Insurance Curator Professional liability insurance (Errors & Omissions, E&O) choices materially affect cost, coverage continuity, and claims exposure for U.S. businesses. This checklist — focused on the U.S. market (examples call out Los Angeles, CA; New York City, NY; and Houston, TX) — helps brokers, agency buyers, and business owners compare claims-made and occurrence policies and make defensible purchase decisions.
Quick primer: claims-made vs occurrence (one-line)
- Claims-made: Policy responds if the claim is filed while the policy is active (and after the retroactive date). Requires attention to retroactive dates and tail coverage.
- Occurrence: Policy responds if the incident occurred during the policy period, regardless of when the claim is filed.
Key evaluation categories (checklist)
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Policy trigger & reporting window
- Verify whether the policy is claims-made or occurrence.
- For claims-made, check the retroactive date, and whether prior acts are covered.
- Confirm the policy’s reporting requirements and any written notice periods.
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Tail, nose, and transition options
- If switching from claims-made to occurrence or between carriers, confirm availability and cost of tail (extended reporting) and nose (prior carrier endorsement).
- Read: What Is Tail Coverage? Managing Extended Reporting for Professional Liability Insurance (Errors & Omissions).
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Limits, aggregates, and defense cost handling
- Common small-business limits: $1,000,000 per claim / $2,000,000 aggregate. Verify whether defense costs are inside or outside the limit.
- Understand how settlements reduce remaining limits and whether punitive damages are covered (often excluded).
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Deductible and retentions
- Check for per-claim deductibles and insurer retention for defense (some policies have higher retentions for claims alleged to be fraud).
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Exclusions and endorsements
- Look for exclusions (contractual liability, cyber, bodily injury/property damage, ERISA) and whether industry-specific endorsements (technology E&O, architects & engineers) are available.
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Prior acts / retroactive date negotiation
- Confirm ability to negotiate retroactive dates at renewal or on tender; review prior-acts coverage carefully.
- See: Retroactive Dates Explained for Professional Liability Insurance (Errors & Omissions) Policies.
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Carrier financial stability and claims handling
- Check AM Best, S&P, or Moody’s ratings and recent claims-handling reputation.
- Preferred carriers for professional liability: Chubb, CNA, Travelers, The Hartford, Hiscox (availability varies by state).
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Jurisdictional and venue exposure
- Evaluate litigation climate in operating states (NY & CA often produce higher claims frequency and defense costs).
- Ask carriers if policy includes consent-to-settle provisions or duty-to-defend clauses that could affect settlements.
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Pricing & renewal trend analysis
- Request multiyear rate history, industry loss runs, and underwriting notes that explain rate drivers.
- Typical small-business E&O premiums vary widely; expect $400–$3,000+ per year for low-exposure consultants and $3,000–$25,000+ for higher-risk professions (architects, engineers) — market ranges summarized from carrier and broker data (see sources below).
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Claims examples & loss scenarios
- Require sample claim scenarios and how the policy reacted (defense allocation, coverage denial outcomes). This helps test endorsements and exclusions in practical terms.
Side-by-side comparison: Claims-made vs Occurrence
| Feature | Claims-Made | Occurrence |
|---|---|---|
| Trigger for coverage | Claim filed during policy period (and after retro date) | Incident occurred during policy period |
| Retroactive / prior acts concern | Critical — needs negotiation | Not applicable |
| Tail coverage needed when cancelling? | Usually yes (to capture late-filed claims) | No |
| Typical premium | Often lower initially for new insureds | Typically higher (premium reflects unlimited reporting for future claims) |
| Best for | Businesses that can manage retro dates and tail purchase | Businesses seeking simpler long-term protection |
| Transferability (when switching carriers) | More complex (tail & nose considerations) | Easier — coverage follows occurrence date |
Sample market economics (U.S., 2024–2026 ranges)
- Typical limits purchased by small firms: $1M/$2M or $1M/$1M.
- Typical deductibles: $0–$10,000 per claim (many small-business policies use $1,000–$5,000).
- Premium ranges by risk class (national market averages):
- Low-exposure consultants/providers: $400–$3,000 / year
- Technology consultants & small software firms: $700–$6,000 / year
- Architects, engineers, and high-exposure professionals: $3,000–$25,000+ / year
Sources: Insureon market data and carrier small-business pages show these ranges and guidance (see Insureon and Hiscox links below). Always obtain live quotes for accurate pricing in Los Angeles, New York, or Houston — state-specific factors (litigation climate, prior-acts exposure) will materially change a quote.
Carriers to request quotes from (sample):
- Hiscox (online small-business E&O quotes) — known for fast online quoting for small consultancies. https://www.hiscox.com
- Travelers & The Hartford — broad agency distribution and specific endorsements for professional lines. https://www.travelers.com / https://www.thehartford.com
- Chubb & CNA — often used for higher-limit placements for architects/engineers. https://www.chubb.com / https://www.cna.com
For national market cost benchmarks and sample premiums see:
- Insureon — Errors & Omissions insurance cost guide and sample premiums: https://www.insureon.com/small-business-insurance/errors-and-omissions
- Hiscox — Professional liability product pages and small-business quotes: https://www.hiscox.com/small-business-insurance/professional-liability-insurance
- Insurance Information Institute — overview of professional liability/E&O: https://www.iii.org/article/errors-and-omissions-insurance-eo
Location-specific considerations (Los Angeles, New York City, Houston)
- Los Angeles, CA: Elevated professional indemnity watering due to class action exposure in some industries, higher defense counsel rates; expect quoted premiums to be on the higher end relative to national averages for comparable exposures.
- New York, NY: Large commercial market, sophisticated plaintiffs bar — carriers price for higher defense costs and jury awards; negotiate consent-to-settle and punitive exclusions carefully.
- Houston, TX: Industry concentration (energy, engineering) can drive specialized endorsements or higher limits; engineering firms often pay substantially more than small professional services firms.
Red flags to watch for in any quote
- Unexplained retroactive date gaps (prior acts not fully covered).
- Defense costs inside the limit where limits are inadequate.
- Specific narrow exclusions for services you perform (e.g., contractually assumed liabilities).
- Excessive exclusions for known claims/losses on loss run entries.
- Carrier with weak financial ratings for a high-exposure risk.
For help moving between policy types, see: Switching Carriers: How to Move Between Claims-Made and Occurrence Professional Liability Insurance (Errors & Omissions) Safely.
Action plan — a purchase checklist you can use now
- Get 3 comparative quotes (ask each carrier for limits of $1M/$2M and $2M/$4M).
- Request written confirmation of retroactive date and prior-acts handling.
- Obtain sample policy forms and mark up the following: defense inside/outside limit, consent-to-settle language, and all exclusions.
- Compare premium + estimated tail cost (if claims-made) over a 5-year horizon.
- Check AM Best ratings and obtain broker claims-handling references.
- Document loss runs for the past 10 years and disclose all potential incidents early.
Selecting professional liability coverage (Claims-made vs Occurrence) requires underwriting discipline, attention to retroactive dates and tail exposures, and clear negotiation on defense allocation and exclusions. Use the checklist above during quote comparison and renewal negotiation to reduce surprise gaps and long-term expense.
Further reading on retroactivity and reporting mechanics: Retroactive Dates Explained for Professional Liability Insurance (Errors & Omissions) Policies and Nose Coverage, Tail Coverage and Transition Strategies for Professional Liability Insurance (Errors & Omissions).