LAWPRO - E&O Insurance - FAQs - LAWYERS in Private Practice FAQs

If you have questions that are not answered below, or if you need further clarification or information, please contact LAWPRO^®'s Customer Service department toll-free at 1-800-410-1013, 416-598-5899 in Toronto or at service@lawpro.ca.

About HST and insurance premiums

Please note that, as an insurance company, LAWPRO does not provide tax advice. The answers provided below represent our understanding of the application of the various tax laws. However, we encourage you to consult your tax adviser about the application of these tax laws.

When does the HST come into effect in Ontario?

The Harmonized Sales Tax (HST) formally comes into effect in Ontario on July 1, 2010. Note that some transitional rules were enacted and some of them take effect before the July 1, 2010, implementation date. The Ontario Ministry of Revenue has published an Information Notice to help businesses and individuals with these special rules.
pdf icon Download PDF file.

Will goods and services be subject to the same rate of taxation under the HST regime?

In many cases, yes, and in other cases, no. In general, goods are currently subject to a five per cent Goods and Services Tax (GST) and an eight per cent Ontario Retail Sales Tax (PST), and come July 1, 2010, will be subject to a 13 per cent HST (i.e., no change). In general, services are currently subject to a five per cent GST; however, on July 1, 2010, they will be subject to the higher 13 per cent HST. Given that the legislation contains many exceptions to the above, the Ministry of Revenue has published a guide below to help businesses and individuals appreciate the differences.
pdf icon Download PDF file.

Is the PST disappearing?

No. Although the provincial sales tax for many goods and services is, in effect, being rolled into the HST, the Ministry of Revenue is retaining the PST on some items, such as an eight per cent provincial sales tax on insurance premiums.

After July 1, 2010, will HST be payable on premiums for my professional liability insurance under the mandatory program?

No. Premiums for your professional liability insurance under the Law Society of Upper Canada's mandatory program will continue to attract only the eight per cent PST.

After July 1, 2010, will HST be payable on my firm's premiums for our LAWPRO Excess policy?

No. Premiums for your professional liability insurance under LAWPRO's Excess insurance program will continue to attract only the eight per cent PST.

I have a new professional liability insurance policy with LAWPRO effective July 1, 2010. How will the new HST affect my premiums?

Policies effective on or after July 1, 2010, will not attract the HST. Premiums for your professional liability insurance under the Law Society of Upper Canada's mandatory program and your firm's LAWPRO Excess policy will continue to attract only the eight per cent PST.

I have paid my 2010 LAWPRO insurance premiums in full before July 1, 2010. Will I have to pay any HST as of July 1, 2010?

No. Whether or not you have paid your premiums in full or not is irrelevant as insurance premiums will continue to attract only the eight per cent PST which you have already paid if you have paid your premiums in full.

I pay my 2010 LAWPRO professional liability insurance premiums on a monthly/quarterly basis. Will the HST affect the amount of my premium payment after July 1, 2010?

No. Premiums for your professional liability insurance under the Law Society of Upper Canada's mandatory program will continue to attract only the eight per cent PST.

I have an outstanding premium balance as of July 1, 2010. Will the HST be applied to the overdue premiums?

No. Premiums for your professional liability insurance under the Law Society of Upper Canada's mandatory program will continue to attract only the eight per cent PST.

After July 1, 2010, how does the HST impact the amount I must remit to LAWPRO for the transaction levy surcharge?

The transaction levy surcharge remitted to LAWPRO is considered to be an insurance premium, and as such, does not attract the HST.

If the amount of the transaction levy surcharge is disbursed to a client after July 1, 2010, does the HST have any impact?

If you disburse the amount of the transaction levy surcharge to a client, subject to the Ministry of Revenue's transitional rules, this amount no longer attracts the five per cent GST, but after July 1, 2010, is subject to the 13 per cent HST (which is remitted directly to the government).

If a claim is reported after July 1, 2010, will the HST have an impact?

After July 1, 2010, the HST will apply to many defence and investigative costs, such as legal fees, fees for expert witnesses and other services. However, the maximum amount that you would be obligated to pay in relation to your deductible or that LAWPRO would be obligated to pay under the policy would remain unchanged.

What is the expected impact of the introduction of the HST on current and future claims?

As at December 31, 2009, LAWPRO accrued an additional $10.7 million in loss reserves to cover the expected impact of the HST on claims already reported that remain open after July 1, 2010. In other words, the additional cost to the insurance program to cover HST that will apply to many defence and investigative costs on claims not yet resolved is close to $11 million. In addition, going forward, we expect the HST to add about $3 million annually to claims costs reported under each new policy year.