An indemnity refers to a contractual obligation for one party to provide compensation in the event of losses on the part of another. Despite some similarities, insurance and indemnity are separate entities altogether, with the key differentiator being that one can have indemnity without an insurance policy (for example, many business & employment contracts include indemnity clauses), but not the other way round. However, still these two terms are often used interchangeably.

• Indemnitee: An indemnitee is the party who has been indemnified from liability for compensation related to losses. Under Professional Indemnity for Doctors, the doctors are the ‘indemnitee’
• Indemnitor: The indemnitor is the party which bears the financial and legal responsibility in the event of a setback, adverse event, accident, error or other issue that may lead to losses. Under Professional Indemnity for Doctors, insurance company is the ‘indemnitor’

As a professional it is the duty of the doctor to take care of his/her client / patient. Unfortunately, human errors cannot be completely eliminated, exposing doctors to the risk of claims from patients who have suffered loss due to perceived or real neglect, error, or omission. In today's litigious world, claims can pose a significant threat to the financial security of a medical practitioner. If some day one fails to exercise his duty and overlook the promises made, then he is liable for the losses incurred by the clients. Professional indemnity insurance acts as a kind of shield protecting doctors and their business from the financial claims made by their dissatisfied customers / patients. 

Since the inclusion of medical profession in the ambit of CPA 1986 (VP Shanta vs IMA) and since the incoherent, uncoordinated and sporadic efforts to strongly plead the legislative intent for exclusion of medical profession out of CPA shattered miserably, the need and importance of a robust, comprehensive, reliable and trustworthy professional indemnity insurance cannot be over emphasized.

Doctors are probably the only professionals who face the risk of a financial liability in the course of practicing their profession. A survey conducted by the National Law University in 2016 observed a whopping rise of 400% in cases related to medical negligence filed in various consumer fora which continues to rise exponentially. 

As the name implies, Consumer Protection Act is a biased legislation tilted towards the consumer (patient). The new CPA has been made more liberal and consumer friendly widening the scope by permitting consumer’s place of residence also for territorial jurisdiction, removing penalty for false & frivolous complaints altogether, making appeals more difficult and giving a wide definition of unfair trade practices (no issuance of cash invoice/receipt of bills, breach of confidentiality etc.) rendering the doctors more vulnerable. Moreover, though the charges remain same for patients of different socio economic strata, the compensations are being awarded depending upon the earning capacity of the patient.

Present day consumers (patients) are more aware about their rights. Their expectations, as in other sectors, are rising very high. In the changed scenario and current practice dynamics the small and medium healthcare facilities are struggling for their survival in this competitive atmosphere. The situation has been further compounded by various impractical state run health schemes compelling the vulnerable service providers to work on wafer thin margins. The amount of compensation, at times unjustified, may run into crores without any capping and without any clearly defined objective criteria for calculating the award amount which lies at the sole discretion of the court. This gives a fertile ground to the patients to blackmail the doctors / hospitals and exploit any adverse event. In addition, the variable rates of interest being awarded by courts (which may be more than the best investment opportunities available in the market) further puts the professionals in jeopardy. 

Professional indemnity for Doctors / hospitals

The indemnity covers for doctors and the hospitals are different. One needs to understand that the hospital can be held vicariously liable for the negligent acts of its employees - doctors as well as others. Similarly, the doctor, as the team leader can be held vicariously liable for the negligent acts of his team members. Vicarious liability means a party is held responsible not for its own negligence but for the negligence of another.

The scope of Professional Indemnity Insurance of doctors is to provide cover for the extent of financial damage for the loss caused to the patient against unintentional errors and omissions by the doctors, insured qualified and unqualified employees & staff. In short, the scope of Indemnity Insurance is

• To provide financial cover for the loss caused to patient against unintentional errors and omissions by the doctor and his staff 

• Litigation costs

• Covers liability for a year from the date of commencement

• Does not cover criminal liability

• Covers costs only up to the limit of the ‘sum insured’

• Limit is fixed for per accident (AOA) & per policy period (AOY)

The insurer will pay only up to the sum insured that has been set as a limit. The expense over and above the sum insured has to be borne by the insured (doctor / hospital). The sum insured is referred to as the Limit of Indemnity. This limit is fixed per accident i.e. ‘Any One Accident (AOA) and per policy period i.e. Any One year (AOY). Indemnity insurance policies should be taken for doctors and the hospital/institution separately and should be renewed every year without any breaks. The indemnity is applicable only if the act has been committed during the period of insurance commencing from retroactive date and continued thereafter without break. This means that even if we had a cover at the time of incident happening and in case we had a break in the continuity of the policy, we will not be entitled to any cover for that incident. One also needs to remember that there is no grace period in these policies and the policy should be renewed before the due date to maintain the retroactive date. For example, the policy from 1.2.23 to 31.1.24 was renewed on 15.2.24, with a break of 15 days and the adverse event occurred on say 1.5.23 and its litigation happens in April 2024, the insurer will take advantage of the ‘break’ in the policy and will reject the claim.

One can take a policy directly from a general insurance company (public company like Oriental, New India Assurance, NIC, United or private company) or take it through one of the several medico-legal defense groups. Professional Bodies like MLAG, IMLEA, Cover-U, AMC, AICL and Doc-Shield etc. have been very popular due to their marketing efforts related to group discounts and other benefits. They bargain with the insurance companies and provide comprehensive services. They take care of all medico legal issues being faced by the professionals apart from the medical negligence related claims including facilitation for out-of-court settlements. The Medico Legal defense groups or Professional Protection Groups take care of all medico legal problems and administrative problems whereas general insurance companies only indemnify consumer claims. These groups may provide assistance even in legal issues not related to medical negligence. However, in criminal cases, their help will be limited to assistance and guidance. It is easier to contact these groups for day to day assistance & help, as compared to the insurance company. The insurance company or the medico-legal defense groups do provide the services of a lawyer to advise the insured, draft the replies etc. and argue on their behalf in the courts. At the time of taking the policy, one can insist on incorporating ‘advocate of the choice of the insured’ so as to ensure a complete synergy between the doctor and his advocate at the time of litigation.

It is very useful to take the Professional indemnity insurance collectively, through a collective negotiation process. For example, if 40 / 50 (or more) doctors / hospitals decide to take the Professional Indemnity collectively, you may hope not only to get lower premiums but also get incorporated terms of your choice. Some of these may include (a) advocate of your choice (b) matters beyond the complaints related to medical negligence (c) appeals & revision petitions, if required (d) direct deposit of statutory court fee for filing an appeal or revision petition (e) direct and upfront disbursement of the compensation if awarded by the court instead of compelling the doctor to first pay and then seek reimbursement (cashless insurance).  

Therefore, irrespective of the ills of the insurance companies, one has no choice but to take Professional Indemnity for doctors and for Hospitals. One cannot escape incidences of dis-satisfied patients and litigations during the course of medical practice in today’s context. Since the stakes in CPA have been set highly against doctors, one needs to take preventive and pre-emptive actions to safeguard his professional reputation and practice. Professional indemnity does take care of the financial loss on account of adverse judgment under Consumer Protection Act, to a large extent. It should be taken as a necessary evil and hope for the best.

Possible Reforms in the system

Can we (and should we) think of (and unitedly demand for) some innovative reforms as far as reprisal of grievances of patients against doctors and hospitals is concerned. Within the CPA, small amendments can make a world of difference. For example, (a) Mandatory screening of all complaints against doctors and hospitals by a medical board before the complaint is admitted (b) clear objective definition of ‘false & frivolous complaint’ and provision of mandatory penalty for such a complainant, proportionate to the amount claimed by him (say 50 % or 25 % of the claim amount). Even better option would be to go beyond the CPA and adopt No-fault liability system for legal injuries occurring during medical treatment. This will ensure quick disbursement of compensation, without exploitations, in contrast to the prevailing system.

Existing medical liability system of torts (adversarial system of adjudication) has mainly evolved through the jurisprudence laid down by the English courts

The “no-fault liability system” adopted by many countries like Sweden, Finland, New Zealand, Canada, and Australia; awards compensation based on proof of “causal” connection between treatment and injury. Proof of fault or negligence is not required.  No-fault liability model in healthcare, implemented in New Zealand and Sweden is working very well. In a restricted manner, it is working well in UK, Canada and some other countries too.

No-fault liability is practiced in India under Motor Vehicles Act, 1988, and Clinical Trial regulations (2019 CT Rules). It also applies to workmen working in factories, mines, docks, construction establishments, plantations, oilfields and other establishments listed in Schedule II of the Employee’s Compensation Act.

As fault or negligence is not the focus, it will improve reporting and hence reduce medical errors substantially. In no-fault liability the claimant needs to show that the medical error was a causative factor in the resultant injury, irrespective of who is to blame (proof of causation rather than proof of fault). Although the application of no-fault system differs slightly in each country, the basic idea is to eliminate fault or blame from the system of compensation, to increase the fairness by making the claim process simple and transparent so that patients with meritorious cases could access the system easily and be awarded quickly, for compensable injuries occurred during the course of medical treatment.

The present system is costly, unpredictable, and unjust for doctors and to some extent to the patients too. In the no-fault system either a fund is created or the (mandatory) 3rd party insurance is taken. It delivers the compensation according to predetermined criteria. The suggested procedure could be like,

Step 1. Filling the forms: A form for the patient and for the doctor/hospital is filled. Hospital coordinators can help in the process for both. 

Step 2. The claim forms and the medical records are sent to the statutory medical liability committee

Step 3. The committee examines the records, may call either/both parties to get more information, if required

Step 4. It decides on the quantum of the compensation

Step 5. The decision is communicated to the patient/family.

Step 6. If the patient rejects the compensation, he has the right to approach the civil court for the regular proceedings

Step 7. If the patient accepts the decision, the decision is sent to the relevant insurance company which has the 3rd party insurance taken by the concerned doctor / hospital. If a special fund had been created for it (through mandatory contributions from the doctors, hospitals, state) the award amount is disbursed from it.

Alternatively, but NOT simultaneously, patients can file a complaint of professional misconduct before the SMC / NMC or file criminal complaints, if desired. Hospitals are also expected to undertake internal audits, training and upskilling of staff as well as CAPA, to improve their standards of care.

Conclusion

Professional indemnity is a necessary evil. It indemnifies the doctor / hospital from the financial loss, in case of adverse outcomes in consumer court. It is advisable to select the right insurer and an adequate sum insured. Over the years, the doctors / hospitals have been exploited by the public, advocates as well as the insurance companies. Innovative reforms are need of the day. The professional bodies need to make collective and sincere efforts in this direction, so that the medical practice continues to be the vocation of choice for the bright practitioners of the next generation re-establishing the lost glory of this noble profession.

**Sincere thanks and gratitude for valuable guidance to my Guru and mentor Dr P K Kohli (MBBS, MS, PhD, LLB)