Professional Standards Schemes

What are professional standards schemes?

Unique to Australia, a professional standards scheme is a legal instrument that caps the damages that participating members of an occupational association can be liable for if a court upholds a relevant claim against them. An association with an approved scheme must meet statutory reporting obligations and show that it regulates its members to improve their professional standards and protect consumers of their professional services. This benefits the association by increasing consumer confidence in the profession.  A scheme operates for up to 5 years. At the end of the approved period, the scheme expires and has no legal effect. Before it expires, the association may apply for a new scheme, intended to operate in continuity with the old scheme. Professional standards legislation seeks to protect consumers by striking a balance between: 

• placing a ceiling on the amount of civil liability to which a member of an association participating in a scheme may be exposed 
• ensuring sufficient compensation is available to consumers for the vast majority of claims where liability results in an award of damages 
• requiring associations operating schemes to continuously improve the standards of competence and conduct of its members, so that claims are reduced in quantity and severity. 

An association usually applies for a scheme in the state or territory where it is incorporated or headquartered, for the scheme to operate there. However, professional standards legislation operates as a harmonised national system. So, if a scheme would operate in 2 or more states or territories, the application will be considered under the corresponding laws using mutual recognition provisions. These provisions require the Councils to consider any matter that the Councils for the other jurisdictions would have to consider. 

How we assess the limitation of liability cap

When assessing your application for a professional standards scheme, the Professional Standards Councils must consider:   

• the claims made against your members  
• your association’s oversight of these claims  
• your association’s ability to propose a limit of occupational liability  
• the potential of the scheme to protect consumers and improve professional standards.  

We also consider the need to adequately protect consumers before determining the final limit of liability for you to specify in the scheme. If insurance is unavailable to cover liability at the level of the highest claim, we may set the limitation of liability lower than the highest claim if that would protect consumers adequately.   

Professional standards legislation in all jurisdictions requires us to consider a history of occupational liability claims made against association members. The legislation also requires that associations monitor and analyse claims made against members by either:   

• establishing a claims monitoring committee, or 
• having a committee with these responsibilities.   

You must submit this information to us with your application for a professional standards scheme. This is in line with the relevant legislation in each state or territory.