Originally Posted by LTS
What if i have E&O on myself (sole proprietor). Due to rapid recent growth, I created a LLC. All my sub agents are contractors with their own policies. Should I still change my individual E&O to agency E&O?
Separate question: can I put contractors under an agency E&O or only W-2 employees?
Good response from oldinsuranceguy. I'll just expand a little on your additional queries.
A typical E&O policy will cover the named insured, as well as any employees of the insured. Take this example definition of an "insured" from an AIG professional indemnity policy wording:
"(1) the Policyholder or any Subsidiary (including any predecessor business);
(2) any natural person, who is or has been a principal, partner, director or Member of the Policyholder or any Subsidiary;
(3) any Employee"
If your personal name is listed on the policy it will cover you. If you later decide to create a LLC, there shouldn't be any significant changes required other than adding the name of the entity to the policy. If you then decided to employ staff, they should be automatically picked up. However, if you opt for engaging third party contractors instead, it could be a totally different story.
Generally speaking, underwriters are hesitant to add contractors to policies as insured because of the relative lack of control you have over their behaviour. Contractors are riskier because if they cause trouble it's very easy for them to disappear, leaving few options for recovery.
The second part to this theory is that by adding contractors to your policy, you also expose your claims history to their actions. If things didn't go your way for whatever reason, worst case scenario is that you could quickly find yourself uninsurable.
A better option is to request that all your contractors carry their own insurances. That way your clients or your insurers (via subrogation) can hold them and their insurers responsible for any wrongful actions.
For advice tailored to your situation, I'd recommend that you have this discussion with your insurer.