Contract of Insurance, or a Discretionary Benefit?

Traditional unregulated Medical Defence Organisations provide Medical Indemnity as a purely discretionary benefit of membership. Regulated insurance companies provide Medical Indemnity through a contract of insurance. How far has the Government consultation on the suitability of discretionary indemnity progressed? 

Why do surgeons need Medical Indemnity?

Holding a suitable Medical Indemnity arrangement is vital for anyone with any private practice. For surgeons regulated by the GMC, it is a requirement of Good Medical Practice paragraph 63, “You must make sure you have adequate insurance or indemnity cover so that your patients will not be disadvantaged if they make a claim about the clinical care you have provided in the UK.” Holding the necessary Medical Indemnity arrangements is also an express condition of holding practising privileges at a private hospital or clinic, with some mandating a specific amount of indemnity required.

Adequate cover is crucial for patient protection. Mistakes do happen in private practice and sometimes patients are seriously harmed. No patient should be left unable to pay for their care because their surgeon lacked proper Medical Indemnity cover and cannot afford to pay for the care out of their own pocket. 

Adequate cover is also crucial to protect the surgeon. Where care is provided privately, the appropriate defendant in the claim (or at least one of them) is usually the individual surgeon who provided the treatment complained of. If a surgeon’s cover is absent or fails, then firstly the surgeon would have to fund his or her own legal defence costs. These could potentially be significant – legal defence costs can easily reach five figures even at the pre-action stage, depending on how much expert evidence is required. And, what if the claim has merit and needs to be settled, or the claimant wins at trial? Because the claim is against the surgeon personally, any award of compensation and legal costs can be enforced against him or her personally. Claimants’ legal costs alone can easily reach six-figure sums, depending on how far towards trial the claim progresses. The amount of compensation depends on the injuries, but if the patient will have ongoing loss of earnings or will need long-term care, the amounts could easily exceed £1million. Even more modest claims would have the potential to bankrupt most surgeons. Surgeons with significant assets such as their homes could have to re-mortgage to raise the funds necessary to pay a claim.

What is “adequate” cover?

In terms of the amount and scope of cover you need, the question of what is “adequate” depends to some extent on the exact nature of your practice. As the GMC puts it, “The cover you need is very much dependent on your circumstances and must be in place by the time you begin to practise.” (https://www.gmc-uk.org/registration-and-licensing/managing-your-registration/information-for-doctors-on-the-register/insurance-indemnity-and-medico-legal-support

Therefore, before securing your Medical Indemnity cover, you need to have a detailed discussion with your intended indemnity provider about your practice, to make sure that you buy the right level of cover to deal with the sorts of claims that are possible for you, and to comply with any specific requirements of the hospitals or clinics where you hold practising privileges.

However, there is a bigger question here about what cover is “adequate”.  Leaving aside the question of what amount or level of cover you buy, does the type of Medical Indemnity – discretionary cover or contract of insurance – make a difference to how well you and your patients are protected? 

Government consultation on appropriate clinical negligence cover

This is such an important question that in 2018/19 the Government held a consultation – “Appropriate clinical negligence cover: a consultation on appropriate clinical negligence cover for regulated healthcare professionals and strengthening patient recourse” https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/762296/clinical-negligence-cover-consultation.pdf.

Describing commercial cover, the report said: “At the heart of a contract of insurance is a legally enforceable obligation”. 

The report refers to contractual indemnity as regulated insurance. This is a key differentiator between contractual and discretionary, leading to the following clear benefits of a specific contract of cover:

•     Commercial providers legally have to pay out, and the policy wording must make covered activities completely clear.

•     Insurance companies must hold enough reserves for insurance claims, and enough capital for any unexpected losses.

The report said: “In contrast, MDOs offering discretionary indemnity do so on the basis that their discretion is absolute … they therefore are not obliged to pay out in any circumstances.”  Traditional cover might pay out, at whatever level the MDOs “see fit”.

The GMC responded to the consultation, but did not state a view over whether discretionary cover is really “adequate” for modern private practice.  The GMC’s comment in its response was: “As a professional regulator, we do not believe that we are in a position to comment on whether insurance or indemnity provide the best model for meeting the consultation’s aims.”

The Government has already said that its preferred option is to replace the existing discretionary indemnity arrangements with regulated cover. This is a really powerful indication of the fundamental inherent weaknesses in discretionary cover. In our view it demonstrates that discretionary cover is not adequate or suitable for modern private surgical practice.

What is happening now?

The Government’s consultation period closed in February 2019. Since then the Government has not published any update on its decisions based on the consultation or any next steps. No doubt a combination of Brexit and coronavirus has delayed matters, and we cannot predict when decisions may be made or changes implemented.  Incision is monitoring the issue closely and will publish updates as they become available.

In the meantime, surgeons should give careful thought to whether discretionary indemnity is really “adequate” for them personally. 

Contact Incision for a discussion

The delay in getting a published outcome to the Government consultation means that some truly fundamental questions about the best way to protect against clinical negligence claims are being left unanswered. This is particularly worrying at a time when the private healthcare sector has been severely disrupted by coronavirus, and when a recession may trigger an upturn in clinical negligence claims in due course. 

In these very difficult circumstances, each individual surgeon should have frank and detailed discussions with their indemnity providers, before deciding what type and amount of cover is suitable for them at their next renewal. Contact Incision on 0333 444 1515 for a free, no-obligation discussion with a specialist in Medical Indemnity contracts of insurance.

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Incision Indemnity

Incision Indemnity