$1M Professional Liability (E&O) Insurance for Staffing Agencies

If a client asks your staffing agency for $1M, you need Professional Liability (E&O) that may pay up to $1M on a covered claim that a mistake in your work cost the client money.

What does a $1M requirement mean for staffing agencies?

Professional Liability (E&O, short for Errors and Omissions) covers claims that a mistake in your services cost a client money, such as a screening error or a missed credential check. A typical clause looks like this:

• Per claim: the most the policy pays for any one claim. Here, $1M.
• Aggregate: the yearly total for all claims. A $1M/$1M policy does not meet a $2M aggregate. A $1M/$2M policy usually meets either wording, but check the rest of the clause.
• Claims-made: Professional Liability almost always covers claims first made against you and reported to the carrier while the policy is active, for work on or after the retroactive date (the earliest date of work covered). See claims-made vs. occurrence.

Who asks staffing agencies for $1M?

Your own client agreement sets the real number. You may see a $1M requirement from:

• Employers hiring temporary or contract workers.
• Corporate buying teams that keep an approved vendor list.
• Managed service providers (MSPs), which manage a client's staffing vendors and often pass the client's insurance terms down to you.
• Hospitals and clinics using travel or per diem staff.
• Some city, state and federal agencies, depending on the bid. Limits vary and may be above or below $1M.

Large enterprise and MSP programs may ask for $2M for staffing agencies instead, so check whether your client wants a higher per claim limit, not just a higher aggregate.

How is $1M built?

At $1M, the limit is usually one primary policy (the policy that pays first), with no excess layers (extra policies that sit on top of the first one and pay after it is used up) above it. Many staffing firms buy Miscellaneous Professional Liability, a form for service businesses without their own specialty form. Healthcare staffing firms placing clinicians often buy a medical malpractice form instead.

Workers' compensation and employment practices liability (EPL, which covers claims like discrimination) are separate policies. When you compare Professional Liability policies, look for an exclusion (something the policy will not cover) for the acts of placed workers, a late retroactive date, and a contractual liability exclusion, which can clash with an indemnity promise (your agreement to cover the client's losses). Clients often cannot be added as an additional insured on Professional Liability. Some policies allow it in limited cases, usually for the client's liability for your services. A certificate of insurance (a one-page proof of coverage) is the usual proof, but it does not change the policy.

What will underwriters ask staffing agencies for?

An underwriter (the person at the insurer who decides whether to offer coverage) usually asks about:

• Your revenue split between temporary, direct hire, executive search and payroll work.
• The industries you place, such as clerical, IT, finance or healthcare.
• Your screening steps (background, drug, reference and credential checks) and who performs each one.
• Whether placed workers are your W-2 employees or contractors.
• Your client agreements and who supervises placed workers.
• Prior claims, possible claims, and your retroactive date.

What affects the cost?

• Placement type. Healthcare, finance and IT placements may cost more to insure than clerical or office roles.
• Screening and contracts. Written screening steps, a clear split between your duties and the client's supervision of placed workers, and clear client agreements may help.
• Claims history. Prior claims can raise the price or narrow options.
• Limit structure and retention. A higher aggregate usually costs more. A higher retention (what you pay on each claim before the policy pays) usually lowers the premium. See cost factors.

Frequently asked questions

Do I need $1M Professional Liability as a staffing agency?

Often yes, if your client agreement asks for it, and your own client contract sets the real number.

What kinds of claims could a staffing agency face?

Claims usually say a placement or screening mistake cost a client money. Two hypothetical examples: a firm places a bookkeeper who lacks a required certification, or a firm misses a step in a background check the client relied on. Firms that run background checks may also face claims about how they used those reports. Some policies limit or exclude these. If a claim is covered, the policy may help pay for your defense, even if you did nothing wrong.

Does Professional Liability cover claims from my own employees?

Usually not. Worker claims about hiring or firing usually fall under employment practices liability, and injuries under workers' compensation.

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

No, a $1M/$1M policy does not meet a $2M aggregate, so request new quotes for $1M/$2M. Morrow can ask carriers to keep your retroactive date and prior acts coverage (cover for work you did before the new policy starts) where the market allows. Check the date your contract requires the new limits, and ask that the new policy start by then. Your current policy usually stays in force until then. 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.