Update on competition and choice of professional indemnity insurance for NSW solicitors

21 October 2024

The majority of NSW solicitors have to purchase the mandatory $2 million of insurance cover required to obtain a practising certificate each year from the Law Society of NSW’s wholly owned subsidiary, Lawcover Insurance. They have no choice.

By contrast, based on statistics published by the Law Society of NSW, it appears that approximately 30% of solicitors in private practice in NSW, by virtue of working in cross-jurisdictional practices, have chosen to insure with a different insurer. They enjoy a choice.

The data shows that the average premium per insured legal practitioner paid to Lawcover Insurance appears to be between 2 and 2.5 times the average premium paid to the Legal Practitioners’ Liability Committee (LPLC) in Victoria, per insured legal practitioner. (These findings have been reviewed by a leading firm of actuaries.)

We are continuing to work strenuously to introduce choice for all NSW solicitors, including the vast majority of practitioners working in practices which do not have offices in multiple jurisdictions.

Legal Proceedings

Recap.:

  • An approach was made to the Law Society of NSW in January of 2024, seeking a meeting and the Law Society’s co-operation in the timely issuance of practising certificates, based on advice received from ABC’s legal team and barristers that ABC’s policy was an approved policy in accordance with 210(1) of the Legal Profession Uniform Law (NSW) (LPUL).
  • In late February, without a meeting, the Law Society commenced proceedings against the Attorney General in the NSW Supreme Court (subsequently removed to the NSW Court of Appeal). ABC was invited to participate in those proceedings.
  • The decision of the Court of Appeal, handed down on 23 April, had the effect of maintaining Lawcover Insurance’s monopoly in respect of PI insurance for the majority of solicitors in NSW, for the current practicing year.

Update:

  • The NSW Court of Appeal handed down its reasons on 9 August 2024.
  • Following the receipt of advice from our legal team, led by barristers Bret Walker SC, Craig Lenehan SC and Sean Baron Levi, ABC has applied to the High Court for special leave to appeal the judgement of the NSW Court of Appeal.
  • The proposed grounds of appeal are that the NSW Court of Appeal erred in concluding that s 95 of the Legal Profession Uniform Law Application Act 2014 (NSW) is a “legislative arrangement for the approval or selection of insurers ... in the jurisdiction” for the purposes of s 210(1)(a)(ii) of the Legal Profession Uniform Law (NSW) (LPUL).

Attorney General

Recap.:

  • In late 2022, a formal request was submitted to the then Attorney General of NSW seeking the approval of ABC’s professional indemnity insurance policy.
  • In May 2023, the current Attorney General (The Hon. Michael John Daley, MP) wrote to inform ABC that he had asked the Department of Communities and Justice (DCJ) to obtain an actuarial report.
  • The Attorney General’s right to approve a second policy is not affected by the legal proceedings described above.
  • The Attorney General has approved, under the same section of the legislation (i.e. s 95 (2) of the Legal Profession Uniform Law Application Act 2014 (NSW)), a number of insurers which gives barristers choice.

Update:

  • Even though ABC’s insurance’s policy offers superior cover (including cover for disciplinary inquiries), and will be very cost-competitive, approval (if required by the Attorney General in accordance with the findings of the NSW Court of Appeal) has not yet been received.
  • ABC has continued to make representations to the DCJ, and directly to the Attorney General, seeking to have its application approved expeditiously.
  • Despite those requests, the Attorney General still has not made any determination. Indeed, the Attorney General has declined ABC’s request for an urgent meeting and the DCJ has not provided ABC with information requested such as:
    • The process being adopted by the Attorney General,
    • The remaining timeline for a decision,
    • A copy of the brief given to the actuary, or
    • Any advice or report already received from the actuary.
  • ABC has written to the Attorney General recently to express concerns with the process and to query the relevance or necessity of any actuarial investigation having regard to the approval prescribed by the legislation and the significant and important federal regulatory frameworks applicable to all insurers.

Views of Solicitors

We have received correspondence from solicitors that they intend to write to the Attorney General and the Law Society to express their frustration and to make their views known.

Among other things, we understand that solicitors wish to know whether the Attorney General and the Law Society of NSW (as a regulatory and member body) support competition or whether they wish to perpetuate the current monopoly for the majority of solicitors in private practice in NSW.

There also appears to be an emerging view that the Law Society of NSW should take steps to divest itself of the ownership of Lawcover Insurance.

Please refer to the section below for additional examples of the views being expressed to ABC.

Further details on solicitors’ views

The perceptions outlined below have emerged from correspondence received by ABC from members of the legal profession in NSW.

  • There are perceptions of lack of compatibility of the various functions performed by the Law Society (regulator, member body, and sole shareholder and owner of Lawcover Insurance).
  • In particular, there are perceptions of an inherent conflict of interest in a regulator insuring the entities it regulates.
  • Concerns have been expressed as to whether the Law Society wishes to see competition, and a level playing field, for all solicitors requiring practising certificates in NSW.
  • There appears to be a view emerging that the Law Society should divest itself of Lawcover Insurance, to eliminate one of the perceived conflicts of interest, on the basis that:
    • It would be in the best interest of all stakeholders and parties concerned, including the people of NSW, the legal profession and the Law Society itself.
    • In the event of a divestment, the Law Society would be very well endowed with funds.
    • Notwithstanding that the Law Society asserts on its website (and in the recent legal proceedings) that the Law Society and its wholly owned insurance subsidiary operate independently, it has been observed that:
      • The Law Society appoints the members of the Board of Lawcover Insurance;
      • The President of the Law Society Council and the CEO of the Law Society sit on the Lawcover Insurance Board;
      • The Law Society's consolidates both sets of financial statements in its annual report; and
      • The Law Society takes payments (which have included a substantial dividend) from Lawcover Insurance.
  • There appears to be strong support for action to be taken to resolve these perceived conflicts of interest.
  • As one solicitor has written:
    “You understand how this looks. It looks like a previously unchallenged monopoly is now facing a challenge and the monopoly is reacting badly to the challenge.”