Professional Liability Insurance Requirements for Firms

How to report insurance

As a firm representative, you must report your insurance information to CPA Ontario during the Annual Practitioner Dues (APD) filing period through My Portal, by providing the following:

• insurance information as noted in your policy (i.e. policy number, limit of liability per claim, etc.)
• the source of coverage
• number of members in the firm
• effective and expiry date
• confirmation of coverage for all professional services
• confirmation of discovery insurance (extended reporting period)

Insurance information must be provided during the APD filing period (from mid-July to September 30 of each year) to CPA Ontario to maintain firm registration and membership in good standing as outlined in Regulation 14-1, section 11.

Failure to report insurance information during the APD filing period will result in the suspension of the firm and its firm representative. The firm has 30 days after the suspension to provide proof of insurance to reinstate the firm and Firm Representative. If the firm does not provide this, it will be deregistered and the firm representative’s membership will be revoked.

Prescribed levels of insurance

The minimum amounts of professional liability insurance apply to all firms engaged in the practice of public accounting or providing accounting services to the public. The required minimum limits are as follows, per claim:

• $1 million for a firm of one member
• $1.5 million for a firm of two or three members
• $2 million for a firm of four or more members

The maximum allowable deductible must be reasonable in relation to the total revenue of the firm and shall not be more than 50 per cent of the required minimum limit. Each firm must set aside assets (cash or cash equivalents) that are at least equal in value to the deductible amount specified in the professional liability insurance policy.

The minimum amount of professional liability insurance required to be maintained and maximum allowable deductible are set out in Regulation 14-1.

Firm representatives are reminded that their PLI must continue to cover all professional services conducted by the firm, including the Practice of Public Accounting or Providing Accounting Services to the Public.

Notification Requirements

Firms must notify CPA Ontario directly if PLI coverage is or becomes subject to any exclusion for an area of practice, expires, is cancelled, terminated or reduced below required limits.

Firms also must ensure their PLI policy requires the insurer to notify CPA Ontario of any exclusions from the required coverage for any areas of the firms practice.

Discovery policy requirements

Professional liability insurance in an unreduced amount must be maintained for at least six years after a member ceases to be involved in the practice of public accounting, providing accounting services to the public or the firm is dissolved.

Should a member pass away, the estate should maintain coverage for the six-year discovery period. To provide these details, contact the Firms and Licensing team.

Discovery policy can also be referred to as “an extended report period”.

More specific details on the circumstances are provided in Regulation 14-1.

Providing charitable assurance services without reward

Members who engage in the practice of public accounting without reward, under certain conditions, do not need to be licensed. However, you must still have professional liability insurance coverage.

If you are a member providing assurance services without reward for small charitable or not-for-profit organizations, CPA Ontario has approved a policy to provide insurance coverage at no cost. You must register with CPA Ontario and meet certain terms and conditions.

One of the conditions is that each organization has annual gross revenue from all sources of $100,000 or less. Members who provide assurance services without reward for organizations that have annual gross revenue of more than $100,000, or who otherwise do not meet the prescribed terms and conditions, must obtain their own insurance coverage.

See Public Accounting Licence for more information on the exemption and how to apply for the policy arranged by CPA Ontario. For any further questions, please contact the Firms and Licensing team.