$5M Professional Liability (E&O) Insurance for Technology and Media Firms

For tech and media firms whose client requires $5M: Professional Liability (E&O) usually comes as one $5M primary policy or a smaller primary plus follow-form excess.

What does a $5M requirement mean for technology and media firms?

Professional Liability (E&O, short for Errors and Omissions) covers claims that your work cost a client money. Tech firms usually buy Technology E&O, often with Cyber (coverage for data breaches and cyber attacks). A $5M clause often reads like this:

• Each claim and aggregate: the most paid for one claim, and for all claims in the policy year. Check whether your contract says per claim, aggregate or both.
• Coverages named: Technology E&O for errors, Cyber for data breaches, and media liability for copyright, trademark or defamation (false statements that harm a reputation) claims.
• Claims-made: the policy covers claims made and reported while it is active. The retroactive date is the earliest date of work it covers.
• Primary plus excess: the last sentence lets you stack policies. If your clause is silent, confirm with the client that primary plus follow-form excess meets it.

Who asks technology and media firms for $5M?

Most clients in this group ask for $1M or $2M requirements. Some ask for $3M requirements, and a few large contracts go to $10M requirements. Compared with $3M, $5M more often needs two or more layers and a broker, and underwriters look harder at your largest contracts. $10M usually means a larger tower. $5M tends to show up when one mistake could cost millions:

• Large enterprises hiring developers or IT consultants under a master service agreement (one contract that covers many projects).
• Banks and payment companies buying software that moves money.
• Hospitals and health plans sharing patient data with vendors.
• Clients of managed service providers that run their networks, backups or security.
• Government agencies and prime contractors, often in bid requests.
• Major brands and publishers ordering large campaigns.

How is $5M built?

A primary policy pays first. An excess policy pays only after the layer below is used up. "$3M xs $2M" means a $3M layer above the first $2M. Follow-form means the excess layer copies the terms of the layer below it.

Every layer should share the same retroactive date, policy period and named insured (the business covered). Many Professional Liability policies pay defense costs inside the limit, so legal fees use up limit.

What will underwriters ask for?

An underwriter is the person at an insurance company who reviews your risk and sets the terms. Requests vary, but they often include:

• An application listing your services, revenue and largest clients.
• The contract requiring $5M and your standard client agreement, including any limitation of liability clause (a cap on what you owe).
• Security basics such as a second login step (multifactor authentication), backups, software updates and a plan for responding to an attack.
• For content work, how you clear rights.
• Three to five years of loss runs (a report of past claims), known incidents and your current policy.

What affects the cost?

• Type of work. Payments, health data and managed IT usually cost more than design.
• Data and system access. Client data or admin rights raise possible losses.
• How the $5M is built. The primary layer usually costs the most per $1M of limit.
• Claims history and controls. Past claims or weak security can raise prices.
• Retention. This is what you pay per claim before the policy pays, like a deductible. A higher one usually lowers premium.

Frequently asked questions

Can a small software development shop get $5M Professional Liability?

It may be possible, but it depends on underwriting and is not common for small firms. Some firms use a $1M or $2M primary plus excess layers. Morrow can help you find it.

I carry $2M Technology E&O. How do I get to $5M?

Request new quotes through Morrow, for a new $5M primary policy or for excess layers above a primary policy. Morrow can request quotes that keep your retroactive date, so past work may stay covered (prior acts coverage), where the market allows. Report anything that could become a claim to your current carrier before you switch.

Does my umbrella or additional insured status satisfy a $5M requirement?

An umbrella usually does not help, and additional insured status is usually not available on Professional Liability. A commercial umbrella (extra liability coverage above other policies) almost never covers Professional Liability. Additional insured status (coverage for your client under your policy) is usually not available either. If your contract asks for it, send Morrow the wording so it can be reviewed when quotes are requested.

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.