Commissioner's practice note: General insurance small business exemption – medical indemnity cover

Purpose

This Commissioner’s practice note deals with a part of the exemption from insurance duty for a small business and reflects the Commissioner’s position in relation to this type of insurance.

Background

Section 259B of the Duties Act 1997 (‘the Act’) provides an exemption from general insurance duty for certain small businesses¹. The exemption extends to occupational indemnity insurance, being insurance covering liability arising out of the provision by a person of professional services or other services (other than insurance providing medical indemnity cover within the meaning of the Medical Indemnity Act 2002 of the Commonwealth (‘MI Act’)).

Questions have been asked on what is medical indemnity cover within the meaning of the MI Act.

Commissioner’s Practice Note

The MI Act defines ‘medical indemnity cover’ as a contract of insurance that provides medical indemnity cover for a person if:

1. the person is specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends; and
2. the insurance cover indemnifies the person (subject to the terms and conditions of the contract) in relation to claims that may be made against the person in relation to incidents that occur or occurred in the course of, or in connection with, the practice by the person of a medical profession².

A single contract of insurance may provide medical indemnity cover for more than one person.

Definitions

• A medical practitioner³: A person registered or licensed as a medical practitioner under a State or Territory law that provides for the registration or licensing of medical practitioners
• Medical profession: Includes a health care related vocation.
• Health care related vocation⁴: A health care related vocation in relation to which there is at least one State or Territory under the law of which a person must be registered in order to practise. The Health Practitioner Regulation National Law is a uniform national legislation enacted in each jurisdiction to “establish a national registration and accreditation scheme for the regulation of health practitioners” (s3 of the National Law). In order to practice, all ‘health practitioners’ are required to be registered under the Health Practitioner Regulation National Law (NSW).
• Health practitioner: An individual who practises a health profession. Under section 5 of the Health Practitioner Regulation National Law (NSW), ‘health profession’ means the following professions, and includes a recognised specialty in any of the following professions:
  1. Aboriginal and Torres Strait Islander health practice;
  2. Chinese medicine;
  3. chiropractic;
  4. dental (including the profession of a dentist, dental therapist, dental hygienist, dental prosthetist and oral health therapist);
  5. medical;
  6. medical radiation practice;
  7. nursing and midwifery;
  8. occupational therapy;
  9. optometry;
  10. osteopathy;
  11. pharmacy;
  12. physiotherapy;
  13. podiatry;
  14. psychology.

Any occupational indemnity insurance supplied to a person practicing a health profession listed above is viewed by the Chief Commissioner as medical indemnity cover and is not exempt under section 259B of the Act.

While a policy taken out by a small business covering medical indemnity cover is not exempt, if it also provides other cover (eg: public liability), then that other component may still be exempt under the small business exemption. If a policy provides cover for a combination of risks (Type A or Type B insurance⁵ and exempt insurance⁶), the premium will need to be apportioned by the insurer under the provisions of section 258 of the Act.

Footnotes

1. ^ See Practice Notes 001 for more details on the definition of small business
2. ^ As defined in section 4 of the Medical Indemnity Act 2002
3. ^ As defined in section 4 of the Medical Indemnity Act 2002
4. ^ As defined in section 4 of the Medical Indemnity Act 2002
5. ^ Section 233 of the Duties Act 1997
6. ^ Section 259 of the Duties Act 1997