Employers’ Liability Insurance 僱主責任保險
In Hong Kong, employers’ liability is normally insured through Employees’ Compensation (EC) insurance. The compulsory insurance requirement under section 40 of the Employees’ Compensation Ordinance (Cap. 282) covers work injury liabilities both under and outside the Ordinance. Statutory compensation for accidental injury or death arising out of and in the course of employment does not depend on employer fault, and may fall short of the employee’s actual loss. [Labour Department: compulsory insurance](https://www.labour.gov.hk/eng/faq/cap282a_whole.htm)
Liability outside the Ordinance is often called ‘common law liability’, although it also includes liability arising from certain industrial safety statutes and can be fault-based or strict. The employer’s legal liability must be established and can be contested. Damages reflect the actual loss, with compensation paid or payable under the Ordinance deducted to prevent double recovery.
EC uses a claims-occurring basis. Premiums normally apply an occupation-related rate to payroll, with a provisional premium adjusted to actual figures. Typical exclusions concern additional contractual liability, contractors’ employees, people outside the Ordinance’s definition of employee, and war, nuclear risks and terrorism. Compulsory legislation may override policy restrictions; a recovery clause allows the insurer to recover from the employer where legislation requires payment despite a breach that would otherwise defeat cover. Domestic helper package policies normally include the relevant employers’ liability cover.
The Employees’ Compensation Insurance Residual Scheme (ECIRS) assists employers who struggle to obtain cover. Entry routes include rejection by at least three insurers, or quoted rates 30% above the relevant High Risk Group benchmark. Rejections caused by unpaid premiums or failure to meet statutory occupational health and safety requirements imposed for insurance do not qualify under the rejection route. Rates may be adjusted for safety practices. Under a market agreement, Hong Kong EC insurers join the Bureau and participate as co-insurers with several liability. [ECIRS eligibility](https://www.ecirsb.com.hk/en/Criteria.html)
Products Liability Insurance 產品責任保險
Products liability insurance addresses legal liability for injury or damage caused by goods sold, supplied or repaired, services rendered and similar activities, away from premises owned or occupied by the insured. Manufacturers, assemblers, repairers and suppliers may face claims. Claimants can include users without a contract and bystanders, as well as buyers. Similar accidents on the insured’s premises should be considered under public liability cover.
Typical exclusions include employers’ liability, property in the insured’s custody and additional liability assumed by agreement. Liability arising from a product’s design, plan, formula or specification is normally excluded, as is liability arising from instructions, advice or information about its characteristics, use, storage or application. Cover should therefore not be assumed for every kind of product defect.
Distinguish damage caused by the product from repairing or replacing the product itself. If a folding chair with a manufacturing defect collapses and fractures a user’s leg, the supplier’s liability for the injury may be covered. Liability for repairing, altering or replacing the chair itself is normally excluded. Products liability insurance is not a product quality guarantee.
The policy may use a claims-made basis and an aggregate limit for the whole period. Claims reduce the remaining limit unless cover is reinstated in time. Supplying the United States and other North American markets may make cover more expensive or harder to obtain because of greater claims awareness. Liability insurance is long-tail business: claims can take years to settle, requiring records and claims reserves to be maintained for longer.
Professional Indemnity Insurance 專業彌償保險
Professional indemnity (PI) insurance covers legal liability arising from wrongful professional acts or omissions, including incompetent advice. Relevant professions include lawyers, doctors, accountants, architects and fund managers; medical cover is also called medical malpractice insurance. Depending on the profession and wording, cover may include third party injury, death, property loss or damage, and pure financial loss. Hong Kong licensed insurance broker companies must maintain PI cover meeting the applicable requirements. [IA: broker rules FAQs](https://www.ia.org.hk/en/supervision/reg_ins_intermediaries/files/FAQ_Broker_Rules_Enclosure.pdf)
PI normally uses a claims-made basis, focusing on when the third party first makes the claim: it must fall within the policy period or an applicable extended reporting period. The latter is a limited period immediately following non-renewal or cancellation. A retroactive date may exclude relevant injury or damage occurring before that date, while incidents known at inception are normally excluded. Check these provisions and reporting conditions when changing insurer or cover basis to avoid gaps.
Besides damages, the policy normally covers the insured’s defence expenses and the successful claimant’s legal expenses. Whether insured costs fall within the aggregate limit depends on the wording, and a deductible may apply to each claim. Premiums are often adjustable against annual revenue, total funds managed or another variable, with a provisional payment adjusted to final figures. Rates reflect the profession’s risk.
Typical exclusions include pollution and contamination, additional contractual liability, war and nuclear risks, and liability caused or contributed to by dishonest, fraudulent, criminal or malicious conduct of the person seeking indemnity. Fines, penalties, punitive, exemplary and other non-compensatory damages are not recoverable. The territorial restriction on professional activities and the jurisdiction restriction on claims are separate requirements; meeting one does not establish compliance with the other.
Directors’ and Officers’ Liability Insurance 董事及高級管理人員責任保險
Directors’ and officers’ liability (D&O) insurance addresses damages arising from wrongful acts committed in that capacity, and normally also covers the company. Wrongful acts may include omissions, breaches of duty or trust, breach of warranty of authority, and misstatements or misleading statements. Claimants may be shareholders, employees, customers or creditors. Some policies extend the insured definition to all employees for claims involving harassment, discrimination or wrongful termination.
D&O uses a claims-made basis, normally with a flat premium and an aggregate limit. Defence expenses and the successful claimant’s legal expenses may be covered, either within or outside the limit. Deductibles may apply to individual directors or officers, with an aggregate deductible for the period. Claims about past conduct may arise after departure, closure, dissolution or takeover, so continuing cover needs consideration. An indemnification provision in the company’s articles does not remove that need.
Claims involving an individual’s unentitled personal profit, dishonesty or fraud are normally excluded. However, costs of successfully defending dishonesty or fraud allegations are usually covered. Professional duty claims belong under PI, while third party bodily injury and physical property loss or damage are public liability risks normally excluded from D&O. Liability under guarantees or warranties is also excluded, except for warranty of authority.
Other restrictions concern circumstances known or reasonably knowable at inception, pollution and contamination, additional contractual liability, war and nuclear risks, territory and jurisdiction. Fines, penalties and non-compensatory damages are generally irrecoverable. The exception described in this section concerns punitive or exemplary damages for libel or slander; it does not extend cover to all punitive damages.
Public Liability Insurance 公衆責任保險
Public liability (PL) insurance addresses legal liability for accidental third party death, injury or property damage, normally excluding risks dealt with by specialist motor, EC, products liability and PI cover. A customer injured because a shop negligently maintains its floor is a typical example. The contract generally protects the insured: injury alone does not normally give the third party a direct claim against the insurer, and the insured’s legal liability must still be established.
PL normally uses a claims-occurring basis, focusing on injury or damage arising from an accident during the insurance period. A claim made years later may still be covered if notification requirements are met. Limits normally apply per occurrence, with or without an additional aggregate limit. The insured’s defence expenses and the successful claimant’s legal expenses are normally covered, with insured costs and expenses usually payable in addition to the liability limit.
Check both the accident territory and the jurisdiction clause; typical policies restrict claims to Hong Kong jurisdiction. Additional contractual liability, war and nuclear risks are normally excluded. Premiums may be provisionally based on wages or turnover and later adjusted. Non-adjustable premiums are also common in Hong Kong: projected figures are accepted as final, without an additional or return premium for changes in actual figures.
Specific Hong Kong requirements apply. Owners’ corporations must maintain third party risks insurance for death or bodily injury liability relating to common parts and corporation property, for at least HK$10 million per event. Exceptions include compulsory motor liability, employers’ liability and additional contractual liability; non-compliance may expose management committee members to criminal liability. [HAD: owners’ corporation insurance](https://www.buildingmgt.gov.hk/en/Daily_Operation_of_Building_Management/2_4.html) Hotel or guesthouse licence applicants must also obtain PL for use of licensed premises by any person, with at least HK$10 million per event and no aggregate limit for the insurance period. [Licensing guidance](https://www.hadla.gov.hk/filemanager/en/docs/layman.pdf)
Practice
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