Consumer information

Limited liability explained

One of the key benefits of Professional Standards Schemes is that they limit the civil liability of professionals who take part in them. In other words, they cap the amount of damages that a court can award to a client if they succeed in certain claims against a professional.

These limits vary from scheme to scheme, and the associations need to demonstrate that these limits are high enough to cover losses any person and most companies would suffer if they needed to make a claim. You can find out what these limits are for a particular association by contacting them directly or downloading their Professional Standards Scheme documents.

How limited liability protects you

Consumers are entitled to approach the court with claims for damages against professional service providers who have failed to discharge their duties properly.

But if their professional service provider is inadequately insured, consumers can end up missing out on any compensation awarded by the court, while still having to pay court costs and other expenses.

Professional Standards Schemes address this dilemma by limiting liability – and making sure that, if a claim is upheld by a court, participating professionals are able to meet any damages awarded at or below that limit.

This allows more professionals to stay in business, which increases competition and gives you more choice. It also stops professionals from going bankrupt if one of their clients makes a successful claim – a situation that would potentially leave them unable to pay the damages awarded to the consumer concerned.

Are there any claims that aren’t covered by this limited liability?

Yes. Whether limited liability applies to a claim or not will depend on the relevant professional standards legislation, which varies between states and territories.

Things that generally need to be considered include:

• Whether the professional is a member of an association that has a Professional Standards Scheme
• Whether the claim concerns something the professional has or hasn’t done in providing services related to his or her job
• What’s specified in the Professional Standards Scheme 
• Whether the Professional Standards Scheme applied when the relevant act or omission occurred
• Where the relevant services were provided
• Whether the claim arises from death or personal injury, dishonesty or fraud, or breach of trust, which are generally excluded from limited liability.

For advice about whether limited liability applies in a specific case or situation, please contact your legal practitioner.

If you’d like more general information about limited liability, please contact us.