Choosing Professional indemnity Insurance – What Doctors need to know

Introduction:
This article deals with certain vital aspects of the professional indemnity insurance that is available for the doctors along with several other professionals. The following paragraphs will cover the basics of indemnity insurance, why there is no cap on the amount of compensation payable in a medical negligence case against a doctor, concept of AOA:AOY, what all is and is not covered by the policy, covering negligent acts of unqualified staff and the conditions that the doctor must fulfill for getting the compensation.

Consumer Protection Act, 1986 and Doctors:
The case of “Indian Medical Association vs. V. P. Shantha and ors”gave effect to consumers who were suffering from medical negligence and including medical services in the ambit of Consumer Protection Act, 1986. This additional forum for the patients to complaint against the negligence of doctors in addition to the Civil & Criminal Courts along with the disciplinary committees of the State Medical Council and the IMA gained good traction, as the patient were being monetarily compensated by the doctor. Consequently this has given rise to the number of cases that are being filed against the doctors at the consumer forum.

AnuradhaSaha case impact:
A ruling by the Supreme Court holding three physicians responsible for the death of a woman in a Kolkata hospital 15 years ago and awarding a record compensation is being hailed as a potential turning point in Indian legal history. It marked the highest compensation ever ordered in a case of medical negligence in India. The court ordered a compensation of Rs.5.96 crore, which with interest crosses Rs.11 crore.

Perception of professional indemnity insurance policy as savior:
Understanding on a very primary level, the professional indemnity insurance policy is meant for the doctors to cover liability falling on them as a result of errors and omissions committed by them whilst rendering professional service. However there are also certain ifs and buts to be looked into before one relies on such policy.

What exactly is indemnity?
Understanding indemnity:
• It is compensation for damages or loss. In the legal sense one may also refer to it as an exemption from liability for damages.
Understanding indemnity insurance:
• It is a way for an individual to be protected against indemnity claims. This insurance protects the holder from having to pay the full sum of an indemnity, even if the holder is at fault for the cause of the indemnity in the first place.
Therefore it is the patient who is being indemnified by the doctor and the doctor is being covered for such amount that is paid by to compensate the patient through the professional indemnity insurance policy.

Different liability for doctors and hospitals
It is important to understand that the loss suffered by the patient is not always to be compensated by the doctor but the liability of doctor depends on the fact that whether any loss has been caused to the patient due to any of his negligent act. Accordingly if a surgeon performing surgery in a hospital, which has provided the operation theater for a particular surgery and where the surgeon has been thoroughly diligent while performing a surgery but the patient has suffered some bodily loss due to failure of some equipmentprovided by the hospital or for not keeping the necessary items for that particular surgery in the OT then it the hospital that is negligent and not the surgeon.
Further in case the patient has suffered some bodily loss partially due to the negligence of the hospital and partially due to the surgeon then the compensation will also be divided by the two parties.

Moreover, where a surgeon owns the hospital and the loss suffered by the patient is due to partial negligence of the hospital and of the surgeon and the compensation is to be paid by both the negligent parties then the professional indemnity insurance will only take care of the amount that is payable by the surgeon. However, the indemnity policy of the surgeon will not cover the compensation that is payable by the hospital even though he owns the hospital. Hence such doctors needs have separate indemnity insurance policies for the Hospital and for him in his individual capacity.

Why there is no cap on compensation & how is it compensated as on today?
As on today in case the negligence of a doctor has resulted in bodily loss to the patient then the Schedule I and II of the Motor Vehicles Act, 1998 and Schedule I & IV of the Workman’s Compensation Act, 1923 is referred. Here if the compensation is solely calculated on the basis of the said acts then there would have been a good level of certainty with respect to the compensation. However it is the compensation asked by a patient for mental trauma or agony when the quantum of compensation depends largely on the judge.

Concept of AOY:AOA
In Professional Indemnity Policy, the sum insured is referred to as Limit of Indemnity. This limit is fixed per accident and per policy period which is called Any One Accident (AOA) limit and Any One Year (AOY) limit respectively. The ratio of AOA limit to AOY limit can be chosen from the following:
a 1:1
b 1:2
c 1:3
d 1:4

The AOA limit, which is the maximum amount payable for each accident, should be fixed taking into account the nature of activity of the insured and the maximum number of people who could be affected and maximum property damage that could occur, in the worst possible accident.

Understanding this concept of AOY:AOAin different scenarios:
A doctor has an indemnity policy of Rs. 50,00,000.

Scenario A: AOY:AOA is 1:2
He looses a case where he has to pay compensation of Rs. 30,00,000. Here the insurance company will only pay Rs. 25,00,000 since the total cover of the insurance policy is divided for 2 accidents. Here the doctor has a cover for another accident for which the policy will pay up to Rs. 25,00,000.

Scenario B: AOY:AOA is 1:1
In case where the compensation is payable of Rs. 40,00,000. Here the insurance company will completely take care of the compensation payable for this case as the complete cover can be used for a single accident.
But if there is another accident where the doctor has to compensate with Rs. 7,00,000 then this shall not be covered by the policy even though the limit is of Rs. 50,00,000 and only Rs. 40,00,000 was being compensated in the earlier case in the same year since only one accident is to be covered by the policy.

What all is covered
• All sums legally liable to pay as damages in respect of any error and/or omission. No out of the court settlement is covered by the insurance company.
• Legal cost and expenses incurred in defense of the case, with the prior consent of the insurance company, are also payable, subject to the overall limit of indemnity selected.
• What if there are multiple claims for particular act? Claim series clause

Covering acts of unqualified staff
It is imperative to inform the insurance company that there are unqualified staff working in ones institution. In case this declaration is not made and there is some negligence from any unqualified staff of hospital then in that case the company will not stand by the doctor as the contract of insurance is based on the utmost faith.

However the institutions are not required to lay off the unqualified staff but they can get the negligence acts of such staff covered by paying an additional premium of 7-8% for the policy.

What is not covered
Some of the important liabilities which the insurance company generally does not cover are:
• Any liability arising out of any criminal act
• Third party public liability
• Fines, penalties, punitive and exemplary damages
• Loss of goodwill or market
• Plastic surgery
• Intentional non-compliance
• Services rendered under the influence of intoxicants or narcotics
• Willful neglect or deliberate act
• Promise of payment to be made without prior approval of the insurance company

Conditions for getting the compensation
• Written notice to the insurance company as soon as reasonably practicable. Email is the best available option.
• No promise of payment on behalf of the company without prior consent.
• Give all the information and assistance.
• Notice of any material change in the information supplied to the company.
• The company shall not be liable in case there is material mis-statement or non-disclosure of material information by or on behalf of insured.
However there might be certain additional requirements, which may differ from policy to policy.

Prepare and prevent rather than repair and repent
Last but not the least is that the policy holder should make the utmost disclosure at the time of taking policy or else the insurance company will only have a way out in case of any liability. These are the some of the important points that must be carefully filled:
• Think of your prospective actions while filling the proposal form.
• Whether the all facilities are maintained through regular service contracts with the manufacturers or service agencies?
• The most accurate details of the employees operating the facilities.
• Whether you wish to extend the policy to cover the personnel who are unqualified.
• Have any claims been made upon you or legal proceedings are likely (Legal notice, mail from patient) to be instituted.

Conclusion
At the end I would like to leave you with the following three quotes on why one needs to be careful:
• It requires a lot of carefulness to kill a fly that touches on the scrotum.
(So first precaution is to not let the fly to sit on the scortum and if it sits then at least manage to get rid of it carefully)
• If you can’t be good, then be careful.
(In todays scenario being good is also not an excuse for not being careful)
• A full vessel must be carried carefully.
(More the reputation and standing of the doctor in society and fraternity, the more careful he has to be)

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