More than 100 law firms in England and Wales have been forcibly closed because their insurers refused to cover them against negligence claims. The Solicitors Regulation Authority (SRA) was responsible for this enforcement action because lawyers failed to obtain proper professional indemnity insurance cover before January 5, 2014. Amongst the closed law firms a majority were classed by the SRA as larger partnerships and companies. This significant event should send a chill through the dental market and it could be a sign of things to come. Why?
Dental Professional Standards
The new GDC Professional Standard paragraph 1.8.1 gives rise to concern: “You must have appropriate insurance or indemnity in place to make sure your patients can claim any compensation to which they may be entitled.”
We all know the meaning of insurance only too well but what does indemnity mean?
Dr Desmond Turner, the MP for Brighton Kemptown, raised the matter of dental professional indemnity in the House of Commons more than a decade ago (May 20, 2003). One of his unfortunate constituents sued a dentist in court successfully but could not get a penny in damages because the dentist had no professional indemnity. More than 40 other cases were pending against the same dentist who declared himself bankrupt and left the country. There may be a number of practitioners who are unaware of the serious implications of discretionary indemnity and in this respect it would be a major benefit to bring some much needed clarity to the problem.
Other similar cases have since been reported in the press. Dr Turner stated: “The current situation in which insurance is discretionary is not acceptable,” and he went on to say that as many as 70 per cent of dentists may not have the contractual certainty of insurance. He could have added that whilst some have no cover at all, others may falsely believe they have cover when in reality they don’t.
I would go much further, and say that the present situation is unacceptable for two very good reasons. In the first place the GMC/GDC registrars are issuing Annual Practising Certificates without any evidence of a valid ?public protection policy covering the registrants. Secondly “appropriate membership of a mutual defence organisation” is presently deemed sufficient to fulfil GMC/GDC professional indemnity requirements.
I have had extensive correspondence in the past with the minister concerned at the time Rosie Winterton MP on this particular issue. I have suffered personally from the doubt and uncertainty that surrounds discretionary indemnity and ended up in the High Court having to pay my own legal fees to defend an injunction hearing. Fortunately, most of my stake was returned having passed the winning post a distance clear of the prosecution. This did not however diminish the fact that it was a very stressful experience having to find suitably experienced lawyers and the funds to finance my legal team in the High Court in Bristol. I was also prevented from earning a living in dentistry until the injunction was heard following several weeks without any dental income. Little or nothing has changed in the professional indemnity field since this High Court case in 1981.
Following Dr Turner’s proposed bill to require the holding of professional negligence insurance as a condition of registration to practise in medicine or dentistry (2003), Lord Hunt went further and stated: “Any health professional must hold a valid certificate of indemnity insurance, and that to practise without insurance would be an offence.”
Certainty or doubt?
In the arcane world of medical/ dental professional discretionary indemnity we have inherited a generic product that has stood the test of time reasonably well with one or two notable exceptions since 1892. Today we live in a world where financial regulation has been refined to bring new levels of consumer protection and the mutual society discretionary ‘product’ (or more correctly ‘service’) is, in my opinion, past its sell-by date. The example cited about law firms being closed should not be ignored as we now have the CQC armed with similar powers to the SRA in being able to close a medical/dental practice down.
Discretionary professional indemnity, in the language I was taught to understand at school, has to be a contradiction in terms – an oxymoron. The word ‘indemnity’ quite simply means security against damage or loss but there is no contractual certainty or security with the ‘mutual’ offering. Indeed, it seems to me that the mutual (the societies that sell this type of product) might be regarded as guilty of mis-selling if there is no contractual certainty. In a detailed judgment (2006) brought against the Medical Defence Union Ltd, Mr Justice Newman commented upon the uncertainty and unsatisfactory nature of discretionary indemnity. He stated: “The character of discretionary indemnity gives rise to concern on a broad front. It highlights the existence of a disparity between discretionary indemnity and the terms provided to practitioners by insurance companies.”
The mutual product
To issue a legal contract in respect of discretionary indemnity is impossible and in effect you will pay a subscription to join an organisation that will provide you with specialist professional advice subject to a variety of conditions. The ultimate decision to accept any liability depends upon the council members of the society concerned.
To refer to an Annual Report: “Potential claims…….are subject to the council’s absolute discretion and only become a liability when they are validated by council.” Then later on: “The society has the right to call each year for additional funds from its members up to an amount equal to the annual subscription.”
In other words you can be informed of court proceedings and then have to wait for your mutual to accept or reject liability in the absence of any contractual arrangement. Also, during the period of cover and without any claims being made, a second demand can be made for another premium to be paid as part of your contract.
Dangers
The political implications of failing to grasp this stinging nettle pretty soon could be very damaging. In the first place there may be huge unfunded liabilities building up within a defence organisation insulated from any form of recognised financial regulation that could eventually prove to be terminal (it has already happened in Australia). Secondly it is only a matter of time before prudent and better-informed customers appreciate the implications and rush for the lifeboats of the sinking ship.
It is difficult to understand how any medical or dental mutual can be resistant to change when so much controversy exists and the higher echelons of society have expressed serious reservations about the status quo. Only the Medical Defence Union (and dental arm the DDU) announced a change in its product terms to include the choice of contractual insurance. This change lasted for 11 years and then for some unknown reason the MDU/DDU reverted recently from being an insurer to being a mutual society again.
Professional indemnity as a generic product is in the news much more frequently. Some headline settlements in the USA have reached eye-watering proportions in the field of aesthetic dentistry and implant work. Six-figure case settlements are not uncommon over here in the UK. The lawyers have experienced massive annual rises in their premiums over the years and doctors on emergency call have encountered similar hikes in premiums. All around, the professions are under attack in a highly litigious environment and none more so than the one in which doctors and dentists operate.
The lesson of the solicitors
Firms that failed to secure insurance cover could buy into an ‘assigned risks pool’ that allowed them to obtain emergency policies from insurers until the end of last year. However, the nature of the risks involved meant the insurers were in some cases propping up bad businesses and negligent solicitors at the expense of others. The SRA and the insurers agreed that the emergency pool funding would have to be scrapped and the poor risks removed from the market place.
It is easy to foresee a situation arising in which some dentists in general practice may not be able to obtain appropriate indemnity cover in the future. There will inevitably be GDC registered personnel who will be prepared to practise illegally unless of course the GDC/CQC begin a check on the existence of suitable documentation being in place when the Annual Re-registration Fee (ARF) becomes due.
Interestingly under the Osteopaths’ Act and the Chiropractors’ Acts, both professions are required to have suitable insurance. The MPS attempted to enter the market a few years ago with a discretionary product but had to withdraw because they were unable to meet the legal requirements. It is rather odd that osteopaths and chiropractors need insurance but doctors and dentists do not.
A Sign of Things to come?
Having been employed as a consultant in the mutual or non-profit sector of the health insurance industry (that included dentistry) it is easy to diagnose where the problems lie. They arise from a basic failure to quantify the risk and introduce proper underwriting procedures. The praiseworthy efforts of our forefathers to spread the risks amongst similarly qualified professionals with high levels of professional ethics and responsibilities is not a model that will work in an age of advanced technology and aggressive consumerism. The Dentists Provident Society embraced a similar ethos in which sickness and an inability to work were insured. This concept worked brilliantly for many years but as in other walks of life it became necessary to introduce very strict risk rating procedures to protect the fund holder (member) investments from damaging claims sometimes amounting to fraud.
In the case of the mutual indemnity providers, it is the premium residue ‘profit’ that is used to provide the necessary cover for claims. In the case of the DPS the premium residue is paid out to retirees. It has proved to be an incredible investment over the years whilst providing free sickness cover at the same time. In the case of the mutual indemnity providers, there may be no surpluses to cover future claims. It is possible that a flood of future negligence claims could overwhelm the funds and it is a moot point on whether the claims could be handled in an organised manner or whether they would prove catastrophic.
Whatever the outcome, it is inevitable that significant changes will be required in order to discriminate between good and bad risks in the form of risk rated insurance premiums.
This will transform the manner in which primary care dental services are delivered in general practice. As with motor insurance the initial premiums may prove unaffordable for some, forcing the newly qualified to work within the confines of the NHS, the corporates or large specialist practices using advanced digitised technology.