Professional Liability Guide

CHAPTER 5 – WHAT IS A PROFESSIONAL/PROFESSIONAL DUTY?

CHAPTER 5 – WHAT IS A PROFESSIONAL/PROFESSIONAL DUTY?

It is perhaps most fitting in the context of this Guide to consider the concept of a professional or professional duty.

Professional indemnity policies cover conduct connected with a professional duty (or the breach of a professional duty) or the provision of professional services or advice.

Today, professional indemnity insurance is accessible by a broad range of industries and not limited to those who fit within traditional notions of a ‘ profession ’, such as doctors, lawyers, accountants and engineers. As a result, over the years, it has fallen to the courts to consider what the terms ‘ professional ’ and ‘ professional duty ’ mean in an insurance context and how narrowly or broadly those concepts should be construed.

Development of the meaning of ‘ professional ’ FAI v Gold Coast City Council

The Queensland Court of Appeal was asked in FAI General Insurance Co Ltd v Gold Coast City Council 340 to determine whether a negligent misstatement by an officer of the Gold Coast City Council was a breach of the Council’s ‘ professional ’ duty in the context of its professional indemnity policy with FAI. The officer had made incorrect statements to a third party about the location and depth of a water main in a trench near a boundary of land on which the third party intended to build a warehouse. The officer said the water main would not affect the proposed building. As a result, the design of the warehouse foundation did not account for the risks posed by the true position of the trench. Once the warehouse was erected, part of the foundation subsided, and the third party brought proceedings against the Council. ƒ not every breach of duty during the conduct of the Municipal Authority’s practice or business is a breach of a ‘ professional ’ duty; and ƒ professional’ connotes ‘ pertaining or appropriate to a profession ’, ‘ engaged in one of the learned professions ’. 341 The Court was guided by a Canadian decision, Chemetics International , 342 in which a failure to give proper operating instructions in a manual (albeit prepared by a qualified engineer) was held not to be a breach in the provision of ‘ professional services’. Instead, it was simply characterised as part of a service provided by a vendor to a purchaser. 343 On the facts before it, the Court placed importance on the Council’s officer having done no more than convey incorrect facts. Although the third party had relied on the information and arguably exercised professional judgment in respect of the information, this of itself ‘did not impart any “professional” component to the [Council’s] duty to provide correct information in the circumstances’ . The Council’s policy indemnified it against a claim for breach of professional duty in the conduct of its practice as a ‘ Municipal Authority ’. The Court observed:

340 [1992] 2 Qd R 341. 341 Ibid 344.

342 Chemetics International Ltd v Commercial Union Assurance Co of Canada (1984) 11 DLR (4th) 754. 343 It is important to note that Chemetics International concerned a professional services exclusion rather than an insuring clause.

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