Viewing professionals in the eyes of the law

Legal challenges to professional indemnity policies or exclusion clauses could rest on the court’s view of what a “profession” is and even the jurisdiction hearing the case, barrister Mark Steele told an AILA Queensland seminar.

He said Queensland was the only Australian state that continued using a narrow, traditional “learned profession” definition to differentiate between professionals, workers and tradespeople.

Mr Steele’s presentation was titled: “What is professional duty and when does a policy of insurance for breach of professional duty apply?”

He said professional indemnity litigation could be difficult because the meaning of the term professional was not always clear, and courts could react differently when the occupation was not a traditional or learned profession.

He said only divinity, medicine and law were originally considered part of Australia’s learned professions. In the past 100 years, the definition had widened to include other occupations, but progress had been slow, particularly in Qld, which still relied on a 20-year-old Appeal Court ruling that differed to opinions in other states.

“In 1912 for example, [High Court judge and Australia’s first Prime Minister Sir Edmund] Barton did not consider farming or grazing to be either professions or trades, although he was willing to accept that each did amount to ‘an employment and a vocation’,” Mr Steele said.

“Eleven years later, [High Court Justice Sir Hayden] Starke considered medical herbalists could not be considered professionals because their learning and experience was ‘a far cry from the special knowledge of medicine and chemistry possessed by medical men to that possessed by the appellants, and it is this special knowledge which lifts the calling of the medical man to the rank of a profession’.”

Justice Starke was appalled the Oxford Dictionary at the time accepted teachers of the arts and some sciences could call themselves professors. “It is, of course, a misuse of the term to describe these callings as professions,” he said.

Mr Steele said modern courts throughout Australia now accepted a wider definition of professional. Architects, accountants, engineers and others were considered by most courts and the community to be professionals.

But as the definition of “profession” and “professional” had widened, so too had the potential to challenge professional indemnity policy clauses that excluded cover for breach of professional duty.

Only in exclusion clauses had the definition remained tight in recognition of the contra proferentem rule giving the benefit to the insured rather than the insurer, especially if the wording was ambiguous.

Mr Steele said in professional indemnity litigation, courts were increasingly being asked to rule on what work was considered “professional duties” and whether the nature of the task or the nature of the person performing the task was more relevant.

He said most states and territories relied on a ruling by former New South Wales Appeal Court President Justice Michael Kirby in GIO General v Newcastle City Council (1996) following the 1989 Newcastle earthquake.

Part of the case centred on whether council officers providing building code advice before the quake could have been considered professionals.

Justice Kirby said: “It does not necessarily matter whether the [council] officers who were alleged to have given faulty advice and service were professionally qualified engineers.”

Mr Steele said although the decision was later overturned by the High Court (in relation to the application of s40 of the Insurance Contracts Act), appellate courts around the country continued to cite Justice Kirby’s analysis of the concept of “professional” in the context of professional indemnity insurance.

However, he said Qld courts followed a 1995 Qld Appeal Court ruling (FAI General Insurance Co Ltd v Gold Coast City Council) that differed to Justice Kirby’s opinion.

The case involved a council inquiry officer providing incorrect water mains information to a resident, resulting in burst pipes and subsiding buildings.

The Qld Appeal Court agreed with the insurer that the inquiry officer, while giving advice on the council’s behalf, was not a professional or engaged in a “learned profession” and therefore professional liability could not be proved.

“That decision, made [more than] 20 years ago, remains the authority in Qld,” Mr Steele said. “Although the court noted that context is important, nevertheless the question of whether a particular duty was a professional one was to be considered according to traditional benchmarks, such as whether it pertained to a profession, or occurred in the course of a learned profession.

“The courts in Qld are not free simply to disregard the ‘learned profession’ authority, despite the apparent evolution of relevant concepts in the rest of the country.”

But Mr Steele said for practical reasons, Qld courts would generally consider the nature of the service rather than the qualifications of the person providing the service in determining professional liability.

“Where the relevant policy relates to the practice of a profession generally, rather than the provision of particular professional services, the Appeal Court seems to have accepted that a broader approach may be warranted,” he said.

“Given the recent trend in other Australian jurisdictions to draw a distinction between indemnity clauses and exclusion clauses, I think Qld courts will be more willing to make the same distinction in future.”

He said that would be particularly important for insurers that specialised in professional indemnity policies for a wide range of businesses and trades.

“In [most] Australian jurisdictions the concept of professional duty has gradually broadened since 1995, except in relation to exclusion clauses,” he said.

“The courts have increasingly recognised that such policies are frequently taken out by businesses that would not otherwise be described as ‘professional’.

“In Qld, although the binding authority holds that the terms ‘profession’ and ‘professional’ connote one of the ‘learned professions’ (a term that is itself in many ways outdated in this context), the courts will adopt similarly broad definitions.”