Often Hong Kong businesses find themselves obligated to establish specific insurance policies when entering into contracts with corporate clients. Details can differ depending on the nature of services or the industry involved. This article aims to provide some tips for gaining a clearer understanding of the implications and significance of these requirements.
Commercial General Liability (CGL Insurance)
Commercial General Liability insurance protects you and your business against claims for bodily or personal injuries, and property damage to third parties arising from your operations or products or occurring on your business premises. It is a combination of a public liability insurance, advertising liability and product liability insurance.
What is the difference between a CGL insurance and the public liability cover included my business package?
The public liability insurance included in the business package is often limited to your activity in your premises. It may therefore be sufficient in some circumstances but does not cover certain issues arising from the use of your product or service.
As instance, it will not be sufficient if you are a contractor carrying some operation at the client’s premises, especially if this is outside of Hong Kong. Same case if you are selling products, the liability insurance included in your business package will not be sufficient either as it does not include the product liability cover.
Workers’ Compensation and/or Employers Liability Coverage
Both insurances above are related to accident or illness at work. Briefly said, workers compensation insurance covers the costs related to the injury without alleging any liability on the employer’s side. Employer’s liability insurance covers expenses if the employer gets sued for other damages.
This is not a medical insurance or a group personal accident insurance.
Systems are different in every country. In Hong Kong, the employees’ compensation insurance is the nearest equivalent to the insurance categories names above. Employees Compensation Insurance (ECI) is mandatory in Hong Kong and often bought through the business package insurance. For larger companies, it can be done on stand-alone.
Errors and Omission (E&O) liability insurance
Different from the general or public liability insurance, it can also be called professional liability insurance or professional indemnity insurance. It covers claims of negligence, errors, or omissions in the performance of the professional services. This insurance is particularly relevant for service providers (HR consultant, Tech Companies, Architects, business consultant). Limits requested by contract can vary from USD 1,000,000 to USD 5,000,000 and sometimes above. Of course, the higher the insured limit is, the more expensive is the premium.
It is crucial to understand that E&O policies operate on a claims-made basis. Therefore, if the policy is not renewed or is cancelled, any claims made after that date are not covered by the insurer. This is why, the contractual request to buy an E&O insurance will often come with the obligation to maintain the insurance for a certain period.
Privacy and network security cover
More and more often requested by contract, Privacy and network security coverage, often referred to as cyber liability insurance, is a type of insurance that provides protection against risks associated with data breaches, data security incident and the potential compromise of sensitive information.
Privacy and network security coverage and professional indemnity insurance are distinct types of insurance, but some insurance companies may offer a combination of both coverages under a single policy.
Other type of insurance
The insurance clause might include some other type of insurance such as automobile insurance or umbrella liability insurance. Obviously, if you don’t own cars, the automobile insurance does not make sense for your company and you can simply explain the situation to your client.
The umbrella liability insurance sits above the underlying general liability or professional liability and is not very common in Hong Kong.
Additionally, the required coverage limits and any additional insured or waiver of subrogation clauses should be clearly outlined in the contract.
It’s crucial for both parties to carefully review and negotiate these insurance requirements based on the specific risks associated with the services provided. At Clema Risk Solutions, we can help you decoding the insurance requirements, don’t hesitate to contact us.