advice online - Professional Liability

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Professional Liability

What is professional liability?
Do I need to be concerned about professional liability if I'm an employee?
Do I need to be concerned about professional liability if I'm a contractor?
Further information on APESMA Professional Indemnity Insurance

What is professional liability?

Professional liability arises where a professional is negligent, that is where the professional breaches a duty of care to another person. For example, a doctor has a duty of care to a patient, a teacher to a pupil and an engineer to a client. The duty is to perform the required task (treat the patient, instruct the pupil, design the process) to the standard of skill, care and diligence of a reasonable person performing similar work. A person who suffers a loss because of a negligent act can make a civil claim for compensation for that loss.

Do I need to be concerned about professional liability if I'm an employee?

The employer is almost always liable for the actions of the employee under the principle of "vicarious liability" and usually has an insurance policy to cover the loss. While they can be sued, employed professionals are hardly ever sued personally. Employers are unlikely to sue their employees as they usually rely on insurance to make good any loss.

Where an insurance company makes a payment arising from professional liability, they are also barred from recovering that money from an employee of the organisation in question, unless the act of the employee was serious or willful misconduct. Third parties rarely sue employed professionals, preferring to sue the employer which usually has more assets and an insurance policy.

Employed professionals can, however, be found personally liable for their actions in some circumstances. Employed professionals in high risk positions who are concerned about being held personally liable should seek an indemnity from their employer.

Members can contact adviceonline@apesma.asn.au to speak with an Industrial Officer who can outline the issues in detail.

Do I need to be concerned about professional liability if I'm a contractor?

Independent contractors are liable for their own actions. If you are a contractor, that is, you are not an employee but in business for yourself, you will be liable for your own acts.

Experienced professionals working as independent contractors need to have a good professional indemnity insurance policy. The insurance also needs to be maintained after the work is done to ensure it is valid at the time a claim is made. The only circumstance where you would not have your own insurance as a contractor would be where you were only doing work for one client and that client gave you a comprehensive indemnity.

APESMA has available to members competitive professional liability insurance cover. Members can contact adviceonline@apesma.asn.au to be transferred to APESMA Insurance Services who can discuss options for comprehensive cover.