Professional Liability Guide

PROFESSIONAL LIABILITY GUIDE

The Council’s breach of duty was held not to be of a ‘ professional ’ nature and, therefore, outside the terms of its professional indemnity policy.

A broader approach: GIO v Newcastle City Counci l The New South Wales Court of Appeal signalled the development of a broader interpretation of ‘ professional ’ in an insurance context in GIO General Ltd t/as GIO Australia v Newcastle City Council . 344 That decision concerned an earthquake in Newcastle, which had badly damaged a building owned and operated by the Newcastle Workers Cooperative Club Ltd, killing and injuring people who were in the premises at the time. Before the earthquake, the Newcastle City Council had inspected and certified the building as structurally sound. However, an engineer, who later produced a report on the collapsed building, gave evidence of a serious defect in the construction of the building, causing structural instability. This defect allegedly had caused the collapse of the building during the earthquake. Numerous legal actions arose out of the building’s collapse, including a claim by the Club against the Council for failing to identify the defect during the inspection and approvals process. The Council sought to be indemnified in respect of the claim by GIO. One of the questions on appeal was whether the activities of the Council that had given rise to the claim against it concerned the ‘rendering or failure to render professional advice or service’ under the policy. ‘The relevant activities conducted by the [Council] must be examined to see whether, in their nature, they are properly characterised as “professional”. The source of the [Council’s] duties to perform the activities, although a relevant circumstance, is not definitive. For the same reason, it does not necessarily matter whether the officers of the [Council] who were alleged to have given faulty advice and service were professionally qualified engineers … The question is: is the type of service which was provided properly characterised as “professional service”? The term “professional” in the context of professional indemnity insurance today is very broad. This is evidenced by the very large range of policies which are written for such insurance …The term involves, in the context of a policy written for a local government authority, no more than advice and services of a skilful character according to an established discipline …’ 345 President Kirby (with whom Sheller and Powell JJA agreed) observed:

The Court held the Council’s activities consisted of the provision of ‘professional advice or service’ because:

ƒ examining and analysing building proposals with a view to granting consent was ‘properly characterised as the provision of a service of a skilful character according to a discipline’; and ƒ although not determinative, there was evidence that some, or all, of the activities had been performed by professionally qualified persons.

344 (1996) 38 NSWLR 558. 345 Ibid 568.

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