The perils of not being insured
Professional indemnity insurance cover is a requirement of many professions. When bringing a damages claim against any professional an important initial consideration is whether the proposed defendant is insured and whether the level of that insurance will cover the proposed claim. Whilst professional indemnity insurance may be a requirement of the professional body or of a regulator the minimum level of cover may be insufficient for substantial claims. For example so far as solicitors are concerned the minimum level of cover for firms operating on the basis of limited liability is £3m; for other, smaller firms, £2m.
Claims against professionals that exceed the level of cover may have very serious financial consequences for the professional involved. Obviously the ability of most professionals now to operate through a limited liability company or LLP has reduced the exposure of many individual professionals.
The absence of professional indemnity insurance cover will leave the professional exposed to a personal liability for any award. The Solicitors Regulation Authority requires firms to obtain six years run-off cover when they cease to practise without a successor practice. Run off cover is required because professional indemnity insurance generally operates on a ‘claims made’ basis. It should be noted that the Legal Services Board has approved a rule change by the SRA whereby law firms can switch regulators without the need to obtain six years of run off cover before doing so. As the new regulator will also have requirements for professional indemnity cover this change is unlikely to adversely affect claimants.
This article is concerned with the regulatory consequences of a professional failing to ensure that annual cover is in place with reference to a number of recent decisions.
The very experienced consultant obstetrician in the case of Irvine v General Medical Council  EWHC 2038 (Admin) had dishonestly carried on in private practice for almost five years knowing that he was not a member of either the Medical Defence Union or the Medical Protection Society and had failed to disclose his lack of cover to the hospitals where he had a private practice. He was covered in respect of his NHS practice. The GMC’s Medical Practitioners Tribunal Service Panel had found that he knew that he was without professional indemnity cover and in breach of his professional obligation to be adequately insured. In fact the consultant claimed that a contract of insurance had been formed with either the MPS or the MDU but the Administrative Court held that the MDU could not have intended that a binding contract of insurance would be concluded when the consultant filled in an application form and signed a direct debit mandate in 2010. There was no suggestion that the MDU had considered the application or had determined the level of premium. The consultant had not continued to pay any premiums in any event. The decision to erase the consultant from the register was upheld by the Administrative Court. The consequences for the consultant were obviously extremely severe but the court held that the maintenance of confidence in the profession was more important that the effect of the sanction on an individual doctor.
The disciplinary proceedings against Mr Irvine had come about because a claim was made against the consultant in respect of which the MPS had refused to provide an indemnity. Mr Irvine was perhaps fortunate that the damages that he had to pay to his former patient were only £35,000.
In passing it should be noted that the Irvine decision was one of the last in the context of professional disciplinary proceedings to apply the test, including the subjective element, for dishonesty in R v Ghosh  QB 1053 which was subsequently overturned by the Supreme Court in Ivey v Genting Casinos UK Ltd (t/a Crockfords Club)  UKSC 67. In light of Ivey findings of dishonesty are more likely to be made in disciplinary proceedings than on the application of the old Ghosh test.
The dentist in Akhtar v General Dental Council  EWHC 1986 (Admin) practised for four years without professional indemnity insurance. The dentist had admitted the various charges including one of dishonesty. Mr Akhtar had been subjected to an interim six-month suspension period and was then given a further six-month suspension. He sought to challenge that decision with reference to an earlier decision in an unreported case called Carmichael where a suspension of three months was imposed. The challenge in the Administrative Court was that the suspension was disproportionate and inconsistent with Carmichael. The suspension was upheld by the court with again reference to a particular sanction being necessary to declare and uphold proper professional standards so as to maintain public confidence in the profession.
In Ballard v Solicitors’ Regulation Authority  EWHC 164 (Admin) a solicitor whose practising certificate was subject to a condition that he was not a sole practitioner appealed against the findings of the Solicitors Disciplinary Tribunal that he had acted privately (ie not through the firm in which he was employed) for a client in criminal proceedings. The SDT had fined him £2,500. The SRA had cross appealed. The judgment makes clear that Mr Ballard could have been charged with practising on that one occasion without professional indemnity insurance but that charge was not brought. The Administrative Court allowed the SRA’s cross-appeal and increased the fine but it should be noted that no suspension was imposed and there was no finding of dishonesty.
What, if any, learning points can be taken from these recent decisions?
- Professional indemnity insurance is a requirement of nearly all professions and their regulators. Ensuring that it is in place is obviously essential.
- The absence of professional indemnity insurance will be seen by most professional regulators as a serious disciplinary matter.
- Knowingly practising without professional indemnity insurance will probably be regarded as dishonest thus rendering the offence even more serious.
- The sanctions imposed on professionals for knowingly practising without professional indemnity insurance will reflect the need to protect the public and the recent decision in Irvine points towards erasure from a register or being struck off as being within the range of sanctions that a disciplinary tribunal can impose. For solicitors any finding of dishonesty in relation to the absence of professional indemnity insurance will in most cases lead to an individual being struck off.
Members of the Hardwicke Professional Liability team also represent professionals faced with regulatory prosecutions and can assist if you or your clients are facing disciplinary proceedings.
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