Are you seeing clauses where your practice is being asked to waive its rights if it is a member of an association under a Professional Standards Scheme now and/or in the future? Well recently, we have been! Understandably, this is something that many design consultants highlight as a risk due to the idea that they would be waiving their right to something. However, there appears to be some uncertainty as to the application of such clauses and schemes. That’s where we step in and try to untangle it all for you!
A Professional Standards Scheme, is legally binding arrangement for an approved professional association (for the purpose of professional standards legislation within each State and Territory) to operate under a Professional Standards Scheme. Each approved association is required to set out a number of standards, which once approved, are then monitored and enforced under the scheme.
The aim of these schemes is to improve professional standards within those approved associations and increase client confidence when engaging those professionals who are members of the approved association operating under a Professional Standards Scheme. The real incentive for associations to participate in a Professional Standards Scheme is this – If a professional indemnity claim is made against a professional who takes part in an association’s scheme, and the court determines that the professional is liable, the Professional Standards Schemes will cap the civil liability or damages that those professionals may be required to pay. As you can see, this is clearly something that protects and benefits professionals when you keep in mind that your liability would otherwise be unlimited at law.
However, it is important to remember that the Professional Standards Scheme will have no effect on your practice unless your professional association decides to go through the process to get a scheme approved, and your practice is a member of that association.
Although Engineers Australia and the College of Investigative and Remedial Consulting Engineers of Australia (CIRCEA) used to have a Professional Standards Scheme, no architectural or engineering association currently has a Professional Standards Scheme in force. The one construction industry exception is the Royal Institution of Chartered Surveyors Valuers (RICSV) who do have Professional Standards Scheme in force, and as such, any member of RICSV also has the obligations and benefits under the association’s scheme.
As things stand currently, given that architectural and engineering professional associations do not have a Professional Standards Scheme in force, it is vital to continue good risk management within your practice and on each project, maintaining a current professional indemnity insurance policy and ideally, seeking to limit your liability where possible in contract in order to provide some protection in the event of a third party claim for negligence.
If you do come across a clause within your consultancy agreement which asks you to waive your current rights under any Professional Standards Schemes, and you are not a member of RICSV, then although possibly this clause could be considered low risk as it would be irrelevant, you might consider deleting the clause in any event as a “safest option” approach.
In circumstances where you are asked in your consultancy agreement to waive your current rights under any Professional Standards Schemes and you are a member of RICSV or you are not part of an association’s scheme but are being asked to waive any future rights you might have under a Professional Standards Scheme, then we would suggest that you delete the clause as agreeing to waive rights and protections that you would ordinarily have at law risks infringing the “waiver of rights” or “subrogation” exclusion within many professional indemnity policies.
If you would like to see a full list of approved associations with Professional Services Schemes in force or would like to know more about the process for approval of associations and scheme or the limits of liability, please visit the Professional Standards Scheme website.
This article is only general advice in respect of risk management. It is not tailored to your individual needs or those of your business, nor is it intended to be relied upon as legal or insurance advice. For such assistance you should approach your legal and/or insurance advisors.