Professional Indemnity Insurance

09 Nov Professional Indemnity Insurance

Practice note ID: 4.8 Professional Indemnity Insurance

Status: Approved

Issued: October 2022

 

1. Rationale

A number of registered professional engineers (“RPEQs”) have made enquiries to the Board of Professional Engineers of Queensland (“Board”) about their personal requirements to obtain professional indemnity insurance, as contemplated by principle 3.2 of the Code of Practice[1].  The purpose of this practice note is to clarify the Boards position on the requirement that RPEQs must take all reasonable steps to procure and maintain professional indemnity insurance.

 

2. Introduction

Under the Professional Engineers Act 2002 (Qld) (“Act”) the Board must make a code of practice.[2]  The Board must also review the code of practice every three years.[3]  The code of practice has no effect until it is passed by regulation.[4]

The current code of practice was approved by the Board on 4 August 2020 after undergoing a consultation process as stipulated in the Act.[5]  The code of practice came into effect on 29 October 2021 after it was passed by regulation.[6]  The code of practice is a statutory instrument.[7]

The Act provides that the code of practice is admissible as evidence in a disciplinary proceeding brought by the Board against an RPEQ.[8]  The code of practice may only be used as evidence, in the disciplinary proceedings, of appropriate conduct or practice for a RPEQ.[9]

The code of practice provides guidance to RPEQs as to appropriate professional conduct and practice.

 

3. Requirement of the Code of Practice regarding Professional
Indemnity Insurance

The Code of Practice states:

Principle 3.2

Registered professional engineers are aware of the legal requirements that pertain to their profession

A registered professional engineer must:

….
• take all reasonable steps to procure and maintain professional indemnity insurance during each year that is appropriate for the services being provided by the registered professional engineer
….

Professional indemnity insurance is a form of insurance that indemnifies the insured against the consequences of a breach of professional duty and particularly professional negligence. A professional indemnity insurance policy may provide indemnity against all losses that the insured sustains as a result of professional errors or omissions in the conduct of its business, or it may provide protection only against claims arising from professional negligence. It may provide cover under which the insurer agrees to indemnify the insured for liability caused by negligent acts or omissions in providing professional services, such as in the design of a product, plant, or equipment; the testing of another person’s products or machinery; or providing advice, for example, in relation to use of a product.[10]

The use of the word must indicates the Board’s intent that RPEQs are required to comply with the provision. It is not a choice that may or may not be exercised at the RPEQs’ discretion. [11]

The reasonableness of the steps taken by an individual must be assessed on an objective basis, but with regard to the background and situation of the individual.[12] When considering whether something is ‘reasonable’, it is necessary to look at all the circumstances of the case, including financial factors.[13]

 

4. Practice

Based on the provisions in the code of practice, the objects of the Act[14], the history of amendments to the Act[15] the Board considers that RPEQs should conduct business with appropriate levels of professional indemnity insurance. The Board also considers that best practice would involve RPEQs identifying and explaining to clients the levels of professional indemnity insurance they hold.

The requirement to take all reasonable steps to procure and maintain professional indemnity insurance does not apply to an RPEQ in respect of the provision of a professional engineering service[16] if:

(a)

(i)         a person, other than the RPEQ, is engaged to provide a professional engineering service;

                         and

(ii)        the RPEQ provides the professional engineering service only as an employee of that person and not on the RPEQ’s own account; and

(iii)       the person has complied with the requirements of principle 3.2 for, or on behalf of, the RPEQ; or

 

(b)

(i)         the insurance is unavailable or would be economically unviable for the RPEQ, taking into account all relevant factors including:

(A)       the cost of insurance; and

(B)       the previous and expected future turnover of the relevant business or part of the business; and

(ii)        the RPEQ has, before entry into an agreement with a client for the provision of professional engineering services, advised the client in writing that the RPEQ does not maintain a policy of professional indemnity insurance for provision of the professional engineering services.

 

The Board expects that a RPEQ who is employed by a business, government entity or other employer could reasonably be expected to check with that employer that they are covered by the employer’s professional indemnity insurance.

RPEQs are reminded of the Board’s view that that RPEQs providing direct supervision for an unregistered person performing a professional engineering service must take full professional responsibility for the service. The supervision of unregistered persons who carry out professional engineering services is itself the provision of a professional engineering service. [17]

RPEQs are encouraged by the Board to make their own enquires as what a reasonable level of professional indemnity would be.

Finally, the Board considers that RPEQs should document and retain documentation of the steps taken to procure and maintain professional indemnity insurance, to be produced if verification is ever required.

 

5. References

Acts Interpretation Act 1954 (Qld).

Code of Practice

Encyclopaedic Australian Legal Dictionary, Lexis Nexis 2022

Professional Engineers Act 2002 (Qld).

Professional Engineers (Code of Practice) Regulation 2021 (Qld)

 

 

[1] Code of Practice (date effective 29 October 2021).

[2] Professional Engineers Act 2002 (Qld) s 108.

[3] Professional Engineers Act 2002 (Qld) s 108(5).

[4] Professional Engineers Act 2002 (Qld) s 108(3).

[5] Professional Engineers Act 2002 (Qld) s 108(2).

[6] Professional Engineers (Code of Practice) Regulation 2021 (Qld).

[7] Professional Engineers Act 2002 (Qld) s 108(6).

[8] Professional Engineers Act 2002 (Qld) s 112(1).

[9] Professional Engineers Act 2002 (Qld) s 112(2).

[10] Encyclopaedic Australian Legal Dictionary, Lexis Nexis 2022.

[11] See definitions of “must” and “may” when used in relation to a power in an Act s 32CA(1) Acts Interpretation Act 1954 (Qld).

[12] See NF v Queensland [2005] QCA 110 (citing Castlemaine Perkins Limited v McPhee [1979] Qd R 469); Randel v Brisbane City Council [1984] 2 Qd R 276 at 285).

[13] Waters v Public Transport Corp (1991) 103 ALR 513.

[14] Professional Engineers Act 2002 (Qld) s 3.

[15] See cl 108 Professional Engineers Bill 2002 Explanatory Notes.

[16] As defined in Schedule 2 Professional Engineers Act 2002 (Qld); see also Practice Note 4.4.(1A) A Guide to the Elements of a Professional Engineering Service and Practice Note 4.3(2A) Professional Engineering Services and Prescriptive Standards.

[17] Practice Note 4.5(1A) Direct Supervision; see also Hall v Board of Professional Engineers of Queensland [2012] QSC 23.