The Property, Stock and Business Agents Regulation 2003 (NSW) has been amended to regulate what professional indemnity insurance licensees (including real estate agents, stock and station agents, business agents, strata or community managing agents, and on-site residential property managers) (‘licensees’) must hold as a condition of their Licence under section 22 of the Property, Stock and Business Agents Act 2002 (NSW) (‘Act’).

The Property, Stock and Business Agents Amendment (Professional Indemnity Insurance) Regulation 2012 (NSW) inserts a new clause 13B into the Regulation, which commenced on 1 January 2013, but does not take effect until 1 July 2013.1

Clause 13B provides:

  1. The policy must provide cover for the following types of civil liability arising in the conduct of an agency business:
  1. Liability arising from any acts or omissions of the licensee that constitute:
  1. negligence;
  2. misleading or deceptive conduct;
  3. breach of professional duty;
  4. unintentional defamation; or
  5. unintentional interference with intellectual property rights;
  1. vicarious liability arising from any acts or omissions of an employee, agent or other person engaged in the agency business that constitute:
  1. negligence;
  2. misleading or deceptive conduct;
  3. breach of professional duty;
  4. defamation (for which the claimant is not at fault);
  5. interference with intellectual property rights (for which the claimant is not at fault);
  6. fraud or dishonesty by the employee, agent or other person (for which the claimant is not at fault).
  1. Civil liability includes personal injury.
  2. Cover must be for not less than $1,000,000 for any one claim and not less than $3,000,000 in the aggregate for all claims in a period of insurance. These amounts must include costs payable by the claimant in connection with the claim.
  3. A Licencee is required to be insured under this clause only if the Licensee engages in activities for which a licence is required under the Act.

By comparison, in Queensland, the Property Agents and Motor Dealers Act 2000 (Qld) (‘PAMDA’) states that a condition may be imposed on a licence requiring a licensee to hold insurance of a kind and in an amount prescribed under a regulation.2 However, there is no clause in the Property Agents and Motor Dealers Regulation 2001 (Qld) governing insurance for licensees.

Therefore, the scope of professional indemnity insurance for licensees under PAMDA is governed by the insurers rather than statute as will be the case in New South Wales.

The professional indemnity insurance policies available for licensees under PAMDA generally cover the matters listed in clause 13B of the Regulation. However, they generally exclude cover for personal injury unless it arises out of a breach of professional duty.

As clause 13B of the Regulation does not limit what is meant by “personal injury”, the New South Wales statutory requirements for professional indemnity insurance are arguably broader than what is generally available in Queensland. Therefore, insurers of Licensees in New South Wales will have to broaden the scope of their cover, which may affect premiums paid by Licensees.

If a Licensee is already insured under a professional indemnity insurance policy that was issued prior to 1 January 2013, pursuant to clause 50 of the Regulation the policy is taken to comply with the requirements of clause 13B until 1 January 2014, or the expiry of the policy, whichever occurs first.

All Licensees should now be reviewing their current level of cover to ensure that, when it comes time to renew their policy or take out a new policy, they comply with the requirements of clause 13B of the Regulations. Otherwise non-compliance could amount to a contravention of a condition of the Licensee’s licence, which is a ground for disciplinary action to be taken against the Licensee3 and may result in the cancelling of the licence. 4

The Regulation provides statutory protection for clients of agents in New South Wales and it will be interesting to see whether, under PAMDA, the position in Queensland will follow suit albeit that most licensees under PAMDA would have professional indemnity insurance.