Most professionals focus on the premium and the limit when buying errors and omissions insurance. But one of the most important parts of the process may be the application itself. The answers you give can shape what the policy covers, and incomplete or inaccurate answers can create problems exactly when you need the policy most.
Why the Application Matters
Professional liability policies are typically underwritten based on the information you provide. The application often becomes part of the policy, which means the insurer relies on your statements when deciding to offer coverage and at what price. If a statement later turns out to be inaccurate, the insurer may dispute a claim or, in some situations, seek to rescind the policy, depending on policy language and state law.
Prior Knowledge Questions
Many applications ask whether you are aware of any facts, circumstances, or incidents that could reasonably give rise to a claim. This is sometimes called a prior knowledge or known circumstances question. It is designed to keep insurers from covering problems that have already surfaced.
The question can be broader than many professionals expect. It may include a client complaint, a threatened dispute, a significant error you discovered, or a project that went badly wrong, even if no lawsuit has been filed. Answering thoughtfully matters. If you are unsure whether a situation counts, ask your agent before you sign.
Warranty Statements and Signatures
Some applications include a warranty statement, in which the applicant states that the answers are true and complete. Signing it generally means you are confirming that you reviewed the application and that the information is accurate to the best of your knowledge. Some policies also exclude claims arising from matters you knew about before the policy began, even if you did not mention them.
Because these statements can carry legal weight, review the entire application rather than relying on a pre-filled form. Check descriptions of your services, revenue, number of employees, and any subcontractors for accuracy.
Describing Your Services Accurately
Applications typically ask what services you provide and what share of revenue comes from each. If you describe your work too narrowly, the policy may not respond to a claim arising from a service you actually perform. If you add a new service after the policy begins, ask whether it is covered or needs to be endorsed.
Likewise, report your revenue honestly. Premiums are often based on revenue, and carriers may review it at renewal or in an audit.
Claims History and Loss Runs
Insurers commonly ask for details about past claims, and may request loss runs from prior carriers. Disclose claims and incidents accurately, including those that were resolved without payment. Being forthcoming can help an agent present your risk in the best light.
When You Switch Carriers
Changing insurers raises special issues for claims-made policies. A new application may include prior knowledge questions that apply to the time before the new policy starts. Pay attention to retroactive dates and any exclusions for known matters so that you do not accidentally create a gap in coverage.
Practical Tips for a Better Application
A few simple habits may help you avoid headaches:
Gather your contracts, revenue figures, and claims history before you begin. Review the full application and correct anything that is wrong. Ask questions about any term you do not understand. Keep a copy of the final signed application with your policy. Update your agent when your services, revenue, or staffing change.
Talk With an Independent Agent
A good application is a partnership between you and your agent. An independent agent can explain what each question means, help you answer carefully, and compare carriers’ approaches. If you are buying E&O for the first time or switching carriers, consider reaching out to an independent agent before you complete the paperwork.
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