THE LAW Council of Australia will be writing to all state and territory governments seeking an amendment to professional standards legislation to reflect the professional indemnity cover now generally available in the market.
The Victorian Bar has drafted a proposed amendment to the professional standards acts now in place around the country to allow for compulsory layer insurance that includes defence costs, and compulsory cover that doesn’t include defence costs — commonly known as costs-plus or costs-in-addition cover.
They have been backed by the NSW Attorney-General, Bob Debus, who has written to all state and territory attorneys-general asking them to amend their legislation to allow for both cost-plus and cost-inclusive cover.
Based on legal advice it had received that cost-inclusive cover did not satisfy the standard required by the legislation now in place, the Professional Standards Council (PSC) in November last year issued an amended policy statement saying that only cost-in-addition cover would be acceptable for professional standards schemes.
However, Christine Harvey, chief executive officer of the Victorian Bar, said “costs-plus cover is not easily obtainable in the market” and this is the case for all professionals, not just lawyers.
For example, the Legal Practitioners Liability Committee (LPLC), Victoria’s publicly run professional indemnity insurer for lawyers, offers only $1.5 million compulsory layer cover inclusive of legal costs. In a circular to members last year, the Bar said the LPLC had shown no “preparedness to amend the wording of its policy”.
To comply with the legislation, the Bar said the LPLC would probably have to change the cover to $1.5 million plus defence costs. However it said this would significantly increase the cost of premiums for Victorian barristers.
“The Bar Council is therefore of the view that under present legislation, members could not confidently rely on the availability of a cap on liability under a scheme for even $1.5 million without having in place the present primary layer insurance for $1.5 million inclusive of costs and appropriately worded top-up insurance for an amount equal to the amount of the relevant cap on liability,” the circular states.
Instead, along with the Law Council nationally, since the PSC guidelines were released, it has been lobbying for changes to the law in Victoria. Its chair, Kate McMillan, will be meeting with the state Attorney-General Rob Hulls to ask for amendments in coming weeks.
The Bar has proposed two options for its scheme — either separate classes of cap per claim according to seniority, ranging from $1.5 million for juniors to $5 million for silks, or a blanket $1.5 million cap for all barristers.
But under the present legislation, the Bar said barristers would also have to hold additional top-up cover equivalent to their cap level as well as a minimum of $500,000 to cover for defence costs.
The NSW Bar Association has had a professional indemnity scheme in place since January last year providing a $1 million cap on claims plus defence costs, but it is the only legal professional association that has managed to introduce this.
The Victorian Bar had considered introducing a similar scheme to NSW, but this couldn’t readily be achieved with the difference in insurance requirements for barristers in the two states.
Law Institute of Victoria (LIV) CEO John Cain agreed it would be preferable if the professional standards legislation were changed “to ensure that where you have a costs inclusive policy, that is appropriate insurance to have under a professional standards scheme”.
LIV has already lodged a draft application for a professional standards scheme to the PSC for its members, but its final application has been held up by the PSC’s revision of the application form, which is being circulated for discussion.
“Victoria [has] been poised to lodge an application for approval of a scheme, but we have been caught up in the redrafting of the application,” Cain said.
LIV’s proposed scheme includes a cap of $1.5 million for sole practitioners in firms with fewer than three principals. Liability increases by $500,000 for each additional principal up to a maximum of $10 million. There is also discretion to increase the cap beyond this level for individual clients.
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