Submission: Response to Discussion Paper Mandatory Professional Indemnity Insurance for Migration Agents Onshore Implementation Issues

Transcription

1 page 1 To: The Hon. Gary Hardgrave, Minister for Citizenship and Multicultural Affairs Submission: Response to Discussion Paper Mandatory Professional Indemnity Insurance for Migration Agents Onshore Implementation Issues A submission from: Migration Law Committee of the Administrative Law and Human Rights Section Date: 30 June 2004 Queries regarding this submission should be directed to: Contact: Jo Kummrow Phone: jkummrow@liv.asn.au ww.liv.asn.au

2 page 2 Contents 1. Introduction 3 2. Summary 4 3. International Practices in the Migration Advice Industry 5 4. Issues 6 5. Implementation Issues 8 6. Responses to Questions 9 7. Conclusion 11

3 page 3 1. Introduction The Migration Legislation Amendment (Migration Agents Integrity Measures) Bill 2003 (Bill) was passed by the Parliament on 24 March The Bill facilitates making mandatory the holding of professional indemnity insurance by migration agents, it is part of the Federal Government s attempt to ensure both high standards of professionalism and better consumer protection within the migration advice industry for the benefit of clients. As noted in the Department of Immigration and Multicultural and Indigenous Affairs discussion paper, Mandatory Professional Indemnity Insurance for Migration Agents Onshore Implementation Issues (May 2004) (Discussion Paper), it is accepted that those: offering advice or a professional service have a responsibility to their clients to offer correct advice and their competent service. Any breach of perceived breach of that responsibility could result in a claim for compensation in relation to the negligent or unprofessional service. As stated in the Discussion Paper: In the major professions in Australia, it is accepted that Professional Indemnity Insurance (PII) is a vital safeguard to both consumers and providers: For clients, it provides assurance that if a problem occurs with the professional advice that they have paid for, it is backed by an opportunity to seek and obtain recompense where it is warranted. For professionals, it provides protection from the potentially devastating impact on their business of a court ordering them to make substantial payout to their aggrieved client. The Review of Statutory Self Regulation of the Migration Advice Industry (2002 Review) in recommending that registered migration agents hold professional indemnity insurance (PI Insurance) at a specified minimum level to better protect clients from professional negligence (Recommendation 11), noted that lawyers with current practising certificates who were migration agents, were subject to two tiers of control, namely their State Law Society and the Migration Agents Registration Authority (MARA). It further noted that adequate professional indemnity insurance was compulsory for migration agents with current legal practising certificates. It acknowledged the entry requirement to practise law, namely a Bachelor of Laws Degree or similar followed by a period of supervised professional training. Lawyer migration agents therefore meet higher entry standard requirements. This is recognised in practice and in the 2002 Review which lawyers note that with current practising certificates do not have to sit the entry level exam to become registered by the MARA.

4 page 4 It is unfortunate that there is inadequate data in regard to the breakdown of complaints received by the MARA in respect of: migration agents with current legal practicing certificates; migration agents who have a law degree, but are not currently licensed to practise as a lawyer; and other migration agents including their level of qualification if any. The Discussion Paper raises a number of issues relevant to the legal profession. The Discussion Paper notes at paragraph 2.4 that: As at 31 March 2004, the migration advice industry comprised of 3,288 registered migration agents 3,016 commercial migration agents; 272 non-commercial or not-for profit agents; and 794 agents (24.1 percent of the industry) with legal qualifications hold practising certificates requiring PII. The MARA s Annual Report stated that as at 30 June 2003: almost half of the agent community practises as sole traders; around 30% practice as a company (many as single person companies); and around 12% are partnerships. 2. Summary The LIV believes that lawyers, who hold current practising certificates, meet the requirements of providing migration legal advice given they: hold mandatory PI Insurance as a condition of practice; have the professional and ethical training; and are accountable to a complaints and discipline regime that provides independence, accountability and transparency in the regulation of the profession. It is also the LIV s view that given the majority of migration agents have no formal legal training and further do not have current legal practicing certificates, in the interests of consumer protection and awareness, it is essential that: the MARA make the public aware as to the nature and extent of the professional qualifications of the migration agent (ie if they are a lawyer, whether they have a current legal practicing certificate); keep detailed data which can be readily statistically analysed as to the complaints received; have a transparent, efficient and effective complaints handling procedure; and if a complaint is made about an agent with legal qualifications who also has a practicing certificate, to consider the appropriateness of referring that complaint to the relevant State law society.

5 page 5 The LIV strongly supports the proposal that non-lawyer migration agents be required to hold adequate PI Insurance as a condition of registration with the MARA, as this will provide greater consumer protection and encourage a higher level of professional and ethical standards. However, the LIV does not support lawyer migration agents being subject to dual regulation as a consequence of the Bill. The LIV submits that provision should be made in the regulations to exempt lawyers from this section of the legislation on the basis that they are already under a mandatory obligation to hold PI Insurance as a condition of holding a practising certificate. On this point, the LIV seeks clarification from the Government that lawyers registered as migration agents satisfy the PI Insurance requirements of the Bill if they hold a current practising certificate. Alternatively the regulations should at a minimum recognise applicable legal PI Insurance schemes as a kind applicable to intended section 292B of the Migration Act 1958 (Cth). The Discussion Paper notes at paragraphs 2.5 that professions like lawyers, medical practitioners, insurance brokers, accountants, tax agents, and several professional bodies require its members to have PII. The Discussion Paper also raises a number of questions for discussion at paragraph 5. The most relevant of these to the legal profession is the section dealing with exemptions to mandatory PI Insurance, which provides as follows: 3. Exemptions to mandatory PII 3(a) Should certain groups be exempted from mandatory PII? 3(b) If yes, which agents and why? 3(c) Would consumers be disadvantaged by an exemption? For example in New South Wales, under the Legal Practitioners Act 1987 (NSW), a solicitor or barrister is not permitted to be granted a practising certificate unless they hold appropriate insurance, pursuant to sections 41 and 38R of the Act respectively. 3. International Practices in the Migration Advice Industry The Discussion Paper makes reference to the manner in which the migration advice profession is currently regulated in Canada, United Kingdom, South Africa and New Zealand. Both Canada and New Zealand have identified problems within the immigration consulting industry and are proposing options to resolve these problems including by a mechanism of registration.

6 page 6 Both the Canadian and New Zealand proposals exempt practising lawyers from the licensing or registration requirements for immigration agents. The New Zealand Cabinet has agreed to exempt practising lawyers from the licensing requirements for immigration agents on the basis that the regulatory system for lawyers in New Zealand is based on setting a consistent standard of professionalism, regardless of the area of law in which the individual practises. Similarly, the Canadian proposal is to regulate immigration consultants and to require a minimum level of liability insurance. The proposal does not include practising lawyers who again are subject to a regulatory system for lawyers in Canada which is based on setting a consistent standard of practice, regardless of the area of law in which the individual practices. Similarly, the United Kingdom Office of Immigration Services Commissioner (OISC) which is responsible for ensuring that all immigration advisors fulfil the requirements of good practice, exempts members of certain professional bodies (including people working under their supervision) from being registered with the OISC. The professional bodies include the Law Societies of the United Kingdom, Scotland and Ireland, the Institute of Legal Executives as well as the various Bar Councils. The Discussion Paper notes that persons in the employ of these designated professional bodies are already required, under their individual governing body, to have PII coverage. The United States recognises that immigration law is complex and that both the laws and policies are ever changing and as such, only licensed immigration attorneys are permitted to file petitions and applications. The American Immigration Lawyers Association has expressed concern in regard to immigration consultants in their unauthorised practice of law failing to provide consumer protection and posing as licensed immigration attorneys. The American Immigration Lawyers Association believed the approach of attempting to control the unlicensed practice of law through the licensing of immigration consultants as being misguided. For example, The Florida Bar unlicensed practice of law system, was established by the Supreme Court of Florida to protect the public against harm caused by unlicensed individuals practising law as for example, as immigration consultants. It is therefore vital that the PI Insurance proposal recognise the fundamental difference between lawyer migration agents and those who are not and that the regulations exempt lawyers on the basis that they already have a mandatory obligation to hold PI Insurance as a condition of holding a practising certificate. 4. Issues Adequate professional indemnity insurance cover is essential to providing greater consumer protection and encouraging a high level of professional and ethical standards. PI Insurance is a contract between the insured and insurer, in which an insurer indemnifies the insured for claims against it by a client or person affected by the insured s activities. PI Insurance is subject to the normal law of contract, taking into account that a contract of insurance is a contract of utmost good faith. As stated by Dr Donald E Charrett in, Professional Indemnity Insurance - Do third parties have an interest?, PI Insurance is:

7 page 7 a fundamental issue in today s legal and commercial environment for both professionals and consumers of professional services Professionals operate under the legal risk that an aggrieved party who has suffered damage from professional conduct may have a cause of action for breach of contract, for negligence, or a statutory cause of action such as that under the provisions of the Trade Practices Act. Consumers of professional services run the risk that, in the event of an unsatisfactory outcome from a professional s work, they will be unable to obtain adequate redress for losses suffered as a result. The advantages of professional indemnity insurance are recognised. They provide access to substantial funds to compensate consumers for losses and can give certainty that the funds will be available to cover the relevant losses if the claim is within the terms of the policy. To ensure adequate cover, the LIV therefore favours setting out minimum requirements for the PI Insurance policy. PI Insurance also introduces a further element of discipline to the market as the insurer needs to be satisfied with the conduct and the integrity of the business and the controls in place of its member, before accepting the risk. PI Insurance therefore provides a positive incentive for the insured to adopt good business practice standards so as to minimise the incident of claims and obtain PI Insurance. For PI Insurance to be effective, it should not be liable to limitations and exclusions that are not widely known. The policy must cover claims made after the policy has lapsed as in the case where a migration agent is no longer registered. Issues to be considered include whether a copy of the policy should be provided by non-lawyer migration agents to the MARA as a condition of their registration and re-registration. It should also be considered whether the policy should contain fidelity insurance extension to cover losses arising from the dishonest acts of employees only, as the insured cannot insure against their own dishonesty. It should be possible to specify minimum requirements for an acceptable policy including minimum cover and which should provide indemnity both in respect of the claims made against the insured and notified to the insurer during the period of the policy, and claims made after the termination of that policy period, where during the period, the insured had become aware of the occurrence which may subsequently give rise to a claim, and during the period of the policy, had the claim notified to the insurer. PI Insurance policies contain various provisions including the requirement once the insured becomes aware of any fact which might subsequently give rise to a claim against the insured, to give written notice to the insurer of those facts. The duty of disclosure protects the insured under the existing policy and minimises the risk of a denial of liability under a new policy on the ground of non-disclosure material facts. PI Insurance encourages better professional standards through the duty of care and hence consumer protection.

8 page 8 The Discussion Paper recognises that the insurance industry has thresholds for cover and in calculating the insurance premium insurance providers take into account a range of factors from business turnover, assets and associated risks. It also notes that agents who hold legal practising certificates are required to have PII as a condition of being registered to practice as a lawyer and there were 794 such agents as at 31 March As the Migration Agents Institute (MIA) has negotiated a tailored package with VERO Insurance, non-lawyer migration agents can already obtain PI Insurance separately from the MIA. The LIV agrees that PI Insurance is essential to consumer protection and, as it is a mandatory requirement for lawyer migration agents, the additional cost for agents is not an issue of concern. In any event, as noted in the Discussion Paper it would be a legitimate business expense that is tax deductible. 4.1 Not-for-profit organisations As noted by the Discussion Paper, the case of Mutual Life & Citizen s Assurance Co Ltd v Evatt (1968) confirms the long accepted view that loss and damage caused by careless professional advice, even advice which is given gratuitously is recoverable. Consumers who seek advice from not-for-profit organisations are entitled to be equally protected as any other consumer who has suffered loss and damage caused by the careless professional advice. Accordingly, mandatory PI Insurance should equally apply for not-for-profit organisations as this is consistent with consumers expecting reasonably competent advice and being able to seek compensation in the event of loss and damage caused by careless advice given gratuitously. 5. Implementation Issues It is accepted by the Discussion Paper, the MARA and the 2002 Review that lawyer migration agents, who hold practising certificates, already hold PI Insurance as a condition of being registered to practice as a lawyer. Indeed, Recommendation 11 of the 2002 Review recognises that in major professions in Australia, PI Insurance is a vital safeguard to both consumers and providers. The 2002 Review recognised that PI Insurance should be required for the migration advice industry as a whole. The Discussion Paper notes that the Migration Institute Australia (MIA) has expressed its support for requiring PII and has advised that it had established a package for agents seeking indemnity insurance. As lawyer migration agents are already under a mandatory obligation to hold PI Insurance as a condition of holding a practising certificate, it is submitted that provision should be made in the regulations to exempt lawyers under the new section 292B in the Migration Act 1958 (Cth). Lawyer migration agents should not be subject to dual obligations as they already hold professional indemnity insurance. The regulations should therefore recognise applicable legal PI Insurance schemes as the kind intended under section 292B of the Migration Act 1958 (Cth).

9 page 9 Subject to lawyers not being regulated under two systems as a consequence of this legislation, the LIV supports migration agents, who do not hold a current practising certificate, being compulsorily required to hold PI Insurance. 6. Responses to Questions 1. Professional Indemnity Insurance model 1(a) What minimum level of cover would be appropriate if PI Insurance is made mandatory? With such limited date in the Discussion Paper, it is difficult to express an opinion, save as to say that the mandatory minimum level of cover should be comparable to that required by legal practitioners. 1(b) Should PI Insurance be per principal or per company or per agent? Insurance should be per agent in the same way that each legal practitioner who holds a current practising certificate must have mandatory PI Insurance. Insurance per agent would also force the identification of every agent employed in the business and would therefore encourage greater accountability and transparency. 1(c) What period should the insurance cover after the person leaves the industry? Generally, PI Insurance policies contain a provision that, if during the subsistence of the policy an insured person becomes aware of any fact that might subsequently give rise to a claim against them, the insured person has an obligation to give written notice to the insurer of those facts. Upon notification of those facts, any claim may subsequently be made against the insured person arising out of those facts would, for the purpose of the policy, be deemed to have been made during its currency. In this way, even if the actual claim is made after the expiration of the policy period, the claim can be treated notionally as a claim made at that time against the insured. By giving notice of awareness of facts during the policy period, there is mutual benefit for each party to the insurance contract. 1(d) Give details of a suggested model The legal profession with its well developed and consistent rules governing professional standards, conduct and ethics has been mandatorily required to have PI Insurance as a condition of being registered to practice as a lawyer. As such the legal industry has well-developed models for PI Insurance. As the Discussion Paper notes, the MIA has established a package for agents (who do not hold current practising certificates) seeking indemnity insurance, that model may be suitable to non-lawyer migration agents.

10 page Availability of PI Insurance 2(a) Is PI Insurance readily available and affordable? The Discussion Paper refers to agents who are MIA members generally pay between $1,000-$1,500 in premiums per annum for $1 million PI Insurance cover through a tailored package negotiated by the MIA. It therefore appears that for non-lawyer migration agents, such PI Insurance is readily available and affordable. 2(b) Are there any different types of PI Insurance policies available in the market? The Discussion Paper has already made reference to the MIA model. Alternate models are available for legal practitioners. 3. Exemptions to mandatory PI Insurance 3(a) Should certain groups be exempted from mandatory PI Insurance? Lawyer migration agents and hold a practising certificate should be exempted from the provisions of the Bill as it is already a mandatory requirement for a legal practitioner to hold PI Insurance under existing professional obligations. If it is accepted that all consumers are equally entitled to the protection provided by PI Insurance then all agents including those from not-for-profit groups should be required to have PI Insurance. Further, many not-for-profit agencies are already covered by PI Insurance of some description. 3(b) If yes, which agents and why? For example in New South Wales, under the Legal Practitioners Act 1987 (NSW), a solicitor or barrister is not permitted to be granted a practising certificate unless they hold appropriate insurance, pursuant to sections 41 and 38R of the Act respectively. The LIV does not support lawyer migration agents being subject to dual obligations in respect of mandatory PI Insurance. Alternatively, the regulations should at a minimum recognise applicable legal PI Insurance schemes as a kind applicable to the proposed section 292B of the Migration Act 1958 (Cth). 3(c) Would consumers be disadvantaged by an exemption? Consumers would not be disadvantaged if the regulations exempt migration agents holding a practicing certificate to act as a lawyer from the applicable provision, in view of the fact it is already a mandatory requirement for a legal practitioner to hold PI Insurance under existing professional obligations.

11 page 11 However, if migration agents who do not hold current practising certificates are exempted from mandatory PI Insurance obligations, then consumers will be disadvantaged. If it is accepted that all consumers are equally entitled to the protection of PI Insurance, then those consumers who seek advice from not-for-profit organisations who are exempted from mandatory PI Insurance will be disadvantaged. 4. Not-for-profit organisations 4(a) What effect would mandatory PI Insurance have on not-for-profit agents? If it is accepted that all consumers are equally entitled to the protection of PI Insurance, then not-for-profit organisations should similarly be required to have mandatory PI Insurance. 4(b) How could the impact on the not-for-profit sector be minimised? As noted in the Discussion Paper, a number of insurance companies have worked together to establish the Community Care Underwriting Agency, a public liability insurance product for not-for-profit organisations. The Discussion Paper suggests that there is a possibility for lower premiums for such organisations. The LIV notes that the Discussion Paper acknowledges that further consultation is required with the insurance industry to explore all possibilities. 7. Conclusion With the implementation of the reform agenda and recognition of a national legal profession and regulatory framework which will further improve protection for legal consumers by ensuring that there are nationally consistent rules governing professional conduct and with mandatory Continuing Professional Development it is essential that the regulatory scheme distinguished between those migration agents who are lawyers and those who are not. The LIV strongly supports the proposal that non-lawyer migration agents be required to hold adequate PI Insurance as a condition of registration with the MARA, as this will provide greater consumer protection and encourage a higher level of professional and ethical standards. However, the LIV does not support lawyer migration agents being subject to dual regulation as a consequence of the Bill. The LIV submits that provision should be made in the regulations to exempt lawyers from this section of the legislation on the basis that they are already under a mandatory obligation to hold PI Insurance as a condition of holding a practising certificate.