Territorial Limits and Choice of Law in Professional Liability Insurance (Errors & Omissions) Policies

Professional service firms operating across state lines — and internationally — must manage a complex mix of territorial limits and choice-of-law/forum clauses in Errors & Omissions (E&O) policies. For U.S.-based firms in hubs like New York City, San Francisco, and Houston, these provisions directly affect whether a claim is covered, how defense and indemnity are determined, and the cost of litigation. This article provides practical, commercial-focused guidance for U.S. firms purchasing or renewing E&O insurance for cross-border work.

Why territorial limits and choice of law matter for E&O

• Territorial limits define where allegations must arise for coverage to apply (e.g., U.S. only, U.S. & Canada, worldwide except the U.S./Canada).
• Choice-of-law (and forum) clauses determine which jurisdiction’s substantive law governs disputes under the policy and where disputes will be litigated or arbitrated.

These two clauses can interact to create coverage traps. For example, a policy that excludes “claims made or suits brought” outside the U.S. may still be ambiguous if the claimant sues a U.S. subsidiary in a foreign forum or serves process in a U.S. state. Similarly, a choice-of-law clause selecting New York law may favor insurers, while a mandatory forum clause requiring arbitration in London can complicate U.S. defense strategies.

Typical territorial formulations and commercial impact

Common territorial wordings seen in U.S. E&O policies include:

• “United States of America, its territories and possessions, and Canada” (typical for domestic-focused firms)
• “Worldwide” (rare and costly; used by global firms and multi-jurisdiction brokers)
• “Worldwide excluding claims brought in the U.S. or Canada” (used to limit high-risk foreign exposures)

Commercial impacts:

• Broader territorial scope = higher premium and larger retention requirements.
• Narrower scope can leave firms exposed to uninsured foreign-triggered claims, cross-border discovery costs, and enforcement risks.

Example pricing signals (U.S. market indicators)

• Small professional firms (consultants, accountants, small tech shops) buying a typical $1M/$1M E&O policy in markets like New York or San Francisco often see premiums in the $800–$5,000 range depending on risk profile and revenue. Larger tech E&O or firms with cross-border exposure often pay $10,000–$100,000+ for adequate limits and global scope.
• Insurers with substantial E&O platforms include Hiscox, Chubb, and Travelers, each offering different appetite and pricing (Hiscox tends to serve small businesses with online quoting, while Chubb and Travelers underwrite larger, higher-limit international risks).

Sources for market context:

• Hiscox small business product overview and quote portal (see Hiscox U.S. professional liability pages) — https://www.hiscox.com/business-insurance/professional-liability
• Chubb professional liability product descriptions — https://www.chubb.com/us-en/business-insurance/professional-liability-claims-made.html
• Insurance Information Institute on professional liability trends — https://www.iii.org/article/professional-liability-insurance

(Use these references to request or verify real-time quotes for your specific U.S. location and revenue profile.)

Choice of law and forum: how insurers and buyers use them

Insurers commonly include one or more of the following:

• Choice-of-law clause: “This policy shall be governed by the laws of the State of New York” — governs interpretation and coverage defenses.
• Forum-selection clause: “All disputes will be resolved in the courts/through arbitration in [chosen forum]” — can mandate arbitration in a neutral commercial center (e.g., London or New York).
• Consent to jurisdiction: Agreement to submit to jurisdiction in a specified U.S. state (useful for insureds wanting U.S. remedies).

Practical US-focused guidance:

• For firms operating in New York, California, Texas: aim to keep choice-of-law and forum clauses in states where you have significant operations (New York or your home state) to preserve access to favorable procedure and appellate law.
• Watch for “exclusive forum” clauses outside the U.S. (e.g., London arbitration). These can delay U.S. discovery and complicate ERISA/SEC-related claims.
• Where possible, negotiate mutual forum-selection language or carve-outs for enforcement actions within the U.S.

State-specific considerations (commercial focus)

• New York: Courts respect party autonomy in contracts; New York choice-of-law clauses are enforceable so long as they are not contrary to a fundamental policy of a state with materially greater interest. New York is commonly selected by insurers.
• California: Public policy can invalidate choice-of-law provisions that deprive California residents of substantive protection. California courts scrutinize forum and choice-of-law clauses more heavily.
• Texas: Texas courts generally enforce clear choice-of-law clauses and are plaintiff-friendly on venue in certain consumer-facing professions.

Negotiating tips for U.S. firms buying E&O with cross-border exposure

• Seek a territorial clause that at least covers “United States of America, its territories and possessions, and Canada” as a baseline. Expand to “Worldwide” only when necessary and budget accordingly.
• Negotiate a choice-of-law in your state or New York; avoid one-sided foreign-only forums when possible.
• Add a “civil authority” or “enforcement” carve-out allowing U.S. courts for interim relief or to enforce awards if arbitrations are abroad.
• Consider "follow-form" or "subject-to-policy" endorsements for multinational placements when you rely on a lead policy in another jurisdiction.
• Document your operations by state and country to justify territorial endorsements and keep underwriters updated at renewal.

Table — Common territorial/choice-of-law permutations and their business impact

Claims handling and cross-border disputes — practical steps

• Immediately notify insurer and preserve evidence. Insurer’s duty to defend can turn on where a claim is “brought” — e.g., internationally-filed suits may still implicate U.S. counsel and costs.
• Use local counsel in the forum of suit; coordinate with insurer’s panel counsel to protect coverage positions.
• For large cross-border exposures, consider a captive or layered program (domestic primary with multinational excess) to control costs.

For operational guidance on buying suitable multinational coverage, see:

• How to Buy Professional Liability Insurance (Errors & Omissions) for Cross-Border Services
• Choosing Law and Forum Provisions to Protect E&O Coverage Internationally
• Multi-Jurisdiction Policies: Coverage Options for International Professional Liability Insurance (Errors & Omissions)

Bottom line for U.S. firms (NYC, SF, Houston)

• If you provide services in more than one U.S. state, or to clients abroad from a U.S. base (New York, California, Texas), insist on clear territorial wording that matches your exposures.
• Expect incremental premium for expanded territorial limits; budget realistic figures (small firms: mid hundreds to low thousands USD; tech/financial professionals with cross-border work: $10k+).
• Negotiate choice-of-law and forum provisions to preserve access to favorable U.S. remedies and predictable law. Use endorsements and carve-outs to manage enforcement and discovery risks.

Further reading on complementary cross-border E&O risk controls:

• Handling Foreign Litigation Under Professional Liability Insurance (Errors & Omissions): Key Clauses to Watch
• Claims Handling Across Borders: How Insurers Manage International Professional Liability Insurance (Errors & Omissions) Disputes

External references

• Hiscox — Professional Liability insurance product overview and quote tools: https://www.hiscox.com/business-insurance/professional-liability
• Chubb — Professional liability (claims-made) information: https://www.chubb.com/us-en/business-insurance/professional-liability-claims-made.html
• Insurance Information Institute — Professional Liability overview and market insights: https://www.iii.org/article/professional-liability-insurance

If you have specific revenue figures, client geographies, or current policy language, provide them and a tailored clause review and cost estimate for New York, California, or Texas markets can be prepared.