M or $5M.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers (extra policies stacked above it). Many software developers buy Technology E&O, a form built for software and IT services, rather than Miscellaneous Professional Liability. See Technology E&O vs. Miscellaneous E&O.

Compared with $2M, a $1M limit usually fits smaller projects and standard vendor terms, while larger client contracts may call for $2M or more. At $3M and above, the limit often needs a broker. Morrow can help you find it. See $2M Professional Liability for software developers.

A commercial umbrella almost never covers Professional Liability. Clients usually cannot be added as an additional insured (a party given protection under your policy) on Professional Liability. Where a policy allows it, the protection is usually limited, so check what it offers. Also check that the retroactive date covers earlier releases.

What will underwriters ask for?

An underwriter decides whether to offer coverage and on what terms. For a software firm, they usually ask for:

• What you build, such as custom apps, SaaS products or integrations, and the revenue share of each.
• Whether your software handles payments, health records or other critical tasks.
• Whether you host client data, and your security basics, such as multi-factor login and backups.
• How you test, review code and get written client sign-off before go-live.
• Revenue, largest clients, prior claims, warranties, and your current retroactive date.

What affects the cost?

• Type of software. Systems that move money or hold sensitive data usually cost more than marketing sites.
• Data and hosting. Sensitive records or client hosting usually raise the price, especially with Cyber.
• Revenue and contract size. Bigger projects mean bigger possible losses.
• Claims history and controls. Prior claims can raise the price.
• Limit structure and retention. A higher aggregate, or separate per claim and aggregate limits, may cost more. A higher retention (the amount you pay on each claim before the policy pays, like a deductible) usually lowers the premium.

Frequently asked questions

What kinds of claims could I face as a software developer?

Software developers often face claims about broken code, lost data or late delivery that cost a client money. Hypothetical examples: an update breaks checkout on a client's online store for two days, and the client claims lost sales. A data migration drops customer records. Many policies may pay defense costs for a covered claim, but defense often counts against the limit.

Do I need Cyber as well as Technology E&O as a software developer?

Often yes, if you host data or write code that handles personal data, because many clients expect both. Technology E&O usually covers mistakes in your work. Cyber usually covers breaches and privacy events. See Professional Liability vs. Cyber.

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

No, a $1M/$1M policy usually falls short of a $1M/$2M clause. Request new quotes that meet the clause, such as a $2M limit or separate per claim and aggregate limits. Morrow can ask that your retroactive date and prior acts coverage (coverage for earlier work) carry over where the market allows. Most people keep their current policy until the new one starts, so there is no gap. 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.