All legal practitioners in Victoria are required to obtain and maintain a minimum level (compulsory layer) of professional indemnity insurance. The LPLC policy meets the minimum PII requirements of the LIV scheme for law practices with 20 or fewer principles and/or less than $10 million in annual turnover.
However, LIV recommends law practices regularly review whether they need to purchase additional (top-up) PII having regard to a variety of factors including the firm profile, areas of law, value of transactions undertaken, client profile, contractual requirements with the clients, areas of occupational liability excluded from the LIV Scheme and the risk of appetite of the firm’s principals.
Firms should also be aware that the LPLC’s compulsory layer insurance policy contains various limitations and exclusions:
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if the policy of $2m includes expenditure by the insurer for defence costs associated with a claim
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normal PII exclusions such as
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claims for refunds of costs paid to the firm
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claims for contractually assumed liability beyond that otherwise payable at law
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claims for penalties, fines or enquiries into a practitioners conduct
In the situation where liability is capped at $1.5 million, there may be potential shortfall equal to the amount by which defence costs exceed $500,000 that a law practice will be required to finance from its own resources, in order to complete a full payment to the claimant.
A legal practice is not liable for damages in relation to the cause of action above the prescribed scheme cap if the claim is covered by the LIV scheme.