Michelmores' Laurence Vick interviewed in latest Insurance Post on NHS privatisation indemnity concerns

Michelmores Clinical Negligence team post this week's Insurance Post article in full below.

Content appears by kind agreement of Insurance Post.

Outsourcing NHS services may leave negligence claims cover black hole

Politicians concerned over sufficient insurance indemnity

Fears have been expressed within political and legal circles that private companies taking on National Health Service contracts may struggle to secure sufficient cover to meet medical negligence claims.

In the past, successful claimants would have received a payout from the Clinical Negligence Scheme for Trusts, an indemnity fund managed by the NHS Litigation Authority. But the government's decision to put portions of the NHS out to competitive tender following the Health and Social Care Act 2012 means a far greater number of NHS patients are now likely to be treated by private providers, which do not have the same indemnity arrangements in place.

Concerns over the issue prompted Jamie Reed MP to ask Secretary of State for Health Jeremy Hunt: "What safeguards are in place to ensure private healthcare providers operating NHS contracts carry sufficient insurance indemnity to meet future claims for medical negligence made against them?"

Responding in parliament on Hunt's behalf, Daniel Poulter, parliamentary under-secretary of state at the Department of Health, said the NHS standard contract required all contractors of NHS care "to hold and maintain adequate and appropriate indemnity arrangements".

"The NHS Litigation Authority bears the full indemnity for private healthcare providers in cases of medical negligence, where providers are a paid-up member of an appropriate NHSLA scheme," he added. "Private healthcare providers are also able to procure clinical negligence indemnity cover from the insurance market."

Changes in secondary legislation have meant that, from April 2013, private healthcare providers can now be covered by the Clinical Negligence Scheme for Trusts, if they make an annual contribution. But Post understands many are unhappy with the terms.

An industry source told Post: "The NHSLA told companies the rules of membership were going to be to sign up for three years and there was no price certainty around years two and three."

Additional fees
On top of the annual fee, firms were also told they would have to pay an "exit fee" or procure commercial run-off cover to protect against future claims from the period of their membership of the scheme.

Laurence Vick, a medical negligence lawyer at law firm Michelmores, said: "The agreement is that firms will contribute to the NHS Litigation Authority fund, which provides indemnity to hospitals within the NHS. The nature and extent of that contribution is not clear, but we are further concerned at what happens after the provisional agreement with the NHSLA is over.

"From our experience it is usual for private healthcare providers to refuse to accept responsibility for negligence and choose to go to law - that's one problem. But what if they aren't properly insured at all?"

Philip Dearn, healthcare practice leader at Marsh, claimed there was no lack of appetite from insurers to underwrite this business and said the broker had been involved in procuring "a range of different options for private hospital operators that have elected to go with alternative insurance solutions".

Alex Wakeley, class underwriter of medical malpractice at Lloyd's insurer Marketform, was the only underwriter contacted by Post to confirm his organisation is insuring private sector companies working within the NHS.

However, in Vick's view, any insurer that steps into the breach is playing a risky game. "There is no means by which any commercial insurer can assess the risks involved in performing surgery and providing clinical services - there is no data and many of the claims would be historic, dating back 10 years or more, with potential for cases coming 20 or more years later," he said.

"For a commercial insurer to have to indemnify claims likely to arise from the Mid-Staffordshire inquiry, for example, would be catastrophic," he added.

Despite the NHS delegating its responsibility, litigation could still be brought against the NHS on the basis that it has "a non-delegable duty of care", Vick suggested.

He referred to the Independent Sector Treatment Programme that began in 2003.

Under the programme, private sector-owned treatment centres are contracted with the NHS to treat patients for elective procedures such as knee or hip-replacement surgery. But the system gave rise to a high number of claims, often due to poor communication between the NHS - which provided treatment leading up to an operation - and the private treatment centre that was contracted solely to undertake the operation.

Commenting on his own experience, Vick said: "We had many of those cases that were a disaster and in each of these cases we successfully sued the NHS. If the NHS hasn't successfully delegated the liability and it gets sued, as taxpayers we need to know that the NHS can recoup these costs from the private companies."

The NHSLA was unavailable for comment.

Read the article on the Post Online Website