Law Letter Hub Articles
Frequently Asked Questions: The Law Society Professional Indemnity Insurance Scheme
1 December 2020
In my last article I provided an update and overview on the current PII Scheme claims that were impacting on the profession in Tasmania.
In this article I thought it was timely to provide an overview of the important aspects of the professional indemnity insurance policy for the 2020/2021 period. Throughout this article I address a number of the frequently asked questions that I have had to address over the last twelve months in my role as Claims Manager for the Scheme.
When is a claim required to be notified to the claims manager and what are the duties of the practitioner?
Under the policy there are defined instances when the insured must notify the Claims Manager in writing as soon as practicable of any claim made.
A claim includes:
- Any writ, statement of claim, summons, application or other originating process, cross claim, counterclaim, third party notice or similar notice issued or served against the insured; and
- The receipt by the insured of any written notice of demand for compensation made by a third party against the insured.
When the insured receives notice of a claim a practitioner is not to admit liability or settle any claim or incur any expense in connection with any claim without the consent of the insurer.
When the insured provides a notification of a claim, a concise summary of the events giving rise to the claim should be provided and this should include relevant documents that provide sufficient background to the claim.
In instances where a writ or statement of claim is served the insured should ensure that accurate dates of service are provided to ensure that time limits can be complied with.
Appointment of a panel solicitor will be discussed with the insured, and where appropriate the insured may nominate a panel solicitor.
What if the claim is below the current excess?
In the event a claim is below the current firm excess, consent must be obtained from the insurer if the insured wishes to retain conduct of that claim and settle the claim.
If the insured retains conduct of the claim, they will be required to provide regular updates and advise the Claims Manager when the claim is resolved.
The insurer may take over the defence of a claim at any time and further provision can be made for a panel solicitor to be appointed if the current insured management of the claim becomes too onerous or more complex than initially envisaged.
What if the claim is over the current firm excess ?
Once a claim is notified to the Claims Manager the steps involved include an assessment of the claim by the Claims Manager and for the Claims Manager to brief a panel solicitor approved by the insurer to provide advice on liability, quantum and how the claim should be conducted.
The insured’s consent will be sought before proceeding to a defended hearing or the settling of a claim or in deciding whether to appeal.
If there is a dispute between the insurer and the insured as to whether to defend, settle or appeal a claim there is a provision in the policy for a binding opinion to be obtained from Senior Counsel. The fee payable to such Senior Counsel will be paid by the party requiring such advice.
The insured will be entitled at its own risk to contest any claim which in the opinion of the insurer should be compromised or settled. However, the insurer is not liable for any damages, costs or expenses incurred in addition to those which would have been incurred if the offer to compromise or settle such claim which was contemplated by the insurer had been made and accepted.
Am I covered for a complaint to the Legal Profession Board?
There is an additional benefit for practitioners under the current policy for hearing costs for any complaint that may result in civil liability or civil proceedings. The policy provides that the Insurer agrees to indemnify the Insured up to an amount not exceeding $100,000 for Investigation Costs & Expenses.
This includes, an official investigation, examination or inquiry includes an investigation, examination or enquiry by way of a Royal Commission or Coronial Inquiry or conducted by a regulatory authority such as the Australian Securities and Investments Commission and including any investigation, examination or enquiry conducted by the Legal Profession Board or any disciplinary tribunal but does not include any parliamentary committee.
Legal costs and expenses include those arising out of any legally compellable attendance at any official investigation, examination or enquiry that may result in civil liability. Importantly these costs include the costs of necessary preparatory work, advice and responses.
Am I covered for an order for payment of monetary compensation ?
Under the current policy, Investigation Costs and Expenses do not include an order for monetary compensation. This would include an order arising out of part 4.9 of the Legal Profession Act 2007 for an order to compensate a complainant for loss arising out of the complaint.
What claims are excluded?
The policy includes provisions when a claim will be excluded. This is not an exhaustive list but includes the following:
- For death, bodily injury (other than bodily injury consequent upon an act or omission in the provision of a professional service which gives rise to a civil liability in respect of which the practitioner is entitled to indemnity);
- Physical loss of or physical damage to property;
- Arising from a contract other than a contract to provide services in the business of practicing as a barrister or solicitor as defined by the policy;
- Brought about by the dishonest or fraudulent act or omission of the insured (not including any claim brought about by the fraudulent act or omission of an employee of the practice);
- Involving a fee dispute;
- For the payment of any trading debt incurred;
- For any civil penalty imposed on the insured;
- Directly or indirectly caused or contributed by external factors such as war, terrorism, radiation, nuclear weapons, malfunction of computer hardware or software;
- Incurred in connection with a practice conducted wholly outside of Tasmania;
- Incurred by the insured acting as an insurance agent;
- In respect of which notice has been given under a previous policy;
- Incurred by the insured acting as a director, secretary, officer or public officer of a body corporate other than a service, administration or nominee company or trust the sole business of which is conducted in connection with the practice;
- Arising in connection with practice or partnership disputes;
- Arising from wrongful dismissal or termination of an employment agreement;
- Arising from acts or omissions in business activities which include acting as broker, facilitator, commission agent or spotter associated with money lending activities or transactions other than where the insured’s only participation involves winding down these activities that commenced prior to 1 January 2000; and
- Arising from or contributed to by any flaw or malfunction in or inadequate or lack of programming of the Insured’s information and technology system, computer hardware resulting in a failure to manage date, time or time limitation information.
How much excess is payable on each claim?
Under the current policy the excess for each claim is $5,000 including the claimants costs multiplied by the number of partners and/or former partners who are liable at the time the liability is incurred to compensate the claimant (which is usually the time when the negligent act or omission occurs) or where the Schedule states some other amount, that amount.
Over the last two renewal periods the Professional Indemnity Scheme has issued certificates of insurance that specify the excess payable for the insured per claim.
Under what circumstances will my excess increase?
The policy sets out a number of circumstances where the excess on the claim will be increased.
The excess will be doubled if the claim arises out of:
- The insured acting for more than one party to a transaction otherwise than in accordance with Rule 12 of the Rules of Practice 1994; or
- A claimant’s action for damages or compensation being statute barred.
- The excess will be tripled if the claim arises out of a transaction in which the insured has acted in breach of an undertaking given in relation to the type of work performed.
In situations where the excess is doubled or tripled the insured is provided with notice of this at an early stage of the management of the claim and the reasoning for such a decision.
What assistance can the Claims Manager provide
In addition to managing claims notified by the profession, the role of the Claims Manager is to assist the profession on a daily basis and provide incidental advice that is associated with claims notifications. Specifically, the Claims Manager can provide assistance with risk management and risk mitigation strategies.
The Claims Manager can also provide advice in relation to the application of the current policy and guidance with respect to the obligations that arise under the policy.
Finally, as outlined in my previous article, the Scheme maintains data on the claims made and when required insureds can request an accurate claims history if required for professional reasons or top up insurance.
(Reference, The Law Society of Tasmania Certificate of Insurance and Professional Indemnity Insurance Master Policy, for the period 2020/2021.
Fleur Dewhurst
Lawyer
Professional Indemnity Insurance Scheme – Claims Manager
PO Box 79, Lauderdale TAS 7021
0427 800 030
fleurcd@fleurdewhurst.com.au
