As the healthcare sector continues to await the final outcome of the Paterson Inquiry, WTW specialists offer clarity on the current choices for medical negligence protection.
The 2020 Paterson Inquiry highlighted issues around the adequacy of medical negligence coverage for doctors in cases of malpractice. It also raised concerns about patients not having access to appropriate compensation for malpractice. Mr Ian Paterson, a Consultant Breast Surgeon was employed by the NHS and also practised privately. On 28th April 2017, Paterson received a criminal conviction for wounding with intent and unlawful wounding. It was found that Paterson had been misrepresenting test results, exaggerating the risk of cancer and carrying out unnecessary biopsies and non-evidence-based cleavage sparing mastectomies. Paterson's original sentence of 15 years imprisonment was increased by the Court of Appeal to 20 years. Mr Paterson was a member of a Medical Defence Organisation (MDO) which provided him with membership and discretionary medical negligence protection. However, the MDO applied their discretion to restrict their contribution to the settlement due to the unlawful acts committed by Mr Paterson. Without the private hospitals' compensation, the patients would have remained uncompensated.
This February marks four years since the Paterson Inquiry. While the healthcare sector continues to await its conclusion, healthcare professionals and the entities where they practice, continue to wrestle with a lack of clarity around medical negligence insurance choices.
It's vital for healthcare professionals to understand the various features of their medical negligence protection so that they are adequately safeguarded. Having appropriate compensation arrangements protects the healthcare professional financially. It also protects any corporate healthcare provider from being brought into claims where the healthcare professionals' indemnity arrangements fall short.
In this article, we provide clarity on the existing medical negligence options of discretionary versus contractual protection and the differences between 'claims made' and 'losses occurring' cover.
We begin with a recap of the significance and key recommendations from the February 2020 Paterson Inquiry, and consider where this leaves healthcare professionals and healthcare providers today.
Q: What was the significance of the Paterson Inquiry?
A: Surgeon Ian Paterson was convicted of wounding with intent in 2017. His actions not only violated the trust of his patients but also exposed systemic failures within the healthcare system. The independent inquiry into the issues raised by Paterson, published in February 2020, aimed to prevent such harmful incidents from happening in the future.
The Paterson Inquiry went beyond an investigation into the actions of a rogue surgeon, becoming a comprehensive examination of the healthcare system's failure to prevent his malpractice and ensure patient safety.
Q:What was the key recommendation from the Paterson Inquiry?
A: The final government decision is still outstanding. However, the government has stated that so-called 'Option 2' was its preferred option for clinical negligence cover. This would change legislation to ensure all regulated professionals in the U.K. not covered by a state-backed indemnity scheme hold appropriate, non-discretionary clinical negligence cover that is subject to appropriate regulatory supervision.
The stated objectives of this proposed change are to ensure:
- Patients harmed by the negligence of regulated professionals can access appropriate compensation
- Regulated professionals hold stable and sufficiently funded clinical negligence cover, thereby reducing potential risks of prohibitive costs to the healthcare workforce and the patients they treat failing to access appropriate compensation
- Regulated professionals have greater clarity and confidence about the security and terms of their cover, as well as suitable patient protection in the event of a dispute with their indemnity provider
- Patients have greater clarity and confidence in their recourse to any compensation.
Q: Where does uncertainty on outcome of the Paterson Inquiry leave healthcare professionals?
A: Until the government makes its final decision, there are several options available to regulated healthcare professionals, from the traditional discretionary-based protection provided by medical defence organisations (MDOs) to the contractual options available in the commercial market.
Q:What are the key features of discretionary protection compared to contractual protection?
A: With discretionary protection there is no limit to the indemnity offered and no excess/deductible payable by the consultant. As the name suggests, discretionary protection is at the absolute discretion of the MDO, with no legal obligation to pay claims and the funds are not regulated by the Financial Conduct Authority (FCA). There is no access to an external ombudsman service in the event of a dispute.
Contractual insurance is a legally binding agreement regulated by the Financial Conduct Authority. It provides access to a dispute resolution service and requires ring-fencing of funds for additional financial security. An excess/deductible may be payable by the healthcare professional, and there is a policy limit for successful claims.
Insurers offer contractual insurance policies, generally on a 'claims made' basis. However, some insurers do offer 'losses occurring' policies.
Q: What is the difference between claims made and losses occurring cover?
A: Claims-made cover only applies to incidents discovered and reported during the policy period, while 'losses occurring' cover provides lifetime coverage for incidents that occurred during the policy period, regardless of when the claim is reported.
A 'retroactive date' is a date that may be applied to a claims-made policy, restricting cover for any incident that occurred before this date.
Q: What key features should you look for in claims-made policies?
A: Run-off cover is an insurance policy that comes into effect when a healthcare professional stops trading or chooses not to continue purchasing a policy. It provides coverage for claims related to work you carried out before the policy started.
Claims-made policies should include unlimited or at a minimum 21-year run-off cover, 24/7 legal/medical support, medical council inquiry assistance, inquest assistance and professional training and risk management services.
If you switch away from a claims-made policy, run-off cover must be maintained.
Lessons from the Australian model
Key lessons can be learned from the Australian model. Rising claim numbers and settlement costs ensued during the 1980s and 1990s culminating in the medical indemnity crisis of the 1990s which resulted in the liquidation of the leading discretionary provider. This was primarily due to inadequate reserving due to providing occurrence-based cover. This resulted in around 60% of doctors without protection and MDOs making calls on their doctors for additional funds.
In 2002 the Australian Government announced a strategy to improve transparency in the medical indemnity industry, making medical indemnity a viable commercial product and bringing MDOs away from discretionary based coverage into the fold of insurance under the prudential framework. Since 2003, it has been a mandatory requirement for registered healthcare practitioners to hold appropriate medical indemnity insurance for healthcare practice in Australia.
The Australian model improved transparency in the medical indemnity industry and made medical indemnity a viable commercial product. It shifted MDOs from discretionary-based coverage to insurance under the prudential framework, ensuring adequate protection for patients, healthcare professionals and healthcare entities.
Next steps on your medical negligence cover
Appropriate compensation must be available for patients while also protecting the healthcare professional and any entity where the professional practices. We hope this article provides much-needed clarity on the key differences between the protection and policies available from MDOs and insurers. We recommend that healthcare professionals scrutinize their protection, whether it's the terms and conditions of a commercial insurance product or the nature of discretionary protection. Similarly, entities should pay close and ongoing attention to the protection afforded to those with practicing privileges.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
