In June 2016, the Australian New South Wales Supreme Court held a liability insurer liable to indemnify its insured, a prison detention centre, for a claim arising from the insured’s failure to note that one of its inmates suffered from chronic schizophrenia as a result of which he was not given access to his anti-psychotic and anti-depressant medication. The inmate then threw himself from a landing resulting in significant physical and brain injury.
When the insured sought to recover an indemnity from its insurers under a Medical Malpractice Civil Liability Insurance policy, the claim was rejected by the insurer on the basis that the insuring clause had not been triggered by the claim.
The insuring clause provided:
‘The Insurer will indemnify the Insured against civil liability for compensation and claimant’s costs and expenses in respect of any Claim or Claims first made against the Insured and notified to the Insurer during the Period of Insurance resulting from the conduct of the Health Care Services’.
Health Care Services was ‘the provision of medical services and treatment including services and treatment provided by psychologists and counsellors’.
Insurers argued that the real basis of the claim was failure by the insured’s staff to refer the inmate to psychologists and counsellors. The negligence was in the operational failures that prevented the medical services and treatment being provided and not the provision of the medical services and treatment themselves.
The court held that the policy covered claims made against the insured where those claims arose from the conduct of the services specified in the policy i.e. Health Care Services. Cover was not confined to acts of the psychologists and counsellors who actually provided the services but to all employees providing health care services. The insured was under an obligation assess the medical condition of inmates including by psychologists and counsellors on entry to the detention centre and thereafter by management of any risks identified.
The insured’s failure to undertake a proper assessment of this risk resulted from the conduct of health care services as defined and for which there was cover under the policy.