Stephen Warne on professional negligence, regulation and discipline around the world

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Insurance cover for disciplinary investigations and prosecutions

April 29th, 2013 · No Comments

In the financial year ending 30 June 2012, the Legal Services Commissioner in Victoria received 1,982 new complaints following 5,316 enquiries. When representing lawyers in disciplinary investigations and prosecutions, my fees generally come out of their own pockets. I have seen lawyers bankrupted by disciplinary prosecutions and others who have left practice and sought psychiatric assistance because of the trauma associated with them. This post provides some case studies of how ugly disciplinary investigations can get and points out that there is insurance available for the defence costs.

Presently, I am representing a man who is essentially a sole practitioner in a disciplinary prosecution arising out of his billing practices, costs disclosures, and alleged overcharging which is listed for five weeks in VCAT involving multiple costing experts. This is following an investigation which ground on for years, changing in scope as it went. Both sides have briefed silk.

In another case, I represent a sole practitioner in a case of  false attestation alleged to have occurred more than a decade ago.  All four charges were dismissed following a trial at which he and other witnesses gave evidence and he was cross-examined.  But the Commissioner has briefed silk, sought a rehearing within VCAT under s. 4.4.21 of the Legal Profession Act 2004, and has announced an intention to consider calling new evidence and amending the charge, and to conduct the rehearing as a hearing de novo in the fullest sense.

For an example of how big disciplinary prosecutions can get, see Victorian Bar Inc v [CEM] QC [2006] VCAT 1417 (7 counsel engaged between 10 April and 11 May 2006 in the liability phase alone, and it went on and on from there). One of the lawyers prosecuted successfully defended the proceedings. From that case, it will be apparent that advocates’ immunity protects lawyers against only one kind of liability.

I am fairly sure that some of my clients did not ‘expect the Spanish Inquisition’ when they did what they did, and I am quite sure that some of my clients did not even do what they are alleged to have done.

The LPLC’s policy does not insure against disciplinary investigations or prosecutions.  But the optional top up cover provided by CGU through the brokers Affinity does: it provides an insurance against $500,000 worth of defence costs with a $1,000 excess. The premium this year is $509 for practitioners earning fees of between $200,000 and $500,000 who are members of the professional standards scheme (and about half that for those earning less).  For that  you get what might be regarded as a side-benefit, namely an extra $1 million worth of cover against that which is insured by the LPLC up to the first $2 million (remembering that the LPLC’s cover for liability for damages and costs, and for defence costs, is limited to $2 million, and the professional standards scheme does not apply when it is not complied with (which is in my experience frequently) nor in relation to some personal injuries claims).  Of course if you get fined, I do not suppose the insurance provides an indemnity, but the defence costs in a matter properly defended will often exceed the fine.

In case you’re wondering, I have no relationship with Affinity or with CGU; I just wish more practitioners knew about insurance for disciplinary prosecutions and that more took it up.  I also wonder whether those practitioners who do take out top up insurance remember that they actually have this policy when the letter in the Legal Services Commissioner envelope arrives. Practitioners are sometimes forced into accepting reprimands at the end of the investigation stage as a condition of avoiding prosecution in respect of conduct which they believe would be vindicated in a disciplinary prosecution.  Others choose, if they are prosecuted, to enter into plea bargains in respect of similar conduct, mainly to avoid the costs of prosecution, especially given that if the Commissioner loses, VCAT is prohibited from ordering costs against him except in ‘special circumstances’.

When I see what practitioners have done in representing themselves at the investigation stage, I often weep.  Some are beligerent and parsimonious with information in a way calculated to get themselves prosecuted, while others spill their guts in an unseemly reaffirmation of their own incompetence, blithely disregarding problems associated with legal professional privilege, not even contemplating the privilege against self-incrimination, and not going back over their own files carefully enough to work out that they actually have good defences. Those who are represented as a favour by mates do not always necessarily exhibit much more competent representation. What is also apparent is that many of those who get prosecuted do not appreciate that that is likely to be the end-result of the investigation until very shortly before it happens, by which time it is often too late to avert it. Think about it…

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Tags: Discipline · Insurance