Limited Liability - A Headache For Banks And Insurers

• the limited liability of contractors leaves banks and insurers exposed.

Mind the gaps

The potential recovery gap created by the mandatory limitation of liability under professional standards legislation is causing headaches as banks and insurers debate who should carry this exposure.

Although schemes providing for the limitation of accountants' liability have been in place in some jurisdictions (eg New South Wales) for some time, it is only since early 2008 that most States and Territories have implemented accountants' schemes under legislation similar to the New South Wales Professional Standard Act 1994 . Although subject to a variety of exclusions, in general such schemes provide for a maximum cap of $75 million in respect of auditor liability and $20 million for other exposures.