Recent developments in the area of vicarious law particularly Various Claimants v Barclays Bank Plc [2017] EWHC1929 have blurred the distinction between employees and independent contractors which previously had governed the placing of liability in such circumstances.

Five criteria were identified in the Barclays case:-

  • The defendant is more likely to have the means to compensate the victim and can be expected to have insured against that liability;
  • The tort i.e. negligent activity had been committed as a result of activity taken by the tortfeasor on behalf of the employer;
  • The tortfeasor’s activity is likely to be part of the business activity of the defendant;
  • By employing the employee to carry on the activity the employer will have created the risk of the tort being committed by the employee and
  • The employee will, to a greater or lesser degree, have been under the control of the employer.

The public policy of ensuring compensation is paid to those injured in the course of medical treatment by reason of negligence or criminal activity is a key driver behind this change.

The fact that the private hospital or clinic may be more likely to have the means to compensate injured patients, and can be expected to have insured against that liability is highly relevant, especially if the healthcare professional does not have indemnity, has insufficient indemnity or, for some reason the indemnifier declines to provide indemnity. In the Paterson case, which settled a matter of weeks after the Barclays decision, it seems that the value of the claims exceeded the level of indemnity provided by MDU.

The reduction in the discount rate, and consequently huge increases in damages awards may mean that the level of indemnity provided by the MDO’s is inadequate for the specific circumstances.

Private hospitals will, as a result of this case no doubt be looking afresh at the arrangements they have with medical and other professionals engaged as independent contractors and in the light of the additional risks they face, reviewing the terms in which they work together in the future. What changes result from any such review remain to be seen but it may be in the light of this decision that indemnity obtained by the medical professional on a discretionary basis from his or her Medical Defence Organisation may not be as attractive to either party as it has been in the past.

It may be that private hospitals will prefer to take control of the situation themselves and insure for all liabilities arising out of the operation of their business including the conduct of medical professionals in the course of their contracts with the hospital. This of course would likely come at considerable cost and may well have implications for the level of remuneration of medical professionals undertaking procedures in this environment who are thereby unburdened of the need to obtain their own indemnity.

Changes are also coming quickly in relation to indemnification of GPs in the course of their NHS work. Jeremy Hunt recently announced a State Scheme for general practitioners to be operational next year and it seems likely that this is going to be managed by NHSR. The funding of such a scheme, however, and detail of how it might operate remain obscure. What is clear is that such a scheme will only cover GPs in relation to claims and they will still be obliged to seek indemnity or insurance in relation to disciplinary, regulatory, criminal proceedings and inquests. That cover has until now been provided by the defence organisations in the main. Whether the insurance industry will respond either with products for both claims and regulatory and disciplinary cover or whether products will be launched in relation to risks arising from regulatory and disciplinary proceedings only remains to be seen.

The threats and opportunities to the defence organisations and insurance companies presented by these recent changes are clear. What is also clear, however, is that hospitals, clinics and other contracting organisations will not be able to escape liability necessarily by pointing to the fact that the medical professional concerned ought to have obtained his own indemnity. Public policy concerns to ensure that injured patients are properly compensated are likely to prevail.