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Indemnity arrangements – appropriate cover to meet the risks of claims?


Local Government analysis: Was an indemnity arrangement appropriate for the purposes of practice? Betsan Criddle, barrister at OId Square Chambers, looks at the lawfulness of the Nursing and Midwifery Council’s (NMC) decision that an indemnity arrangement for practice did not provide appropriate insurance cover in R (Beety) v Nursing and Midwifery Council.

Original news

R (on the application of Beety and others) v Nursing and Midwifery Council [2017] EWHC 3232 (Admin)

The Queen’s Bench Division, Administrative Court, dismissed a challenged by self-employed midwives to a decision by the NMC that an indemnity arrangement for practice did not provide appropriate cover on the basis that the scheme did not have sufficient funds to meet the risk of a claim in negligence.

What is the significance of this case?

Since the introduction of the Health Care and Associate Professions (Indemnity Arrangements) Order 2014, SI 2014/1887, giving effect to Directive 2011/24 EU, a wide range of regulated health professionals from doctors and dentists to osteopaths and chiropodists have been required as a condition of practice to have insurance or indemnity arrangements in place to compensate members of the public in respect of acts of clinical negligence.

The common requirement across all these professions is the need to have ‘appropriate cover’, which is defined as ‘cover against liabilities that may be incurred in practising as [the relevant healthcare professional] which is appropriate, having regard to the nature and extent of the risks of practising as such’.

The decision of the Administrative Court is the first to consider the lawfulness of a regulator’s decision, in this case, the NMC, that an indemnity arrangement was not appropriate for the purposes of practice. The individual midwives who challenged the decision had been required to sign a declaration that they had alternative indemnity arrangements in place, on pain of being removed from the NMC Register if they did not do so.

The indemnity arrangement in question provided cover for self-employed midwives for intrapartum care (ie care during labour). In July 2015, Independent Midwives UK, a small membership organisation, entered into an indemnity arrangement with Lucina Ltd, a company limited by guarantee, to provide indemnity for this phase of labour. The arrangement was a discretionary professional indemnity scheme providing cover against liability for damages arising from successful negligence claims. Under the rules of the scheme, benefits were paid ‘at the sole and absolute discretion of the board’. Importantly, the amount that could be required to be paid out in respect of any claim was expressly limited by reference to the total funds available to the scheme, which was derived solely from the fees paid by members.

The NMC’s registrar determined that this was not appropriate cover for the purposes of Article 12 of the Nursing and Midwifery Order 2001, SI 2002/253, essentially on the basis that the scheme did not have sufficient funds available to it to meet the risk of a claim in respect of a catastrophic or serious injury in the short to medium term. LexisNexis

The decision was challenged, unsuccessfully, on the basis that:

  • the registrar’s reliance on expert evidence was inadequate and flawed
  • she had failed to give those responsible for the scheme additional time before making a decision to allow them to produce further expert analysis on the question of risk
  • the registrar had not taken proper account of the ‘nature and extent of the risks of practising’ as an independent midwife (which involves assisting at home births but not at potentially more complex hospital births) and thus misapplied the statutory test
  • the rights of the claimants as independent midwives to pursue self-employed practice in the UK under Articles 49 and 56 of the Treaty on the Functioning of the European Union and Articles 15 and 16 of the EU Charter of Fundamental Rights had been infringed. Further, the rights under Article 35 of the Charter of the fourth claimant, a woman who might wish to use the services of an independent midwife to access independent healthcare services, had been infringed

In short, the court considered that the registrar had exercised her judgment, reached a permissible decision on the appropriateness of the scheme, having regard to the low but real risk of a high value claim and the limited assets available to the scheme to meet the costs of that claim. The claimants’ EU rights were not infringed because the registrar’s decision was a proportionate one having regard to the interests involved.

Why is it important for practitioners?

The judgment is important in that it indicates how reluctant the court is to intervene in the discretionary decision-making of a regulator on what amounts to appropriate indemnity. This is of general relevance across the healthcare sector, given the common statutory wording as to the definition of appropriateness.

In particular, the court refused to criticise the NMC’s registrar for not informing the scheme operators what she considered to be the precise level of cover that she would consider appropriate. Under SI 2002/253, art 9(2)(aa), it was for a registrant to satisfy the registrar that an appropriate indemnity arrangement was in place and there was no obligation on the registrar to provide guidance on what would be the appropriate level of cover.

How helpful is this judgment in clarifying the law in this area? Are there any remaining grey areas?

The clarification provided by this judgment might be said to lie in the lack of guidance from the court as to what might be appropriate or not in any given circumstances. The judgment certainly provides no guidance as to whether a different scheme might be said to meet the statutory test, whether under the NMC Order or any of the other healthcare statutes.

What are the practical implications of the judgment? What should practitioners be mindful of when advising in this area?

In practical terms, practitioners will have to be mindful of the extent to which their clients’ indemnity arrangements really can be said to provide the necessary level of cover to meet the risks of claims. The Bar Mutual Indemnity Fund was singled out by the court as an example of a mutual indemnity scheme that might be able to raise funds to meet an unanticipated high level of claims because of the large number of members with the ability to meet such costs. Further, the scheme enters into an insurance contract with its members under which it will meet eligible claims made. LexisNexis

How does his case fit with other developments in this area of the law? Do you have any predictions for future developments in this area?

This case is an example of the court’s unwillingness to step into the shoes of the decision-maker in an area in which the appropriate exercise of discretion is paramount, guided by consideration of the public interest in healthcare professionals being appropriately indemnified in respect of the risks posed by their own potential negligence.

It seems unlikely on the basis of this decision that regulated individuals will consider it worth their while to run the risks of judicial review proceedings, with the attendant costs liability in event that their indemnity arrangements are challenged.

Interestingly, the court noted that the claimant midwives could have refused to sign the declaration sought by the NMC and appealed their removal from the register. That would have been a full merits review rather than the more limited form of review inherent in judicial review proceedings. It may well be that those refused registration, or removed from registration in future, will choose this route, seeking a stay of the underlying decision pending the conclusion of the process.

Interviewed by Evelyn Reid.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

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