CAN PAY, WON’T PAY:  REFUSAL OF INDEMNITY

BY MEDICAL DEFENCE ORGANISATIONS

In a large majority of clinical negligence claims, the individual healthcare professional involved is an employee, usually of an NHS Trust. Thus if they are sued for negligent errors or omissions occurring in the course of their employment, their employer, the NHS Trust, is vicariously liable, and the individual can rely on “NHS Indemnity” to meet the damages and legal costs.

The situation is somewhat different when doctors, dentists and some other healthcare professionals in private practice are sued for negligence. Even when they are operating out of a private healthcare facility, such as a BUPA hospital, unlike the nursing and support staff employed by that hospital, their legal status is usually one of “independent contractor”, and they must be sued personally.

All well and good, but what happens when the independent contractor’s defence union, which for a majority of doctors and dentists is a “members’ mutual” providing them with only a discretionary indemnity[1], refuses to indemnify the claim?

This is the dilemma which arose in the case of ex parte Moreton[2]. The claimant was one of a large number of former patients bringing claims against an orthodontist, Melvyn Megitt. He had practiced until 1997, and following an investigation in 1999, he was struck off the Dental Register the following year, for serious professional misconduct.

As details of a potentially large number of claims emerged, litigation started in Manchester was made the subject of a group litigation order in 2001. The legal proceedings included freezing injunctions obtained against the assets of Mr Megitt and his wife.

After indemnifying Mr Megitt in respect of three claims, in another 74 claims the Medical Defence Union Ltd (“the MDU”) declined to assist him, and gave no reason for doing so. Effectively, the claims would have to be abandoned, since Mr Megitt lacked the means to satisfy 74 claims for damages and costs personally.

In a trial of a preliminary issue, the claimants sought to challenge that decision. It was argued on their behalf that the MDU was “so woven into the fabric of public regulation in connection with doctors, dentists and healthcare professionals”, that its decision making was subject to judicial review.

In particular:

• The government provided dental services pursuant to a statutory duty under the NHS Act 1977, as amended.
• The government regulates dentists by itself and through the General Dental Council.
• Historically and presently, the MDU was woven into the public system for the provision of dental services, and of the regulation of dentists, particularly the provision of indemnity. For example, it was argued that a 1954 NHS Circular, which sought to apportion the financial burden of litigation between health authorities and defence organisations on a 50:50 basis, evidenced a de facto partnership.

These arguments failed, even though the MDU’s chief executive went on record to say that the current system was unsatisfactory.

Newman J held that whilst there was a clear “public interest” (in the broadest sense) in persons who had received negligent treatment being compensated for their claims, “we are a long way from there being any guarantee that all practitioners who are negligent will, by way of indemnification, be in a position to pay…There is no form of safety net for those who are negligently treated by practitioners who have no insurance at all…”. 

The court also considered a statement by the Assistant Dental Director of a rival organisation, Dental Protection Ltd, who asserted that: “…Any discretionary organisation that refused legitimate claims from its members would not remain in business for long. In 112 years of continuously indemnifying UK dentists, DPL has never used its discretion to leave a patient uncompensated.”. 

If that statement was correct, then it would seem that many of Mr Megitt’s victims may have been compensated, if he had chosen to be a member of Dental Protection Ltd rather than the MDU.

The problem is not confined to doctors and dentists. For example, existing guidance from the Nursing & Midwifery Council only “recommends” that members working without the benefit of vicarious liability obtain professional indemnity insurance. Further, if they are unable to obtain such cover, they are advised to disclose this to the patient and explain the potential consequences. This loophole means that a child catastrophically injured in the course of a negligently managed home birth, by an uninsured private midwife, would also face a defendant probably lacking the means to ever satisfy any substantial judgment.       

There is an alternative, namely insurance. In fairness to the MDU, it does offer such products to its members as an alternative to traditional discretionary indemnity, although it is not compulsory. The MDU acts as an intermediary for cover issued by Converium Insurance (UK) Limited. The MDU’s literature states that this provides, in the event of a claim against a member for clinical negligence, up to £10M indemnity for any one claim, and the total of all claims annually, as long as the claim falls within the terms and conditions of the policy. The cover is provided on a “claims made” basis – in other words it covers claims incurred while the individual was a member of the MDU which were reported while the policy was still in force.

So there appears to a strong case for making professional indemnity insurance compulsory in the private healthcare sector. In that regard, we are lagging behind other jurisdictions. For example, in Australia, under the Medical Indemnity (Prudential Supervision and Product Standards) Act 2003, all clinical indemnity must be provided on an insured basis, and further it must be provided by a general insurer authorised by the Australian Prudential Regulatory Authority (“APRA”).

Dr Peter Ellis

Lamb Chambers