• Sharebar
Professional Indemnity
Friday, August 1, 2008
Wards and wordings

Most if not all private hospital networks carry professional indemnity insurance.
The National Health Act 2003 in a provision yet to come into force requires every private health establishment (which is essentially a health establishment not owned or controlled by an organ of state), to maintain insurance cover sufficient to indemnify a patient (amongst others) for damages they may suffer as a consequence of a wrongful act by any member of that establishment’s staff or by any of its employees.
The wording of the provision imposing the insurance obligation is somewhat unfortunate. Precisely what insurance is required to be obtained by a private health establishment? Where non-compliance with the provision would expose the establishment to criminal sanction, the provision should make the insurance obligations of the private hospital clear. It currently does not.
Is it sufficient for a hospital to take out insurance for itself as policyholder by way of professional indemnity insurance? The patient would then need to claim against the establishment for damages suffered as a consequence of the wrongful act by its staff or employees and the establishment could defend those claims to determine what its liability is.
Does the provision mean that a hospital must obtain insurance for the patients themselves as policyholders who then accept the benefit (which they would do in the establishment’s admission contract)? In the latter instance the establishment would in effect be required to maintain personal accident or disability insurance for the benefit of the patient.
The wording only makes reference to a “wrongful act”. Presumably, but not certainly, that requires positive conduct and not a wrongful omission. In the context of private health establishments it is, if anything, a negligent omission on the part of the staff or employees which results in damages to the patient rather than a positive physical act.
The indemnity would also only be triggered where the wrongful act is by a member of the establishment’s staff or any of its employees. The National Health Act does not distinguish those concepts. An establishment may for example employ agency nursing sisters who would be part of the staff as envisaged. Staff or employees should not include the doctors attending to the patient at the hospital since they are not agents or employees but independent contractors.
If the intention of the provision is to oblige private establishments to maintain insurance for the patient as a policyholder it would, to a degree, be a matter of luck whether the patient benefits from the proposed indemnity or not:
If they suffer damages as a consequence of a wrongful act by the establishment’s staff or its employees then they would receive an indemnity.
If it is a wrongful omission they would not (if Act is not interpreted to include an omission).
If it is a wrongful act by the treating doctors, the patient will receive no indemnity.
No similar insurance obligation is imposed on Healthcare Practitioners under the Health Profession’s Act and there is no such benefit for State patients.
  While the provision requires the establishment to maintain the insurance cover it does not prohibit the recovery of the costs of maintaining the insurance from the patient. So there will be the upfront financial burden on the establishment to secure and maintain the insurance cover which would ultimately be transferred to the patient. The provision does not give the patient the option of refusing that insurance. The patient may for example have their own adequate accident insurance which would indemnify them for an untoward event arising from medical treatment. They would then be subjected to the additional financial burden of paying, if only indirectly, for the maintenance of the statutory indemnity insurance.
The provision is also silent on the question of subrogation. Subrogation is the right of the insurer to step into the shoes of the insured once an indemnity is paid in full and to recover its outlay from any wrongdoer. So when an insurer indemnifies a patient for damages suffered as a consequence of a wrongful act by a member of staff or employee of an establishment, the insurer would in the normal course of events be entitled to be subrogated to the patient’s rights of recovery against the establishment and/or the staff and employees and any third party (eg the doctor) jointly liable for the loss. The establishment may find that once the indemnity is paid it is then sued by the very indemnity insurer to whom it paid a premium to recover the indemnity paid. An establishment would need to ensure the right of subrogation against it is excluded in the policy.
The provision would benefit from a debate between all the industry role players and the Department of Health and Welfare with a view to agreeing on new wording that achieves clarity and certainty. By Donlad Dinnie,  Director at Deneys Reitz

Copyright © Insurance Times and Investments® Vol:21.7 1st August, 2008
433 views, page last viewed on August 16, 2019