Insurers and underwriters continue to see the Australian medical indemnity market as a positive and profitable marketplace, even though existing underwriters are under competitive premium pressure from aspiring entrants.
Current insurers and aspiring entrants will be encouraged by events of the past year. Firstly, the High Court's ruling that damages cannot be recovered for the "loss of a chance" has been applied in the District Court of NSW. This is because previously there was good state authority to say damages for loss of a chance were recoverable. This decision will have a positive impact on the balance sheet of insurers.
Secondly, new released claims data confirms that medical indemnity claims are resolved cheaply. 40.1% settled with no payment, 29% for less than $10,000 and 8.8% for between $10,000 and $30,000. These statistics will reinforce to those insurers presently on risk that their claims are well managed. Equally, it will encourage and incentivise insurers wishing to enter the market.
END OF "LOSS OF A CHANCE" (0R IS IT?)
The High Court's decision in Gett v Tabet [2010] HCA 12 has now settled the question of whether a plaintiff can recover for a "loss of a chance" following a negligent medical mishap. The effect of the High Court ruling is now being felt by those plaintiffs unable to prove that their injury was more probably than not (ie a greater than 50% probability) caused by the medical error. Previously, the uncertainty in the law allowed some plaintiffs to recover even when the probability of the better outcome was less than 50%. In Clothier v Dr Fenn & Greater Southern Area Health Service [2010] NSWDC 96, the District Court of New South applied the High Court's ruling that a plaintiff will not be able to recover damages for the loss of a chance unless it is proven that a defendant's negligence more probably than not caused the plaintiff's injury.
Commentators have questioned whether a plaintiff can still succeed in proving a "loss of a chance" case through contract law, as opposed to the law of negligence. Strictly speaking, the door is not closed on this. That said, the court might be averse to holding a defendant to an entirely different standard simply because a plaintiff pleaded his or her case in contract rather than in negligence.
For now, Australian courts will not award damages for a negligent medical mistake where the negligence simply meant the plaintiff lost a less than 50% chance of a better outcome. The plaintiff must prove on the balance of probabilities (ie a probability of greater than 50%) that the negligence caused the injury complained of.
LIABILITY OF MEDICAL PRACTICE SERVICE COMPANIES
In recent years, there has been a trend towards groups of medical practitioners (usually general practitioners) practising out of the same premises, either individually or in partnership, to enter into agreements with companies for the provision of administrative services. This provides a number of benefits to the practitioner, including shared administrative, office and reception services, accounting and bookkeeping, debt collection and computer systems. Often the medical practitioners have an interest in the practice company.
Traditionally, patients who alleged they had been negligently treated by their general practitioner practising at a clinic have named the general practitioner as the sole defendant.
However, the practice company providing services to the clinic is not immune from liability. This is illustrated by the New South Wales Supreme Court decision in CS v Anna Biedrycka [2010] NSWSC 1213. In that case a patient of a medical centre had unprotected sex with the plaintiff (who was not a patient of the medical centre) and transmitted to the plaintiff the HIV virus. The patient consulted a doctor at the medical centre who ordered tests. The tests came back equivocal, with the pathologist suggesting retesting. Two opportunities to notify the patient of the need for retesting were missed:
- Firstly, the doctor asked the administrative staff at the medical centre to send a letter to the patient advising her of the need to re-attend, but the letter was sent to an old address and did not reach the patient.
- Secondly, when the patient attended the medical centre to receive the test results the doctor who saw her on the first occasion was unavailable, so she was seen by the next available doctor. That doctor failed to read the note on the patient's record and told her that her tests were clear.
The patient subsequently had unprotected sex with the plaintiff, who contracted HIV.
The duty owed by medical practitioners and companies providing services to those practitioners is not confined to the patients they treat.
The plaintiff's case against the doctors was settled. The doctors then sought contribution from the company that provided the administrative services to the medical centre. The doctors argued that by failing to confirm the patient's address the company was in breach of its duty to the plaintiff and in breach of the contract between them.
The court held that the company breached its duty of care by failing to maintain accurate records to ensure effective and timely contact with patients after pathology testing. The administrative staff failed to comply with New South Wales legislation requiring a medical practice to maintain accurate medical records and the medical centre's procedure requiring confirmation of a patient's current contact details. The company was ordered to contribute 40% towards the damages owed to the plaintiff.
The other interesting point of the case was that the plaintiff was not the patient but the person to whom the patient transmitted the HIV virus. It is a timely reminder that the duty owed by medical practitioners and companies providing services to those practitioners is not confined to the patients they treat.
Australia has a sophisticated and competitive insurance market, offering professional indemnity insurance to doctors. However, even though service companies are becoming more prevalent, the insurance market for this risk is less competitive and often restricted to public liability cover. This case suggests that insurers of practice companies should review the policies traditionally offered and consider a broader policy covering more than just public liability.
The decision also provides scope for insurers of medical practitioners to recover losses from practice companies. In this instance, the recovery was confined to the negligence of the company in the manner it delivered administrative services, as was the extent of the services provided by the company. However, the court has previously found a practice company to be responsible for medical errors of a medical practitioner where that practitioner is an employee of the company. On this point, both the agreement and course of dealings between a medical practitioner and a company can be influential in determining where the responsibilities lie. It is important for insurers to be fully informed of the relationship between a medical practitioner and a company providing services to them before agreeing to insure either party.
2011 REPORT ON PUBLIC AND PRIVATE SECTOR MEDICAL INDEMNITY CLAIMS
In March 2011, the Australian Institute of Health and Welfare (AIHW) released the latest in a series of reports on medical indemnity claims in the public and private sectors. The report, which covers claims made, current or finalised in the 2007-08 period, draws on a wealth of data collected by AIHW.
Of interest are the statistics on the size of settlements. 1,067 of 2,663 finalised claims (40.1%) settled for no payment, 29% for a payment of less than $10,000 and 8.8% for between $10,000 and $30,000. This means that over three-quarters of all claims finalised in the 2007-08 period settled under $30,000. This low settlement figure is difficult to interpret. It might mean that several years after tort reform there are still many small claims being made or were made several years ago and only now being finalised. Alternatively, it might reflect the difficulty and complexity of medical negligence litigation and that the modest settlements reflect the difficulty experienced by plaintiff's proving negligence and causation. The very large claims that garner a great deal of public attention account for a very small number of all claims made (only 2.6% settled for over $500,000).
Data is available for each of the specialty areas reviewed by AIHW. The clinicians subject to the largest proportion of all finalised claims were gynaecologists (15.7% of all finalised claims) and general practitioners (15.5%). General surgeons and emergency medicine clinicians were responsible for 9.8% and 9.6%, respectively.
THE YEAR AHEAD
The medical indemnity market will remain competitive. There has been no catastrophic event to send chills to the market. The entrenchment of the High Court case of Gett v Tabet [2010] HCA 12 rendered 2011 a good year for containing compensation payouts and its effect will flow on into future years. The AIHW data for 2007-08 shows that medical negligence claims continue to be settled for relatively modest amounts. There is opportunity for insurers to benefit from the trend of medical practitioners to enter agreements with companies, including for the provision of administrative services. Insurers should be aware of opportunities in this area to provide broad policies to the companies, and the possibility of recovering losses from the companies if the practitioner has been found liable in negligence.
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