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Increasing E&O Policy Limits

Increasing E&O Policy Limits

Increasing E&O Policy Limits


I carry a $1MM E&O policy in addition to a $1MM/$2MM general liability commercial policy. I have a potential client that is requesting a $5MM umbrella policy as well as increasing my E&O to $2MM in order to work for them. They are not unreasonable, and are willing to pay for this. The job is such that it would be worth the effort and hassle to comply, and the cost would be buried in the job.

The umbrella policy is no problem, however when my agent kicked the request for E&O increase up to underwriting they balked. They don't want to write a $2MM policy for a firm billing under $1MM annually, which is where I am at as a startup.

Has anybody else in the consulting to construction industry seen this lately? According to my agent there is a rash of claims and insurance underwriter's have gotten antsy and conservative.


RE: Increasing E&O Policy Limits

Try another agent??

RE: Increasing E&O Policy Limits

Agree with Mike.  I had to do this a few years back.  Increase in cost was phenomenal and wasn't worth it.

RE: Increasing E&O Policy Limits

I just went through this and the cost of doubling the E&O was very suprisingly relatively small (20% increase in premium) but you need to shop. One agent estimated it would be double my premium. The umbrella prices ranged greatly as well. Part of the issue may be the lack of history you have.



RE: Increasing E&O Policy Limits

The umbrella is no issue and is taken care of.

My agent has been OK so far... it was the underwriter for the E&O insurance company my policy is with that threw up the bollacks. My agent is now shopping my app to other companies that he reps or works with.

The history and amount I bill were both a concern. As per the agent, doubling up my coverage would be about a 50% premium, which was fine by me. We both thought there was no problem until the underwriter got involved.

What I am skeptical of is (by 3rd party word of mouth now) that the underwriter told my agent that there have been a rash of claims, and that insurance companies across the board are backing away from any perceived risk. Through shopping I will eventually see if that is the case.

In my estimation the amount of coverage the client (an insurance provider themselves) is asking for is absurd... but they know it, are willing to pay for it, and in that case who am I to tell them they are in the wrong?

Telling the client what they do or don't need in this case has already gotten 2 much larger firms thrown off of the short list. I have the inside track at this point and if I can satisfy their wants I am in like flint.


RE: Increasing E&O Policy Limits

When I've seen MSA language that required more insurance than the outrageous amount that is normal for my industry, I've marked through it and put in the common value.  Most of the time that is OK.  Once it wasn't and the client told me that their contract was "take it or leave it".  I left it.  They called back in a month with a new contract with reasonable language.  I held them up for a rate increase to compensate me for the hassle and got it.

"Shopping" for E&O scares the heck out of me.  I took a class on professional insurance a few years ago and found a well hidden fact--you are only insured while your fee is current and only for the time your have had the same policy.  So if you have one carrier for years 1-5 and in year 6 you change carriers.  After the change (and after your old policy has lapsed), someone sues you for work in year 5.  You are on your own and that work is not insured.  Saving a few hundred (or thousand) dollars looks a lot less attractive in the face of a million dollar uninsured liability.  You can overcome this by getting a "bridge policy" that covers you for the time with the old carrier, but few people do (they're pretty expensive) and few agents bring this to your attention.

If changing because the first underwriter is an idiot, you might want to consider all the costs (and maybe have your agent contact another underwriter in the same firm).


RE: Increasing E&O Policy Limits

What zdas04 said!  

RE: Increasing E&O Policy Limits

I agree that bridge insurance is important. I have an advantage here insomuch as I have only been off on my own for 9 months and so far every contract I have has an explicit limitation of liability to the greater of a few grand or my fee. No single job I have so far would sink me if I had to write a check for the fee.

I big claim down the road would be tough to get stuck with because of this and other contract provisions and language.

My plan would be to bump my E&O limits to what this client wants and roll the premium for a year into the project. If I decide I no longer want the added insurance next year I would simply back my limit down. The request is to carry the higher limit only during the length of the contract, not into the future. I expect construction to last no longer than 6 months including permit submital.


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