Soaring damages claims against the medical profession has prompted the few insurers offering cover to reassess the booming market. John Jackson reports
When Donald Church was admitted to Washington University's medical centre last June for an operation to remove a stomach tumour he had no idea of the pain he would suffer.
The hospital put it down to the healing process, but a second opinion revealed surgeons had left a1 3in medical instrument lodged between his collarbone and pelvis. Last week he was awarded £70,000 in compensation.
This case highlights how it is possible for things to go wrong even in the best hospitals and for the most routine of treatments.
Back in the UK, the rising cost of medical malpractice claims has seen the damages bill for the National Health Service (NHS) soar to a staggering £4.1bn. Cerebral palsy and brain damage cases accounted for 80% of outstanding claims by value and 26% of claims by number in the largest NHS Litigation Authority (NHSLA) negligence scheme. In total, the authority received about 10,000 new claims in 1999-2000.
According to a report on clinical negligence in the NHS by government watchdog the National Audit Office, with the exception of cerebral palsy and brain damage injuries, claims closed in 1999-2000 had taken more than eight years to resolve on average. Nearly a quarter (22%) lasted more than ten years.
GPs, being self-employed, must provide their own professional indemnity (PI) cover, as do NHS doctors and other medical professionals for any private practice they conduct, although they are covered by Crown immunity for their NHS work.
The situation has been exacerbated by the growing list of high profile national scandals involving doctors and hospitals in recent years, not least the horror of Manchester family doctor Howard Shipman.
Not surprisingly, few insurers are willing to underwrite in this market, which for decades has been dominated by three mutuals, the Medical Defence Union (MDU), the Medical Protection Society (MPS) and the Medical and Dental Defence Union of Scotland.
They have traditionally covered members for medical negligence on a discretionary basis through membership fees and so do not provide an absolute guarantee, although members are rarely refused help. This was a key reason why the MDU outsourced its insurance to Zurich, which provided guaranteed cover for up to £10m for any one claim in any one year - double the previous limit.
Legal action for clinical negligence is rarely taken immediately after the event. Typically, a claim will be made two or three years after the incident. In some cases the claim may come many years after the event, so the indemnity is occurrence-based. The MDU has faced a massive 50% increase in the number of General Medical Council complaints received in the 12 months to March this year.
Despite the increase, the pattern of complaints against GPs is the same. The most common claims are for failure to diagnose a patient or refer a patient for further investigation, failure to respond to a request to visit or to be available, prescription issues and breaches of confidentiality.
The NHS complaints procedure has also been successful - more than 94% of patient claims notified to the MDU were resolved at practice level. Last year, the MDU paid out £78m in compensation.
MPS policy director policy Gerard Panting says the Woolf reforms have resulted in fewer claims, with fewer meritorious claims falling out of the system and a higher proportion of meritorious claims going forward.
He adds: "The amount in damages has been going up and legal costs are rising. Damages are up by a third in some cases, but zero in others. The discount given to us for paying a lump sum has been reduced, so the amount we pay out has to increase."
MPS paid out £20m in claims for UK GPs in 2000, which compares with £15m in 1999 and £12.5m in 1998. The cost of damages and the decrease in the discount rate had a very considerable effect on the 2000 figures.
Lloyd's broker Dickson Manchester's marketing director, Michael Dickson, says the medical negligence market is essentially PI, except that it does not exclude bodily injury.
He adds: "Rates are increasing dramatically and cover has always been quite restricted. The wording has always been fairly basic, and the cover has always been aggregated with cost-inclusive cover. It has not had such a severe turnaround as PI, which has given very broad cover to assureds."
Peter Matson, active underwriter of Denham Direct, the Lloyd's service company for syndicate 990, says he is seeing more business due to the market's capacity shortage.
He adds: "What concerns me is that there is more litigation going on. Risks are getting more action, and we have to instruct more often because of allegations being made."
Matson says public perception of the medical profession, caused by the Bristol babies scandal and other cases, has brought the medical profession's esteem down, so people are less reluctant to question and criticise.
One new entrant into the market is Lloyd's agency R J Kiln, which recently purchased medical malpractice syndicate 1204 from Crowe, which has a capacity of £23m for the current year of account. The syndicate's capital comes mainly from US medical insurer SCPIE, where most of the business is written.
The sign of a tough market is when there are few particpants, and medical malpractice certainly fits that description. However, both the state and private health sectors are highly conscious of the need for good risk management, so those who have braved the waters may find them financially rewarding.
NHS roll of dishonour
For both clinical and non-clinical negligence the NHS: