Do property management companies need E&O insurance for apartment buildings?

Property management companies face professional liability exposure that general liability insurance does not cover. Errors and omissions (E&O) insurance, also called professional liability insurance, protects against claims alleging negligent acts, errors, or omissions in the performance of professional management services. Common claim scenarios include failure to maintain adequate insurance on a managed property, mishandling tenant security deposits, negligent tenant screening that leads to foreseeable criminal activity, and failure to address known maintenance hazards.

E&O policies for property managers are typically written on a claims-made basis (ISO form CG 00 02 or proprietary forms), meaning they respond to claims first made during the policy period regardless of when the alleged error occurred. This makes maintaining continuous coverage essential—any gap creates an uninsured window for prior acts. The extended reporting period (tail coverage) provisions become critical when a management company changes insurers or ceases operations.

Typical E&O limits for apartment management companies range from $1 million to $5 million per claim, with aggregate limits of $2 million to $10 million. The appropriate limit depends on the total assets under management, the number of units managed, and the contractual requirements of property owners. Many institutional apartment owners and syndication sponsors require their property managers to carry minimum E&O limits as a condition of the management agreement.

Property owners should verify their management company's E&O coverage by requesting a certificate of insurance and reviewing the policy's exclusions. Key exclusions to watch for include bodily injury (which should be covered by GL), dishonest or criminal acts, and contractual liability assumed under the management agreement. The management agreement itself should include mutual indemnification provisions and clearly allocate insurance responsibilities between the owner and manager.