23 October 2025, by Ram Nandrajog, Executive Vice President, Head of Financial Services, Aon Insurance Brokers (Malaysia) Sdn Bhd
Professional indemnity (“PI”) insurance is designed to protect solicitors, advocates and legal executives from claims made against them arising from advice given or actions taken in a professional capacity. The policy covers claims brought by a client or third party in connection with your legal services. Allegations may include negligence, breach of trust or defamation, among other possible causes. PI insurance is one of the most important policies for solicitors and law firms and is a regulated requirement to practise. It protects both the law firm and its individual advocates and solicitors.
The Mandatory PI Limit of Indemnity for the Malaysian Bar starts at RM250,000 for a one-lawyer firm and increases by RM50,000 for each additional lawyer, up to a maximum of RM2,000,000. Thereafter, Top Up PI provides additional protection to the Mandatory PI Insurance (“Primary Policy”) required by your law firm. Firms may purchase higher limits (to top up their coverage) in addition to the mandatory requirement. Based on claims trends under the PI insurance scheme, it should be noted that claims breaching the mandatory limit are typically severe, making the Top Up cover an essential layer of balance sheet protection.
Top-up insurance works best when it’s put in place at the same time as your underlying mandatory layer, giving you peace of mind and coverage certainty at the time of a claim. Firms should consider purchasing top-up insurance when handling high-value projects, complex cases or work in a foreign jurisdiction. To avoid being in a position where you must pay for claims out of your own pocket, the top-up cover provides an important additional layer of protection. For example, if your firm receives a Letter of Demand where the claim amount is RM5,000,000 but your current coverage is only up to RM250,000 (assuming you are a one-lawyer firm), you risk paying the remaining RM4,750,000 yourself. However, with a top-up limit in place, the entire claim would be covered by the insurance programme.
Top-up limits are renewable annually, just like your mandatory limit, and it is prudent to renew them every 12 months. To reiterate, top-up insurance acts as a safety net for large, unforeseen losses. With rising litigiousness and growing awareness in Malaysia, claims activity is expected to intensify in terms of frequency and severity. As best practice, top-up limits should be maintained consistently to avoid complications at the time of a claim. It is also imperative to note that claims arising from past acts may be brought against a law firm several years after the matter was completed.
Important Note: The applicable Limit of Indemnity is the limit in place when you first become aware of the claim or potential claim, not the Limit of Indemnity when the legal work was performed.
Example:
- Firm A was working on a Sale and Purchase Agreement (“SPA”) project in 2020. At that time, Firm A’s Limit of Indemnity was RM1,000,000 (RM250,000 mandatory limit and RM750,000 top-up limit).
- In 2024, a Writ of Summons was filed against Firm A arising from the SPA project. At that point, Firm A’s Limit of Indemnity was RM250,000 as they chose not to renew their Top-Up insurance once the project was concluded.
- Therefore, the applicable Limit of Indemnity for the claim is RM250,000.
Things to Consider When Choosing Your Top-Up Provider
- Seamless claims experience
To avoid unnecessary complication with claims that may breach the mandatory layer, purchasing your Top Up layer from the same insurer helps ensure that the notification of a claim is handled seamlessly.
- Misconduct claims coverage
When considering your options, look for Top Up solutions that include misconduct claims coverage up to the Top Up limit with no sublimit.
- Unlimited retroactive coverage
A retroactive date defines how far back in time a loss can occur for your policy to cover a claim. If a claim happens prior to your retroactive date, your policy won’t provide benefits. To ensure all legal work conducted since your firm was established is protected, ensure that the Top Up programme you choose provides unlimited retroactive coverage.
- Cyber liability
Consider offerings that allow some level of Cyber third-party coverage. While this exposure is best taken care of by a specialised Cyber Insurance policy, if there are top-up policies that offer a level of coverage, be sure to explore them.
- Daily compensation for court attendance
This coverage relates to compensation provided if you are required to attend court as a witness in connection with a claim against you.It is a useful add-on when considering which Top Up solution to purchase.
- Options at your disposal
Top-up programmes come in different forms, and you should consider which option best suits your needs.For example, some top-up policies include auto-reinstatement while others provide full limits for misconduct.
The Aon proposition allows you to select robust coverage while offering several options for the Limit of Indemnity.
- Option 1: Any One Claim
This means the Total Limit of Indemnity is available for each and every claim brought against the policy during the policy year.
Example: If you purchase a Total Limit of RM2,000,000 and three claims are brought against you that trigger the Top Up policy, each claim will have the total limit available (3 x RM2,000,000).
- Option 2: Any One Claim and in the Aggregate
This means that the Total Limit of Indemnity is the total amount available for all claims brought against the policy during the policy year.
Example: Using the same example under Option 1, the three claims would share the same RM2,000,000 limit (1 x RM2,000,000). If the first claim exhausts the Total Limit of Indemnity of RM2,000,000, the remaining two claims would not be covered under the policy.
Option 2 will be slightly cheaper than Option 1, as it includes an aggregate cap, but the option to save on premium is for firms to decide. .
For firms seeking limits in excess of RM30,000,000, Aon has a facility with capacity of up to RM150,000,000 in total and can also consider case-by-case submissions for even higher limits. Please reach out to us via malaysianbar@aon.com to ensure your specific needs are met.
For further enquiries, please contact:
Elsa Balakrishnan
+603-2773 7155
elsa.balakrishnan@aon.com
Joanne Anthony
+603-2773 7053
joanne.anthony@aon.com