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Frequently Asked Questions

  • What is Professional Standards Legislation (PSL)?

    Professional Standards Legislation (PSL) allows the registration of professional standard schemes by professional associations which have the effect of limiting the civil liability of participants in the scheme. These schemes are approved and monitored by the Professional Standards Councils (PSC), in consultation with the relevant professional association.

    Limited civil liability means that, if participating members or law practices are sued by a client, a monetary ceiling will generally apply to the amount of damages that can be awarded.

    Applicable legislation:

  • What is the status of the LIV Professional Standards Scheme?

    The first LIV Professional Standards Scheme commenced 1 July 2010 for a period of 5 years.  The second scheme commenced 1 July 2016 for an additional 5 years.

    The scheme instrument has changed over time to reflect the changing regulatory environment and allow the recognition of both individual members and incorporated legal practices.

    An application for a new scheme will be lodged in June 2020, a year prior to the cessation of the current scheme.

  • What services are capped under the LIV Scheme?

    PSL imposes a limit (cap) on occupational liability. This is a member’s civil liability, as determined by a court, arising (in tort, contract or otherwise) from an act or omission of a member acting in the performance of his or her occupation.

    A member’s liability for an act or omission outside his occupation (or which would not be covered by his occupational liability insurance) will not be capped by a scheme which otherwise applies to the member.

    The Legal Profession Uniform Law and Rules prescribed the regulatory framework for the provision of legal services in Victoria  

  • What services are excluded from the LIV Scheme?

    PSL imposes a limit (cap) on occupational liability. The Professional Standards Act 2003 (Vic) however specifically excludes the limitation of liability of claims in relation to:

    • Personal Injuries Claims - negligence of a legal practitioner acting for a client in a personal injury claim
    • a breach of trust;
    • fraud or dishonesty; or
    • certain proceedings under the Transfer of Land Act 1958.
  • What are the Scheme Caps?

    In essence, the Scheme caps the occupational liability of participating LIV members to an amount of $1.5m or $10m depending on the total revenue of the law practice and the number of principals of the law practice, and to the extent that liability can be limited under the Professional Standards Act 2003 (Vic).

    Class

    Description

    Monetary cap

    1

    Participating members in a law practice which had, at the time of the relevant cause of action:

    • 20 or fewer principals, and
    • $10 million or less in total annual fee income in the financial year.

    $1.5 million

    2

    Participating members in an incorporated legal practice which had, at the time of the relevant cause of action:

    • 20 or fewer principals, and
    • $10 million or less in total annual fee income in the financial year.

    $1.5 million

    3

    Participating members in a law practice which had, at the time of the relevant cause of action:

    • more than 20 principals, or
    • more than $10 million in total annual fee income in the financial year.

    $10 million

    4

    Participating members in an incorporated legal practice which had, at the time of the relevant cause of action:

    • more than 20 principals, or
    • more than $10 million in total annual fee income in the financial year.

    $10 million

    Both the participating members in a law practice and the Incorporated Legal Practice must be members of LIV and scheme participants for Class 2 and Class 4.

  • Why does the scheme segregate ILPs separately?

    An ILP corporation is a legal entity.  The legal practitioner and the firms may both be named in a claim.   If only the legal practitioners are a member of the scheme, then both the ILP and the legal practitioners (as directors of the ILP) may be exposed to the risk of a claim exceeding any cap the individual legal practitioners within the ILP may have applied for under the Scheme.

  • Can I apply for a Higher Cap / Limit of Liability?

    Yes, the legislation provides discretionary authority for the LIV to confer higher discretionary caps upon application.  Higher caps can be approved for all services, or in any specific case or class of case.

    See section 27 for information on how to apply for higher limits of liability.

  • Who can participate in the by LIV Scheme?

    All members who hold a current Australia Practising Certificate, unless they are corporate or government lawyers. Incorporated legal practices are also defined as a participating member.

    Professional Standards Schemes are not ‘opt-in’ schemes.  All members are deemed to be a participating member unless an exemption has been approved. 

    If a scheme applies to a certain member, it also applies to each partner and employee of that member, and if the member is a body corporate, to each officer of that member. 

    This means that all solicitors (that is, any person who holds a current Australian Practising Certificate) within the law practice would need to be members of the LIV and of the LIV Scheme if an incorporated legal practice wishes to participate

    Sections 19 – 22 of the Professional Standards Act 2003 (Vic) provides additional interpretation.

  • Can I apply for a scheme exemption?

    Yes, PSL allows the LIV to consider applications for a scheme exemption.

    The LIV Professional Standards Scheme is a legal agreement that obligates LIV to monitor, enforce and improve the profession standards of members, reducing the risk for Victorian consumers of legal services.  The scheme exemption application process focuses on an individual risk assessment of a firm and their clients.

  • How do I apply for a scheme exemption?

    An exemption application may be lodged using the prescribed form downloadable from the www.liv.asn.au/scheme

    Applications for an exemption must address the prescribed criteria which requires:

    • a review of their legal service, client profile and risk management framework
    • an assessment of adequacy of their current professional indemnity insurance policy coverage
    • consideration of the appropriateness of top-up cover to manage uncapped liability
    • an acknowledgement of the consequences of unlimited liability for individual principles and law practices
       

    LIV scheme operates on a ‘one in all in’ basis and requires all eligible associates and/or participating members in a legal practice to be scheme members subject to an exemption application. LIV refers members to the Professional Standards Act 2003 (Vic) section 20 - 22 ‘Other persons to whom a scheme applies’. 

    The LPLC has developed a Risk Management Audit Checklist to assist legal practitioners to  determine and monitor whether their practice is at risk of a negligence claim arising from poor management of the retainer or the matter.  The checklist provides an excellent tool for members to undertake a risk assessment.

    An exemption may be granted on and from the date on which the exemption is granted or on and from a later date specified in the exemption. 

  • Is the Professional Standards Scheme just another insurance policy?

    No, a Professional standards scheme is not an insurance policy.

    Section 2112 of the Legal Profession Uniform Law (Victoria) requires all legal practitioners to hold or be covered by professional indemnity insurance before engaging in legal practice in Victoria.

    Professional indemnity insurance (PII) indemnifies you for a claim made against you, subject to the terms, conditions and limit of the policy.  PII does not limit you occupational liability, it simply transfers the financial risk to the insurer.   The LIV professional standards scheme provides an additional level of security in a legal practices risk management framework by capping liability.

    Capped liability means that damages made pursuant to a claim is limited to a prescribed amount.

  • Does the LPLC PII policy meet the insurance requirements for scheme participants in smaller law practices?

    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:

    • if the policy of $2m includes expenditure by the insurer for defence costs associated with a claim
    • normal PII exclusions such as
      • claims for refunds of costs paid to the firm
      • claims for contractually assumed liability beyond that otherwise payable at law
      • 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.