Trust Board 27 June 2013 Public paper Report of Jo Bray, Trust Board Secretary Paper prepared by Subject/Title Jo Bray, Trust Board Secretary and David Hay, Head of Financial Services Directors Briefing - Insurance Arrangements Background papers Purpose of Paper N/A To ensure that annually members of the Board have reflected on the cover they receive while they are acting in good faith within their roles. Action/Decision required Link to: NHS strategies and policy For information and formal minute. As set out in the paper, other existing means of insurance cover. Link to: Trust s Strategic Direction Corporate objectives Becoming a Foundation Trust Resource impact Consideration of legal issues Acronyms and abbreviations 1
THE LEEDS TEACHING HOSPITALS NHS TRUST Directors Briefing - Insurance Arrangements 1. CURRENT ARRANGEMENTS From the late 1990 s NHS Trusts insurance arrangements have been mainly provided through membership of the NHS Litigation Authority s (NHSLA) three schemes eg - Clinical Negligence Scheme for Trusts (CNST) - Liability to Third Parties Scheme (LTPS) - Property Expenses Scheme (PES) Membership has not been mandatory but NHS Trusts have not been allowed to purchase commercial alternatives. Foundation Trusts do have that option although to date all have elected to retain their NHSLA membership. A number however have purchased top up commercial policies where they have identified risk exposures in the indemnity offered by the NHSLA. NHS Trusts have only been able to purchase commercial insurance where the NHSLA does not provide cover at all. Appendix 1 provides an overview of the Trusts current insurance arrangements and their cost. 2. FOUNDATION STATUS In considering the suitability of the Trusts existing cover to Foundation status no regard has been made to whether or not commercial alternatives would offer better economy. This is something which can be addressed subsequently. The primary focus has been to determine if there are likely to be significant risk exposures in the scope of our existing cover once Foundation status is achieved. From that perspective two areas require further consideration ie Directors and Officers Liability Property Expenses 3. DIRECTORS AND OFFICERS LIABILITY The LTPS scheme includes Directors and Officers Liability cover. It operates with no excess and no indemnity limit other then 250k in the case of pollutant discharge related claims. The scheme is designed to meet the costs of defending or settling claims against individual Directors. It meets their personal liabilities provided they have acted honestly and in good faith. It does not meet any costs associated with criminal actions. The scheme is therefore extensive in its scope but the NHSLA itself advises. 2
Foundation Trusts should note that Directors and Officers liability cover will not extend to liabilities in respect of commercial activities that fall outside the relevant function. The relevant function is defined as the provision of health services under the NHS Act 1977 (consolidated into the NHS Act 2006). Income generation schemes outside the scope of the NHS may not be covered therefore and many Foundation Trusts have purchased additional or top up Directors and Officers Liability Cover. At present, the NHSLA does not provide Public Liability cover to non NHS income generation activity (although this exclusion does not apply to Directors and Officers liability for NHS Trusts). A commercial top up policy is purchased each year at a cost of 6k to deal with this exposure. It is recommended that the disclosures used to purchase this policy be used to explore with insurers any additional cost of adding Directors and Officers liability. Once this exercise is complete a further report will be made to Directors. 4. PROPERTY EXPENSES The Property Expenses Scheme operates with a maximum indemnity of 1m per claim. The scheme includes Business Interruption cover which in turn includes loss of profit. The rationale for such a low indemnity value has been that residual liabilities, in the event of catastrophic loss, would be dealt with by the Secretary of State. Clearly, such a situation introduces potential delay and uncertainty into both reinstating loss and maintaining continuity of service. NHS Trusts have had no option but to accept this limited indemnity and uncertainty. Foundation Trusts are free to purchase additional Property Insurance from commercial providers and many have chosen to do this. While the Secretary of State can (under the 2006 NHS Act) provide financial assistance to a Foundation Trust it is not clear how or if this power would be exercised to meet the costs of a property loss exceeding 1m. Nor is it clear what the scale of such loss would have to be before the Secretary of State considered intervention. Similarly, it is not clear that such assistance would be offered to replace income generation activities deemed to be outside the scope of the NHS. The NHSLA does not provide Public Liability cover for such activity. The current PES cover does appear to carry risk exposures to Foundation Trusts and therefore consideration should be given to identifying either top up or replacement options. Initial investigations have identified that to purchase commercial Property and Business Interruption insurance could cost up to 170k. This is a very rough estimate which assumes the first 1m of loss would continue to be covered by the PES and the full value of all our estate and contents would be indemnified. It is highly likely that this cost would be reduced through a proper assessment of our maximum probable loss. 3
Given the indicative value of such a policy a full tender exercise will be required and there will be significant disclosure requirements to be addressed. The process is likely to take several months to complete. It is recommended that further work is undertaken to prepare a specification of required cover and seek accurately costed options for Directors consideration. 5. CONCLUSION Directors are to be re-assured that when carrying out their duties they will benefit from personal liability insurance cover, providing they act honestly and in good faith. (The purpose of this paper is to annually formally minute this cover). Directors are asked to note the content of this paper and during our preparation towards Foundation Trust status more detailed work will be carried out to; - Obtain the cost of top up Directors and Officers liability cover for existing commercial activities - Prepare a full specification and obtain costs of top up Property and Business Interruption Cover JO BRAY Trust Board Secretary DAVID R HAY Head of Financial Services 10 June 2013 4
Summary of Trust Insurance Arrangements 2013/14 Policy Type Provider Excess Indemnity Premium Cover Per Claim Limit 2013/14 000 000 000 Clinical Negligence NHSLA Nil Unlimited 17,005 Loss or injury arising from Trust negligence in diagnosis and treatment. Both NHS and private patients. Liability to Third Parties NHSLA - Employers Liability 10 Unlimited - Public Liability 3 Unlimited - Products Liability 3 Unlimited - Professional Indemnity 3 Unlimited - Directors & Officers Nil Unlimited 710 Claims for loss or damage arising from non clinical activity. Covers claims from employees, students and volunteers as well as the public. Extends to claims arising for provision of goods and services to other NHS organisations. Specifically excludes income generation activity to non NHS parties. Property Expenses NHSLA 81 - Buildings 20 1,000 - Contents 20 1,000 - Business Interruption 1st 24 hours 1,000 - Money 20 var's to 250 - Goods in Transit 20 20 - Fidelity Guarantee 20 250 - Contract Works 20 1,000 General losses arising from fire, flood, theft etc. The excess levels apply individually to building and content losses but also in the aggregate to a combined claim. In the event of significant damage to a building and its contents the excess would be up to 40k. Transport Chaser 5 per claim Unlimited 104 Max 70k per annum Comprehensive on all vehicles owned or leased by the Trust. Public Liability Zurich 10 10,000 6 Loss or injury arising from the provision of Municipal goods and services to non NHS parties. Policy Type Provider Excess Indemnity Premium Cover Per Claim Limit 2013/14 000 000 000 Personal Accident Ace Nil 2,000 5 Covers staff engaged in patient transfers Insurance (blue light), organ retrieval and A&E call out to incidents. "No fault" insurance which makes payment in event of injury, subject to scale of injury Engineering Inspection Bureau N/A N/A 39 Not strictly an insurance policy but Veritas traditionally provided by the insurance industry. Covers statutory independent inspection of boilers, lifts and other high risk plant. 5