A tertiary level of protection against the outcome of litigation would be to go for insurance cover. Professional Indemnity Insurance cover became available for doctors and medical establishments from December 1991.
The term "indemnity" means reimbursement, to compensate. The principle of indemnity is strictly observed in liability insurances. These insurances (e.g., Professional Indemnity Insurance) are designed to provide the insured person protection against the financial consequences of legal liability. If the insured is legally liable to pay damages to others, the policy will indemnify them subject to the terms, conditions and limitations of the contract. Indemnity is also available in respect of legal costs awarded against the insured, as well as legal costs and expenses incurred by the insured with the written consent of the insurers in the defence or settlement of claims.
Professional Indemnity Insurance
Salient features and terms and conditions of the Professional Indemnity Insurance Policy, as provided by the General Insurance Corporation of India, are given below.
General rules and regulations
- Applicability — The policy provides insurance cover in respect of errors and omissions on the part of professionals whilst rendering their services. This applies to doctors and medical establishments, engineers, financial consultants, management consultants, lawyers, advocates, solicitors and counsels.
- Standard Proposal Form — Insurers shall obtain a duly completed Standard Proposal Form from proposers at inception and subsequent renewals. No cover shall be granted unless a declaration in the proposal form confirms all statutory requirements relating to the business activities are complied with.
- Standard Policy Form — All fresh policies and renewals shall be in the Standard Policy Form prescribed by the insurance company / corporation.
- Liabilities covered — Policies cover all sums the insured becomes legally liable to pay as damages to a third party in respect of errors and/or omissions whilst rendering professional services, arising from claims first made in writing during the policy period, including legal costs and expenses incurred with the insurer's prior consent. It is not permissible to issue a policy with unlimited liability.
- Premium — Rates are annual; full premium is paid at inception and cannot be paid in instalments. Turnover figures must be accurately assessed and declared at inception, with adjustments notified immediately if anticipated turnover changes — no adjustment is permitted after the policy expires.
- Retroactive Date — The date the risk is first incepted under a claims-made policy and thereafter renewed without a break in cover.
- Revision in Limits of Indemnity — No revisions are allowed during the currency of a policy. For upward revisions at renewal, the retroactive date becomes the renewal's inception date, for the increased limits.
- Compulsory Excess — All policies carry a compulsory excess of a fixed percentage of the indemnity limit per accident/year, subject to a minimum of Rs. 1,000 and maximum of Rs. 1,00,000 — applicable to both property-damage and death/bodily-injury claims, inclusive of defence costs. This excess does not apply to doctors and medical practitioners.
- Voluntary Excess — Discounts on premium may be allowed for voluntary excess opted by hospitals and medical establishments (not applicable to doctors/medical practitioners):
| Voluntary excess (% of limit of indemnity per accident) | Discount (%) |
|---|
| 1 | 2.5 |
| 2 | 5.0 |
| 4 | 7.5 |
| 6 | 10.0 |
| 8 | 12.5 |
| 10 | 15.0 |
- Short Period Premium — Policies for more than 12 months are not permitted. The following scale applies to policies issued for less than 12 months, and to policies cancelled at the insured's request subject to no claims:
| Period | Rate |
|---|
| Not exceeding one month | 1/4th of the annual premium |
| Not exceeding two months | 3/8th of the annual premium |
| Not exceeding three months | 1/2 of the annual premium |
| Not exceeding four months | 5/8th of the annual premium |
| Not exceeding six months | 3/4th of the annual premium |
| Exceeding six months | Full annual premium |
For annual policies cancelled during their currency at the insured's request, premium is adjusted at the Short Period Scale for the actual period of cover, subject to no claims. No refund is permissible where a claim has been made under the policy. The short period premium is subject to the minimum premium in the Rating Schedule.
