Medical Indemnity Insurance – Universal Insurance Cover or Insurance Of Last Resort For Doctors

From 1 July 2020, new medical indemnity reform legislation will come into effect in Australia for Doctors and their professional indemnity insurance.  One of several changes includes the rules around “Universal Cover” which limits when medical indemnity insurers can refuse to provide medical indemnity cover to a doctor or medical practitioner.

Until now, only medical indemnity insurers that have entered into a Premium Support Scheme contract have been bound by universal cover requirements.  The reference to Universal Cover has sometimes previously been referred to as the medical malpractice Insurer Of Last Resort for Doctors.

The universal cover obligation requires that all medical indemnity insurers must offer professional indemnity cover to any medical practitioner who seeks it. It alsos provide that medical indemnity insurers must not refuse a medical practitioner professional indemnity cover except in circumstances prescribed by law.

If a medical indemnity insurer refuses to offer or renew professional indemnity cover, or makes an offer that includes a risk surcharge, the medical indemnity insurer must, at the time of notifying the medical practitioner of the refusal or the application of a risk surcharge, also inform the medical practitioner of his or her right to refer the dispute to the Australian Financial Complaints Authority (AFCA). Notification will allow the practitioner to understand the reason for the refusal so that the practitioner can decide how to respond to the refusal. For example, the practitioner might disagree with the refusal and decide to make a complaint to AFCA, or the practitioner might decide to remedy behaviour or other circumstances within their control and seek medical professional indemnity cover from another insurer.

The underlying policy premise of universal cover is:

  1. adverse events occur in medical practice (regardless of the competency of the practitioner);
  2. not only do medical practitioners rely on professional indemnity insurance to meet the costs of adverse events, it is also a mandatory requirement under the Health Practitioner Regulation National Law Act 2009 (National Law) for registered medical practitioners to have professional indemnity cover; and
  3. if a medical practitioner were to be denied cover (on the basis of their claims history/performance/adverse events) this would prevent them from privately practicing

The circumstances in which a medical indemnity insurer can refuse to provide medical professional indemnity cover are where:

  1. In relation to a medical professional indemnity insurance contract between the practitioner and the insurer:
    1. the practitioner failed to comply with the duty of the utmost good faith or the duty of disclosure (within the meaning of the Insurance Contracts Act 1984); or
    2. the practitioner made a misrepresentation to the insurer during the negotiations for the contract but before it was entered into; or
    3. the practitioner failed to comply with a provision of the contract, including a provision with respect to payment of the premium; or
    4. the practitioner made a fraudulent claim under the contract; or
  2. the practitioner places the public at risk of substantial harm in the practitioner’s private medical practice because the practitioner has an impairment (within the meaning of the Health Practitioner Regulation National Law);
  3. the practitioner poses an unreasonable risk of harm to members of the insurer’s staff because of persistent threatening or abusive behaviour towards members of the insurer’s staff; or
  4. the practitioner has persistently failed to comply with reasonable risk management requirements of the insurer; or
  5. additional circumstances in which cover may be refused may also be specified in the rules. Any rules made will be a legislative instrument, and subject to Parliamentary scrutiny.

A medical indemnity insurer may require a medical practitioner to pay, as part of the amount payable for medical indemnity cover provided for the practitioner in relation to the practitioner’s private medical practice, an amount (the risk surcharge) of up to an additional 200% :

  1. to reflect that, because the practitioner engages, or has engaged, in conduct that deviates from good medical practice, the practitioner’s private medical practice is likely to pose a higher risk to patients than the private medical practice of a comparable medical practitioner; or
  2. in circumstances specified in the rules

The risk surcharge must not exceed the amount specified in the rules or worked out in accordance with a method specified in the rules.

Click here to view the legislation

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