Australia: The importance of understanding your medical malpractice & civil liability insurance policy - Updated

Last Updated: 18 September 2017
Article by Zara Officer

AAI Limited (t/as Vero Insurance) v GEO Group Australia Pty Limited [2017] NSWCA 110

A recent Court of Appeal decision confirms the need for healthcare providers to understand their medical malpractice and civil liability policy terms and conditions. The primary decision was the subject of our article in the May 2017 edition of the Health Law Bulletin.


Mr Mace was charged with armed robbery offences on 18 February 2010 and was refused bail. On 3 March 2010 Mr Mace was transferred to Parklea Correctional Centre (Parklea) on remand and remained in protective custody from 3 March to 7 March 2010. GEO Group Australia Pty Limited (GEO) was the new private operator of Parklea and was contractually required to provide psychological and counselling services to inmates at the prison. On 7 March 2010 Mr Mace jumped off a landing at Parklea and suffered serious injuries including brain injuries. It was common ground that no psychologist or counsellor employed by GEO had any contact at all with Mr Mace prior to the incident. Mr Mace sued the State of New South Wales, Justice Health and GEO in the Supreme Court. The case was settled by all three defendants.

GEO was insured under a Medical Malpractice Civil Liability Insurance Policy (Policy), and GEO made a claim under the Policy in May 2012 in respect of Mr Mace's claim. AAI Limited t/as Vero Insurance (Vero) resisted the claim, arguing that it did not fall within the terms of the Policy.

Primary proceedings

The essence of Mr Mace's claim against GEO was that it failed to conduct an appropriate risk assessment of Mr Mace on his arrival at Parklea or at all, failed to provide him with access to psychological services, and failed to refer him to Justice Health for treatment or further assessment.

Mr Mace claimed that GEO negligently failed to provide him with health care services as it ought to have done.

The claim in the Supreme Court made by GEO against Vero was expressly limited to the claim made against GEO by Mr Mace.

The trial judge considered that Mr Mace's claim against GEO was a claim "resulting from" GEO's conduct of the "Health Care Services" and therefore fell within the insuring clause of the Policy.

Vero appealed. Vero maintained that the non-provision of counselling and psychological services by GEO to Mr Mace did not fall within the cover provided by the Policy. Vero's argument was not accepted by the Court of Appeal, and the Court of Appeal upheld the primary decision.

Insuring clause

The insuring clause of the Policy provided:

"The Insurer will indemnify the Insured against civil liability for compensation and the claimant's costs and expenses in respect of any Claim or Claims first made against the Insured and notified to the Insurer during the Period of Insurance resulting from the conduct of the Health Care Services" (our emphasis).

Health Care Services were defined as the "provision of medical services and treatment including services and treatment provided by psychologists and counsellors". Those services involved inmate assessment. The cover extended to claims concerning acts and also omissions in the conduct of the Health Care Services.

Contractual obligations

GEO was required by its contractual obligations as the private operator of Parklea to assess, identify and manage inmates at risk of self-harm in custody when they entered Parklea. GEO employed psychologists and counsellors to meet those obligations. In the case of Mr Mace, GEO failed to undertake such an assessment and provide him with necessary mental health services. GEO failed to identify Mr Mace's risk of self-harm.

Court of Appeal findings

Mr Mace's claim against GEO was limited to the non-provision of the services. Vero argued that this was outside the insuring clause of the Policy because it related to the provision of GEO's operational custodial services (which it did not insure) rather than its health care services. The Court of Appeal did not agree.

The Court of Appeal held that an objective observer would conclude that the parties to the insurance policy intended that the "conduct" of the Health Care Services included an omission by GEO to provide health care services. The insuring clause was broad enough to provide cover to GEO in circumstances where, by reason of a failure of GEO's health care systems to identify Mr Mace as requiring assistance, he suffered loss and damage.

The conduct of Health Care Services by GEO involved more than acts and omissions of a particular counsellor or psychologist in the course of the consultation with a particular inmate. The "conduct" of Health Care Services extended to identifying and assessing inmates for the purpose of determining what health services were required.

The Court of Appeal was of the opinion that at the time of Mr Mace's admission to Parklea, GEO was engaged to provide health care services to inmates at Parklea and the failure to assess Mr Mace was an omission in the provision of health care services to inmates. The claim therefore resulted from the conduct of Health Care Services, as defined in the Policy. The primary judge had come to this conclusion, and the Court of Appeal upheld her decision. The policy cover applied.

This is a case in which the Court took a broad interpretation of the insuring clause in the Policy, so that the cover applied. Health care providers should regularly review their medical malpractice and civil liability policy terms and conditions to ensure that their ordinary activities, including the omission to provide their services, are covered.

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.

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