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Article June 17, 2020

Vicarious liability: What does it mean for healthcare insurance?

Let’s explore what the issue of vicarious liability really means for healthcare companies, and how it can be prepared for.

The recent supreme court case of Barclays Bank v Various Claimants has once again brought the question of vicarious liability in corporate healthcare risks to the fore. This is a situation which has attracted plenty of attention in recent years, and it remains a central consideration in the overall rationale of key underwriting decisions.

Let’s explore what the issue of vicarious liability really means for healthcare companies, and how it can be prepared for.

When insurance is provided as a contingent only basis, this means that cover applies only when that of the individual healthcare practitioner’s own indemnity insurance would not. This is problematic for several reasons, the most prevalent being the common misconception that an entity does not need its own insurance cover if practitioners hold their own insurance. Unfortunately, claims are rarely directed at individual practitioners. There are plenty of other pitfalls that could also lead to the ‘contingent only’ policy covering far more than was initially intended, too.

The battle lines on this issue have been withdrawn a number of times, and the extent to which vicarious liability applies in different situations isn’t yet completely clear cut. However, there is much to learn from recent cases. We can no longer assume that individuals must be employees for vicarious liability to apply, for instance. Self-employed team members do not exempt corporate entities from such claims, and steps must therefore be taken to mitigate risks if companies choose to work with self-employed practitioners.

Policies must clearly indicate any exclusions applicable for scenarios where the individual practitioner does not carry their own cover, and explain conditions of the policy which might require individual practitioners to carry appropriate cover. Remember, the entire focus of policies like these is to capture contingent losses, so it’s important to bear in mind any external shortfalls and consider a range of different scenarios when anticipating the risk. Last year, for example the Chartered Society of Physiotherapists indemnity for members excludes indemnity to principle where the physiotherapist is an employee. Furthermore, the Royal College of Nurses scheme contains several exclusions, including claims arising from nurses working under a contract of employment.

What will happen if an injury caused to the patient or service user resulted in damages worth hundreds of thousands or even millions of pounds? Or would it be acceptable for an injured party to end up with nothing, because the defendant doesn’t own any assets? These are the questions that need to be asked.

As a general rule, if a healthcare practitioner is employed by a corporate entity then it must be assumed that the employer will be a named respondent to any allegations of negligence arising from the actions of said employee. For this reason, corporate policies designed to cover employed healthcare professionals cannot be contingent only and must be priced accordingly. Failure to adhere to this risks leaving corporate entities inadequately insured, and can mean that the insurer is over exposed too.