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Practice Liability Explained
Practice Professional Indemnity:
In the health sector many health practitioners hold their own medical indemnity (professional indemnity) insurance. Below are some of the key reasons why this is the case.
- Medical Practitioners: A Medical Practitioner is registered with the Australian Health Practitioners Regulation Agency (AHPRA) and required to hold individual insurance with a Medical Defence Organisation (MDO). The commonly known MDO’s include Avant, MIPS, MIGA and MDA. The practitioners purchasing insurance with an MDO are typically GP’s, Doctors and Surgeons.
- Health Practitioners. Certain health practitioners, other than Medical Practitioners, are also required to hold individual registration with AHPRA. Part of the registration requirement is that they hold medical indemnity (professional indemnity) insurance. These practitioners do not purchase insurance with a MDO, they buy their insurance from the traditional commercial insurance market. These practitioners include Chiropractors, Occupational Therapists, Optometrists, Physiotherapists, Podiatrists and Psychologists.
- Multiple workplaces. It is common for practitioners to be employed at multiple locations, so they cannot rely on the insurance of a single employer. If a previous employer no longer exists, the individual practitioner may be exposed for future claims resulting from past work.
- It is possible for the practice to take action against a contractor if the contractor failed in their professional services, therefore the contractor maintains individual protection.
Given the above, a common question is why the practice needs to maintain insurance if the practitioners hold their own insurance. The practice should maintain a professional indemnity policy for the following reasons:
- Not all employees hold individual cover and the practice’s policy extends protection to employees. The practice’s policy covers valid claims against the practice as well as Directors, Partners, Principals and Employees for an error in their professional services.
- Vicarious liability. The practice has a vicarious liability for the actions of its practitioners, both employees and contractors. The practice’s vicarious liability is covered by the policy for valid claims.
- Patient decision. Patients have the choice to sue their health practitioner personally, or the practice, or both. It is common to see both the individual and the practice listed as a defendant on a writ. The practice policy covers the legal costs to defend an action, and the damages awarded for any valid claim.
- Proportionate liability. In Australia the courts can award proportionate liability, meaning that more than one party contributed to the loss. For example, the health professional gave the incorrect advice, however the outdated procedures of the practice contributed to the loss, so the courts find the practitioner and the practice liable and award a percentage of the loss against each party.
- Subrogation is the legal authority of an insurance company, including a MDO, to pursue any third party which contributed to a loss. For example, Avant provide insurance protection for a GP who made an error. Avant pay $1m for a claim against the GP and then seek to recover costs from the practice, suggesting that the practice had procedures which were inadequate and contributed to the loss.
- Joined to an action. If a practitioner is sued by a patient, and that practitioner holds separate insurance, the practitioner with the advice from their lawyer, may decide to join the practice to the action.
- No practitioner involvement. There may be a case where a patient suffers an injury without a practitioner being involved. This could be because of a procedural error, such as failing to share results of medical scans or failing to organise a specialist referral. Another example is a non-clinical employee giving incidental advice that results in further injury, like a receptionist saying, “try resting for a few hours and if you are still in pain take some Panadol”.
These are some of the common reasons why a practice should always maintain its own professional indemnity insurance protection, as the policy pays the legal costs to defend an action, and the damages if found responsible for a valid claim.
The above is a summary of how the practice professional indemnity policy could operate, however for your specific coverage details please refer to the policy document. The insurance policy will response to the specific details of each event as assessed by the insurer.