Northern Territory Second Reading Speeches

[Index] [Search] [Bill] [Help]

PROFESSIONAL STANDARDS BILL 2004


Information :
Bill presented and read a first time.

Mr STIRLING (Employment, Education and Training): Madam Speaker, I move that the bill be now read a second time.

This bill is a further component in the government’s legislative response to the insurance crisis. Our previous legislative measures have been designed to reduce pressure on the cost and availability of public liability insurance. This bill, however, is focussed on professional indemnity insurance.

This cover insures professionals such as accountants, lawyers and engineers against claims by clients and others relying on their advice or services. Members will be aware of the difficulties faced in recent years by occupational groups in accessing indemnity insurance.

Indeed, the ACCC’s third monitoring report, released in August 2004, showed that professional indemnity premiums had risen on average by over 160% since 1999. Furthermore, many professionals are finding that when they renew their cover, it is subject to an increasing number of exclusions. For example, a survey in May 2004 by the Association of Consulting Engineers found that more than 50% of consulting engineering firms renewing their policies had areas of business limited by policy exclusions. The government is concerned this situation could result in a reduction of services available to consumers as professionals withdraw from providing these services. Alternatively, consumers will increasingly bear the losses arising from poor service because professionals are inadequately insured.

The government has participated in national discussions, which resulted in all jurisdictions committing to introduce nationally consistent professional standards legislation. This bill ensures that the Territory fulfils that commitment. The effect of the bill will also be enhanced by the Commonwealth’s amendments. That amendment prevents plaintiffs from using its legislation as a basis for action in order to circumvent limits established under state and territory professional standards legislation.

The bill is consistent, although not identical, to the national model based on New South Wales legislation. This reflects the fact that the Territory has benefited from the experience of other jurisdictions, particularly Victoria, and consultation with stakeholders.

The purpose of the Professional Standards Bill is to limit the liability of members of occupational associations who participate in an approved professional standards scheme. Such schemes are designed to improve occupational standards, while providing greater protection and certainty to consumers about the quality of professional services and level of recovery should adverse events occur.

I will briefly outline the main aspects of the bill - Establishing Schemes. The bill does not impose a scheme on any particular profession or occupational group. It is up to occupational associations to seek to establish one, and individuals and firms must join an association to access a scheme. Occupational associations must prepare their scheme, then apply to the Professional Standards Council to have the scheme approved.

An approved scheme can apply to all members of the occupational association, or to particular kinds of members of the association. A scheme typically requires members to implement codes of conduct and risk management strategies, develop complaints and disciplinary procedures, and to undertake ongoing professional development. These measures improve occupational standards and reduce the likelihood of claims. In return, the scheme caps the professional liability of members to an approved amount of not less than $500 000.

The capping of liability. Under the bill, liability is capped by reference to insurance arrangements, business assets, a multiple of the professional service fee or a combination of these. In order to receive the benefit of the liability cap, it is first of all necessary to be a member of an occupational association that has developed and had approved a professional standards scheme.

Second, members participating in the scheme must maintain insurance cover or business assets, or a combination of these, sufficient to meet claims up to their specified cap. To facilitate this, the bill provides that schemes may require members to have insurance policies of a particular kind that will cover their level of liability. Members must also comply with other requirements of the scheme, in particular the risk management strategies.

The cap on liability will only limit exposure to damages for property or pure economic loss, it will not apply to any claim involving a breach of trust or fraud or dishonesty. Further, the bill does not allow limitation of liability where there is a personal injury, even if the injury caused economic loss, or where a lawyer is negligent when acting in a personal injury claim. When a person is covered by a scheme, that scheme will apply to all the work done by the person and falling within the scope of the scheme, with the exception of work relating to contracts made before the commencement of the act. For the provisions of the act to apply, such contracts would need to be renegotiated. The bill does, however, provide for flexibility in capping arrangements. Schemes may allow members to accept higher limits of liability, or to be exempted from the scheme if approved by the occupational association. Schemes may also set differing levels of caps, for example, based on firm size or type of work. This flexibility will ensure members are able to retain a competitive edge in circumstances where levels of insurance are important, while encouraging continued improvement in the standards of that service.

The Professional Standards Council: the bill establishes an independent body, the Professional Standards Council, to approve and monitor schemes. It is intended that the Territory and other jurisdictions will appoint a common body of members to each council, thereby forming a single national Professional Standards Council. This will ensure consistent administration of the legislation across jurisdictions and is a cost-effective option for small jurisdictions such as the Territory. In the role of the Professional Standards Council in approving the scheme, the council will need to balance the need to limit the liability of members against the need to protect consumers, and to achieve improvements in occupational standards.

The bill sets out in clause 10 matters to be considered by the council when deciding whether or not to approve a scheme. These matters include the claims history of the members of the occupational association. They also include the cost and availability of insurance to those people; the affect of the scheme on consumers and other parties who may be affected by the scheme; and insurance and risk management standards set by the association. In addition, the decision-making process will be assisted through public consultation. The council must seek, and have due regard to, public comment on a scheme prior to approval. If the council approves a scheme it must then be considered by the minister who may authorise the scheme by publication of a notice in the Gazette. A scheme takes effect on a date set in the Gazette notice or, if no date is set, two months from the date that the notice is published.

The scheme can be disallowed by the Legislative Assembly in the same way as a proposed rule. Individuals can, before a scheme starts, lodge a legal challenge on the basis that the scheme fails to comply with the act. The council, at its discretion or at the request of the minister or the occupational association, can amend or cancel an existing scheme. The council also has authority to audit the compliance of scheme members with the risk management strategy. More generally, the council will have overall responsibility for monitoring and reporting on the operation of the legislation and promoting the development of professional standards.

Penalties: a person covered by an approved scheme is required to disclose that their liability is limited in all their advertising materials and business correspondence, except business cards. Failure to do so will incur a fine of 50 penalty points. Furthermore, if a member fails to advise a client, either through these documents or in some other form, that their liability is limited before an adverse event occurs, their liability will not be limited for damages arising from that event. The bill also obliges the member to provide a copy of their scheme to their client if requested. These requirements are intended to ensure that clients can make an informed choice about whether they wish to deal with a person whose liability is capped by a scheme.

Application: liability will only be limited on acts or omissions that occur after the commencement of the scheme and during the period in which the scheme is enforced. It is the timing of the relevant event that determines whether liability will be limited. Schemes may operate for up to five years, and may be extended for a further 12 months by the minister. This time limitation means that the standards, capping and other arrangements imposed by schemes will be regularly updated.

Consultation: the government has consulted on the proposed bill and it is supported by stakeholders, including Professions Australia, the Law Society Northern Territory, CPA Australia and Engineers Australia Northern Division. The bill is also seen by occupational groups as complementary to proportionate liability legislation which the Minister for Justice and Attorney-General is expected to introduce to the Assembly in the near future. Combined, these two legislative initiatives will have a greater impact on professional indemnity premiums.

As a result of the bill, it is hoped that occupational groups in the Territory will be encouraged to establish schemes that will improve the quality and safety of their service to clients, while reducing their members to exposure to liability risks in the course of their professional work. The bill is intended to balance the need to keep professional services available to consumers while protecting consumers against harm. In the absence of professional standards legislation, a client suing a professional may not have recourse to adequate insurance or assets to meet their claim. The proposed bill increases protection to consumers by ensuring that if an adverse event occurs, recourse is available to a guaranteed level of recovery and meaningful complaints and disciplinary system. Consumers are further protected by increased and more consistent standards of service.

Scheme members also benefit from the limitation and liability and through the risk management strategies which should make them more alert to risk and better able to avoid it. Members can also market the strategies they have put in place as a scheme participant. Participation in a scheme should mean that insurers will be able to more readily access member’s exposure to risk. This should place downward pressure on premiums for professional indemnity insurance, a result that should benefit both professionals and their clients. I commend the bill to honourable members.

Debate adjourned.

 

[Index] [Search] [Bill] [Help]