How does medical professional indemnity operate?

There is currently no statutory requirement for doctors to have professional indemnity or insurance arrangements to respond to any liabilities that arise in their practice. However, the General Medical Council requires them to ensure they have “adequate insurance or indemnity cover so that [their] patients will not be disadvantaged if they make a claim about the clinical care that [they] provide”. Notably, a doctor without indemnity or insurance cover could have their licence removed. Accordingly the arrangements are crucial, but do medical practitioners actually know what cover they have purchased?

In 2011 the Federation of Independent Practitioner Organisations completed a survey of medical consultants. This revealed that only 65 per cent knew if their indemnity arrangements were provided on a discretionary or contractual basis; only 24 per cent knew if their arrangements were applied on a loss occurring or claims made basis; and 56 per cent did not even know the amount they were indemnified for. So, how does it operate?

What is covered?

Typically, there are three key areas that indemnity arrangements and insurance policies usually cover: (i) medical or clinical negligence; (ii) regulatory or professional disciplinary proceedings (ie relating to the right to practice); and (iii) medico-legal work.

Discretionary indemnity

A discretionary indemnity is provided under a membership agreement – usually with one of the medical defence organisations such as the Medical Defence Union, the Medical Protection Society, or the Medical and Dental Defence Union of Scotland. The medical practitioner applies for membership, is accepted to the organisation, and pays a subscription fee.

The terms of the membership and the scope of the cover provided are subject to the organisation’s memorandum and articles of association. These can be as open or narrow as the indemnity provider decides. There is no limit on the indemnity offered or the expenses that will be paid. The cover usually allows for flexibility and can indemnify the “moral” argument. However, as the title suggests, the cover is discretionary and therefore there is no guarantee that a claim will be accepted or paid, and the discretion can be exercised at any time to limit or withdraw assistance. This may therefore leave a practitioner exposed with no upfront certainty as to what is covered. Nor does the practitioner have any right to legally enforce the indemnity, because of its discretionary status. The cover will also not necessarily apply or respond to claims for indemnity for any acts completed before or after the period of membership.

Contractual indemnity

In contrast, a contractual indemnity is obtained by applying to a commercial insurer for an insurance policy (by submitting a proposal form), and then paying a premium when it is accepted. A document (the contract – usually called a policy) is then issued which sets out the terms and conditions of the cover, clearly detailing what is and is not covered, the maximum indemnity limit, and what obligations exist on the part of the practitioner and the insurer. This is a legally enforceable contract.

Unlike discretionary indemnity providers, the insurer is regulated by the Financial Conduct Authority which requires that:

• The practitioner (as a customer) is treated fairly
• The insurer must have adequate funds to meet all liabilities
• A formal complaints service must be available
• Access to the Financial Ombudsman Scheme is available if a dispute should arise with the insurer
• Access to the Financial Services Compensation Scheme is available if an insurer should fail (which in the context of medical malpractice insurance would be a very rare event)

There is further protection for potential claimants via legislation (which may entitle them to make a direct claim against the insurer), which is not available with discretionary schemes.

Practitioners seeking such cover can, usually with the assistance of an insurance broker, take an informed view about the amount of indemnity cover they purchase and the level of the premium paid (akin to the choices of cover, premium and excess for household insurance). Expert guidance from an insurance broker with relevant expertise is needed to understand and negotiate effectively with insurers around the scope of indemnity cover, any exclusions, the contract terms and their implications. The sums payable under the policy are often limited, as determined by the terms, and usually reflect the risk context in which the practitioner operates and their decision, having taken advice, about what insurance terms are best for them.

Claims made versus losses occurring

Discretionary cover is traditionally a losses occurring indemnity, whilst a contractual policy always has a claims made basis. Losses occurring cover is triggered by the date on which the event giving rise to the claim occurred (eg the date the treatment was provided). This therefore has the benefit that run-off cover for retirement, dying or subsequently ceasing to be a member is not required.

In reverse, a claims made indemnity is triggered by the date that the insured practitioner first became aware of a claim/complaint and notified their insurer. It is therefore the policy in force at that time which responds – even though this may be years after the treatment/advice. Notably this does mean that the practitioner needs to ensure that adequate run off cover is purchased to cover claims arising after s/he has retired, died, or the policy expires. It is however possible to extend the cover backwards on a clams made policy, if an individual should move between the different types of cover, to avoid any uninsured periods.

Conclusion

Sadly past research suggests that practitioners obtain their indemnity cover but rarely study the detail until forced to, by which time they may discover that a discretionary provider will not respond to the claim, or that the terms of their contractual arrangements mean that it does not operate as they thought. Given that the potential consequences of being uninsured can be so significant in an increasingly litigious society, understanding and selecting the right cover early is crucial.