Doctors and nurses face an increasing threat of litigation because hospitals are ill-prepared against the dangers posed by cyber hackers and computer malfunctions, warns Lloyd's chairman Max Taylor.

Taylor said the increasing use of computers to store patients records and run equipment has left the healthcare sector dangerously exposed to the threat of complex and time-consuming litigation.

Top of the list were the issues of patient confidentiality and the potential for misdiagnosis.

His comments coincide with news that 154 women were told by Northern general Hospital, Sheffield, that a computer malfunction had led to a misdiagnosis of the risk of their giving birth to a child with Down's Syndrome.

One patient has stated publicly that she is considering suing the hospital.

"Businesses woke up to these new cyber risks in May when the Love Bug hit," said Taylor.

"Now the healthcare sector must do the same.

"Unless proper safeguards are put in place, hospitals could find themselves increasingly entangled in litigation resulting from technological failures."

The US has already witnessed two high profile cases. In the first, a hacker copied patient records from a medical school's database and maliciously published them on an internet bulletin board. In the second, patients attending the University of Michigan had their medical records placed on the internet accidentally.

Such cases has led to the creation of a new Health Industry Portability and accountability Act in the US which imposes strict penalties on healthcare organisations that fail to protect patient data.

Taylor warns the invasion of patient confidentiality could result in some hospitals becoming inoperable - medical no-go zones, where doctors won't practice and patients may be unwilling to be treated.

The British Medical association has called on the Department of Health to issue urgent guidance on the use of the internet for health and medical matters.

But Taylor adds that simply insuring against hackers and viruses is not the complete answer.

"Healthcare organisations need to encourage much closer relationships between their IT departments and risk managers," he says.

"By working together, the risks of damage to individual network systems and the need for increased insurance cover be assessed more accurately."