Professional indemnity insurance
Under the corporate practices (professional indemnity) rules, each corporate practice shall have a valid and binding contract of professional indemnity insurance under the professional indemnity insurance master policy of the Institute and any additional binding contract of professional indemnity insurance required to ensure compliance with the minimum requirements set out in the rules.
The master policy is primarily designed to protect the corporate practices against legal liability arising from professional negligence, errors or omissions, including libel and slander. There are many extensions of coverage under the master policy, which is considered to be the broadest protection available in the market. Registered firms of the Institute may also subscribe to the master policy.
The following is a summary of the salient features of the master policy:
Minimum limit of indemnity
As stipulated in the rules, the minimum limit of indemnity of the corporate practice in relation to each and every single claim during the period of insurance shall not be less than:
- the minimum limit of indemnity of the Institute master policy (currently is HK$5,000,000); or
- two and a half times its gross fee income for the financial year immediately preceding the beginning of the period of insurance subject to a maximum of HK$15,000,000; or
- the amount calculated by multiplying the number of principals in the practice as of the beginning of the period of insurance, by HK$3,000,000;
whichever is the highest.
Standard premiums are based on a standard excess of HK$10,000 in respect of each and every claim for practices with annual gross fees at or below HK$2,000,000. Practices with higher fee income will be subject to standard excess, equal to 0.75 percent of the annual gross fee. Premium discount will be given for increasing the excess voluntarily. However the maximum excess for each and every claim shall not be more than:
- the amount calculated by multiplying the number of principals of the corporate practice as at the beginning of the period of insurance, by HK$200,000; or
- two percent of the gross fee income of the corporate practice for the financial year immediately preceding the beginning of the period of insurance;
whichever is the greater.
There is also a requirement to have annual aggregate indemnity cover for all claims of not less than twice the minimum limit of indemnity. Such aggregate cover is provided under the master policy for the minimum cover and any top-up covers. In effect, this means that every corporate practice will have aggregate cover of $10 million for all claims during an insurance period subject to a maximum of $5 million per claim.
The insurance must cover the corporate practice, any director or former director or authorized person of the corporate practice, and in the event of death, incapacity or bankruptcy of any such persons, the estates or the legal representatives of that person and all professional business undertaken by the corporate practice, and any civil liability or any act, error or omission arising therefrom.
The rules require the corporate practice to carry out insurance to cover its liabilities arising from any circumstances, acts, errors or omissions occurring in the last seven years prior to the date of cessation of the practice and such insurance shall, if the policy is on a claims made basis (the master policy is offering cover on claims made basis) be maintained for a period of not less than seven years after ceasing to have a current corporate practice registration certificate.
More information and enquiries
The master policy is administered by the sole insurance broker, Aon Hong Kong Limited, and is underwritten by Lloyd's of London and other insurers.
Aon have set up an enquiry hotline ((852) 2861-6574 or (852) 2861-6534) which is manned between 10 a.m. and 5 p.m. from Monday to Friday (except public holidays). Institute members are welcome to call Aon's hotline or complete the attached slip and send it to Aon to ask for a quotation or more information about the master policy.