The liability capping framework and PI reform process

Key Points

• PSL in Commonwealth. state and territory jurisdictions now provides the framework for an effective cap on PI claims. The Institute has implemented a system of monitoring PI cover and claims history of members to meet reporting obligations under the PSL.
• The limits on damages provided for in the Institute schemes will give greater certainty in relation to Professional Indemnity (PI) risks and should provide longer term stability to the PI insurance market.
• The Institute continues its lobbying efforts to achieve a workable scheme in Tasmania.

PI reform process

The first leg of the Institute’s strategy to achieving long term changes to a competitive and sustainable PI market in Australia for our members was to achieve an effective liability capping framework , with the adoption of proportional liability and professional standards legislation (PSL) in all states and territories. Together with amendments to Commonwealth legislation, the state and territory PSL provided the framework for an effective regime to cap the level of PI claims.  

Following passage of PSL in NSW, the PSC was constituted, as a statutory body, to consider and approve schemes presented by professional bodies and to drive the improvement of occupational standards and protection of consumers.  

The next step was the finalisation by state, territory and Commonwealth Governments of the administrative procedures to allow the approval of limitation of liability schemes with a single ‘national’ administrative body (the Professional Standards Council (PSC)), to process scheme applications and administer occupational schemes on behalf of the states, territories and the Commonwealth.

However, with the potential benefits of PSL there are also obligations, and the Institute has been actively working with the PSC to meet the reporting, educational and monitoring requirements for our members. Some aspects of the risk management strategies required under the Act (such as claims monitoring) are key to the operation of the PSC Schemes. 

Greater certainty and stability

The adoption of proportionate liability and professional standards legislation in all states and territories, together with amendments to Commonwealth legislation provides the framework for an effective regime to cap the level of PI claims nationally. The Institute now has most elements of the much anticipated ‘national framework of capping schemes’. While members in New South Wales have had a scheme in place since 1997 it is with the approval of schemes in other states and territories (and their prescription by the Commonwealth), that the capping of liability will now be fully effective.

Tasmania

Tasmanian professional standards legislation still presents an obstacle to achieving a truly national framework. As long as Tasmanian legislation contains the provision that the Institute must approve any application for a higher cap, without limitation, a consistent and effective scheme in Tasmania cannot be approved. The Institute is working with the Council of Professional Organisations and the Professional Standards Council to achieve consistent, effective professional standards legislation.  

Article last updated 21 July 2011