The Law Society of New South Wales Professional Standards Scheme (“Scheme”) is an exclusive benefit for its Solicitor Members in private practice. It enables Solicitor Members to limit their civil liability, provided they meet the Scheme Instrument requirements.
The Scheme commences on 22 November each year. Solicitor Members in private practice are required to either register in the Scheme, or apply for exemption from the Scheme if they do not wish for the Scheme to apply to them.
How does the Scheme operate?
The Scheme caps the civil liability or damages that participating solicitors and law practices may be required to pay if a court upholds a claim against them. In principle, a court will limit the damages it awards in respect of a claim for damages against a Scheme participant, relating to occupational liability and arising from a single cause of action, if they show:
- they are a Member of the Law Society and participant of the Scheme at the time the cause of action arose;
- they have the requisite coverage of professional indemnity insurance, insuring against occupational liability to which the cause of action relates; and
- the amount payable under the insurance policy is no less than the amount of the relevant limitation of liability specified by the Scheme.
A court, in awarding damages, will limit those damages to the relevant liability cap specified in the Scheme instrument. Liability that is limited by the Scheme is to the extent permitted by the Act.
Detailed information about the Scheme can be found in our factsheet here.
Section 27 of the Professional Standards Act 1994 (NSW) (“Act”) – Insurance to be of requisite standard
For the purposes of a scheme, an insurance policy must be a policy, or a policy of a kind, which complies with standards determined by the occupational association whose members may be insured under such a policy, or a policy of such a kind.
Is the cap on liability reduced if the sum insured under an insurance policy is less than the relevant cap specified in the Scheme instrument?
No.
Section 26A of the Act – Liability in damages not reduced to below relevant limit
The liability in damages of a person to whom a scheme applies is not reduced below the relevant limitation imposed by a scheme in force under this Act because the amount available to be paid to the claimant under the insurance policy required for the purposes of this Act in respect of that liability is less than the relevant limitation.
Note: Section 4 (1A) permits a defence costs inclusive policy for the purposes of this Act, which may reduce the amount available to be paid to a client in respect of occupational liability covered by the policy. Section 26A makes it clear that this does not reduce the cap on the liability of the scheme participant to the client, and accordingly the scheme participant will continue to be liable to the client for the amount of any difference between the amount payable to the client under the policy and the amount of the cap.
Incorporated legal practices (ILP)
Pursuant to clause 3 of the Scheme Instrument, which can be accessed here, an ILP is qualified to be an ILP Member and the Scheme will apply to the ILP Member if all of its principals and Australian legal practitioners who are recorded by the Society as having their principal place of practice in New South Wales are Solicitor Members. ILP Members must ensure all solicitors who hold a practising certificate issued by the Law Society are Solicitor members throughout the Scheme year to ensure the Scheme applies.
An ILP is ineligible to participate in the Scheme during any period a legal practitioner with a principal place of practice of New South Wales is practising at the ILP and is not a Solicitor Member.
Need assistance?
If you would like assistance or more information about the Scheme, please call one of our friendly Scheme Administration Team members on (02) 9926 0189 or email us at scheme@lawsociety.com.au.
