Short answer
A $5M professional liability requirement doesn’t have to stop a project when you carry $2M. Firms generally have three routes: buy project-specific excess professional liability, raise their practice limits, or negotiate the requirement down to fit the fee and risk. Availability varies by carrier and project, so confirm options before the contract deadline.
How can a small firm meet a $5M professional liability requirement?
A prime asked one of our engineering clients for $5M of professional liability on an $11,000 subcontract. The prime said it “may cover the costs for us to increase our coverage on this project” and asked whether we could help with a quote.
That is a common pattern. Contract limits are often set by a template, not by the size of the job. The three routes below are the usual ways to respond.
What does per claim vs aggregate mean?
Before comparing options, check which limit the contract names. The per claim limit is the most the policy pays for a single claim. The aggregate is the most it pays across all claims in the policy period.
One NYC architect asked us to confirm that the aggregate was also $1M. The answer was that the professional liability aggregate was $1M while the per claim limit was $500K. Those two numbers can differ, so a requirement for “$1M” may be met on one measure and not the other. See our entry on limits of liability for more.
Option 1: Project-specific excess professional liability
A project-specific policy adds limits for one project instead of raising your limits for the whole firm. It can fit a small job with a high requirement, since you pay for the added limit only while it applies. In some cases the turnaround can be same day, though we can’t promise timing. Our page on project-specific professional liability explains how it works.
Option 2: Raise your practice limits
You can ask to increase the limits on your annual policy. That makes sense when higher requirements keep appearing across projects. One client wrote, “May need a rider or general increase in limits,” and noted they could also negotiate. Pricing depends on the carrier, your revenue and your claims history, so ask for a quote at the higher limit.
Option 3: Negotiate the requirement
A requirement should be proportional to the fee and the risk. A $5M limit on an $11,000 subcontract may be worth discussing with the prime. Some firms ask for a lower limit and others ask the client to fund the added cost. Hardcover doesn’t give legal advice on contract terms, so involve your attorney if you negotiate.
Does an umbrella policy satisfy a professional liability requirement?
Usually not. An umbrella or excess liability policy typically sits over general liability, auto and employers liability, and it generally doesn’t sit over professional liability. Professional liability needs its own excess.
One PE consultant without an umbrella asked whether they could get one if selected for a project. We said we should be able to get them an excess liability limit of $5M. Which policy the excess sits over matters, so be specific about the requirement.
Who pays for project-specific coverage?
Asking the client to fund added project coverage is a normal request. Many contracts allow it, and some primes offer to cover the cost, as one did here. Raise it early, and confirm in writing who pays before you bind.
Example: a $2M firm and a $5M requirement
Consider a hypothetical engineering firm with a $2M professional liability limit. A prime requires $5M on a small subcontract. The firm asks its broker for a project-specific excess quote, and it asks the prime whether the prime will fund the cost.
The broker submits the application before the contract deadline. If the carrier offers terms, the firm adds the limit for that project only. If not, the firm goes back to the prime to negotiate a lower number.
What to check before you respond to the requirement
- Whether the contract names a per claim limit, an aggregate or both
- Your current per claim and aggregate limits
- Whether the requirement applies to professional liability, general liability or umbrella
- Whether the project fee justifies the requested limit
- Who will pay for added coverage
- How long you have before the contract deadline
Send us the requirement for a contract check, or get a quote for the added limit.
Related questions
Can I buy extra professional liability limits for one project?
Often yes, through project-specific excess. Availability varies by carrier and project, so ask early.
Can my umbrella policy cover a professional liability requirement?
Usually not. Umbrellas typically sit over general liability, auto and employers liability.
Can the client pay for the added limit?
It is a common request, and some clients agree. Confirm in writing before you bind.
What is the difference between per claim and aggregate limits?
The per claim limit applies to one claim. The aggregate caps total payments across the policy period.
How fast can I get project-specific excess?
Sometimes the same day, though timing depends on the carrier and your application. Submit it before the contract deadline.