( By Dr. Jagdish Singh )

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Protection Against Outcome of Litigation

A tertiary level of protection against outcome of litigation would be to go for Insurance cover. PROFESSIONAL INDEMNITY INSURANCE cover became available for Doctors and Medical establishments only recently, i.e. from December, 1991.

Insurance companies such as Allianz provide insurance coverage and policies to provide this kind of protection.

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 him 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 of settlement of claims. PROFESSIONAL INDEMNITY INSURANCE

General Rules and Regulations :

  1. Applicability
    The policy provides insurance cover in respect of ERRORS and OMISSIONS on the part of the professionals whilst rendering their services. This applies to Doctors and Medical Establishments, Engineers, Financial Consultants, Management Consultants, Lawyers, Advocates, Solicitors and Counsels. The agreeable limits within India and including Nepal / Bhutan, for any one year/during the policy period, shall not exceed Rs. 2 crores.

  2. Standard Proposal Form
    Insurers shall obtain duly completed Standard Proposal Form from the prosecutors at inception and subsequent renewals. No cover shall be granted unless a declaration as provided for in the proposal form is obtained from the proposer to the effect that all statutory requirements relating to the business activities are complied with.

  3. Standard Policy Form
    All policies fresh and renewals issued shall be in the Standard Policy Form prescribed by the insurance company / corporation.

  4. Liabilities covered
    Policies issued under this scheme shall cover all sums which the Insured becomes legally liable to pay as damages to third party in respect of ERRORS and/or OMISSIONS on the part of the Insured whilst rendering professional services, arising out of claims first made in writing against the insured during the policy period, including legal costs and expenses incurred with the prior consent of insurer, subject always to the limits of indemnity and other terms, conditions and exceptions of the policy. It shall notbe permissible to issue any Professional Indemnity Insurance Policy with unlimited liability.

  5. Premium
    The rates of premium under the Agreement are annual rates. Full premium under the policy shall be paid at inception. It is not permissble to accept premium in installments.Turnover figure whenever required shall be as far as possible accurately assessed and declared by the proposer at inception of the policy. In case the insured anticipates any increase /decrease in turnover during the policy period such fluctuations should be immediately notified to the Insurer and necessary adjustments made. Under no circumstances it shall be permissible to adjust the premium for the turnover after expiry of the policy.

  6. Retroactive Date
    Retroactive Date is the date when the risk is first incepted under a claims made policy and thereafter renewed without break in the period of cover.

  7. Revision in Limits of Indemnity
    No revisions ( increase / decrease ) shall be allowed in the limits of Indemnity during the currency of the policy.For any upward revision in indemnity limits at renewals, the retroactive date shall be the inception date of the Policy renewal, so far as the increased limits are applicable.

  8. Compulsory Excess
    All policies issued under the Agreement shall be subject to compulsory excess of certain fixed percentage of the limit of indemnity per any one accident or any one year subject to a minimum of Rs. 1,000 and maximum of Rs. 1,00,000 ( Rupees One Lakh Only) . The Insured shall bear this Compulsory Excess which is applicable to both property damage claims and death /bodily injury claims inclusive of defence costs arising out of any one accident. This excess is not applicable for Doctors and Medical Practitioners.

  9. Voluntary Excess
    The following discounts on the premium may be allowed for Voluntary Excess opted by the Insured except for policy for Doctors and Medical Practitioners. But these are applicable in case of insurance policies obtained by Hospitals and Medical Establishments.

    Voluntary Excess (percentage) of limit of Indemnity per any one Accident

    Discount (%)

    1 2.5
    2 5.0
    4 7.5
    6 10.0
    8 12.5
    10 15.0

    The Voluntary Excess shall be in addition to the Compulsory Excess and shall be applicable to both property damage claims and / or death / bodily injury claims inclusive of defence costs arising out of any one accident.

  10. Short Period Premiums
    It shall not be permissible to issue Policies for periods more than 12 months. The following short period scale of premium shall apply to (i) policies issued for periods less than 12 months and (ii) policies cancelled during the currency at the request of the insured 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 1/2th 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 the currency at the request of the insured,premium should be adjusted at the Short Period Scales for the actual period of cover subject to no claims.No refund is permissible in case of any claim under the policy.

    The short period premium is subject to the minimum premium in the Rating Schedule.


    The policy will indemnify any act committed by the insured, who shall be a Registered Medical Practitioner, giving rise to any legal liability to Third Parties. The Insured includes the policy holder and his qualified assistants or employees named in the proposal.

    The act has to be committed during the period of insurance commencing from the retroactive date.

    In the normal course all claims for compensation have to be legally established in a court of law. However, insurers may arrive at compromised settlement if prima-facie liability exists under the policy.

    Jurisdiction applicable will be Indian Courts.

    The limit of indemnity granted under the policy for any one accident or any one year (per accident per policy year ) will be identical.

    No short period policies are permitted. However, in case of cancellation of the policy by the Insured short period scale rates as provided for will be applicable.

    Registered Medical Practitioners shall be classified as :-

    (1) Physicians (2) Pathologists (3) Oncologists (4) Cardiologists (5) Psychiatrists (6) Radiologists or Roentgenologists (7) General Surgeons (8) Plastic Surgeons (8) Orthopaedic Surgeons (10) Urologists (11) Abdominal Surgeons (12) Thoracic Surgeons (13) Neuro-Surgeons (14) Cardio-Vascular Surgeons (15) Otorhinolaryngologists (16) Protologists (17) Ophthalmologic Surgeon (18) Ophthalmologic Physician (19) Obstetrician & Gynaecologist (Excluding Surgery) (20) Physician & non-specialist (21) Other Practitioner-describe Surgeon. fully.

    Insurance Rating for Doctors and Medical Practitioners
    [To be charged on Any One Year (AOY) limit]

    1. (a) Physicians without dispensing and other facilities General Pathologist/Radiologist

    (b) General Physicians with facilities like dispensing /pathological/ radiological etc

    Rs. 0.5 per 1000 on AOY limit.

    7.5% additional premium for each facility subject to maximum of 20%.

    2. (a) Specialists/Consulting Physician (Non-surgical)

    (b) For other facilities (Specify) such as E.C.G.,X-ray,Scanning, Sonography etc.

    Rs. 1.0 per 1000 on AOY limit

    7.5% extra for each facility subject to facility subject to maximum of 20%.

    3. (a) Surgeons excluding specialists in Plastic Surgery,Lithotripsy Dentists & similar extra corporeal methods of treatment would fall within this category.

    (b) For other facilities (specify) such as E.C.G.,X-Ray,Scanning,Sonography etc.

    Rs. 2.0 per 1000 on AOY limit

    7.5% extra for each facility subject to a maximum of 20%.

    4. (a) Diagnostic Centres

    (b) For other facilities (specify) such as E.C.G.,X-Ray,Scanning,Sonography etc

    Rs. 1.0 per 1000 on AOY limit.

    7.5% extra for each facility subject to a maximum of 20%.

    5. (a) Surgeons (Plastic Surgery) Anesthetics.

    (b) For other facilities (specify) such as E.C.G.,X-Ray,Scanning,Sonography etc.

    Rs. 3 per 1000 on AOY limit

    7.5% extra for each facility subject to a maximum of 20%.

    Minimum Premium Rs. 100.
    No Compulsory or Voluntary Deductibles are applicable.

    Insurance Rating for Medical Establishments
    Rs. 3 per 1000 on AOY limits plus
    Rs. 5 per each in patient plus
    Rs. 1 per out-patient.

    (Number of patients to be as per previous yearís record or the anticipated number of patients during the year whichever is higher.)

    Radioactive treatment Additional premium of 15% (other than X-ray) on total premium.

    The indemnity in respect of any one person would be limited to 25% of the Any One Year (AOY) limit under the policy.
    Minimum Premium under one policy : Rs. 1000.
    Compulsory Excess and Voluntary Excess are applicable.

    1. No liability shall attach to the Company in respect of -

      1. Any criminal act or any act committed in violation of any law or ordinance :
      2. services rendered while under the influence of intoxicants or narcotics ;
      3. the performance by dentists and dental surgeons of :(1) general anaesthesia; or (2) any procedure carried out under general anaesthesia unless performed in a Hospital :
      4. the use of drugs for weight reduction ;
      5. cosmetic surgery ;
      6. third party public liability ;
      7. claims arising from any condition directly or indirectly caused by or associated with Human T-Cell Lymphotropic Virus Type III (HTLV III) or Lymphadenopathy Associated Virus (LAV) of the mutants derivaties or variations thereof or in any way related to Acquired Immune Deficiency Syndrome (AIDS) or any Syndrome or condition of a similiar kind howsoever it may be named.

    2. The Policy does not cover liability -

      1. assumed by the Insured by agreement and which would not have attached in the absence of such agreement ;
      2. arising out of deliberate, wilful or intentional non-compliance of any Statutory provision ;
      3. arising out of loss of pure financial nature such as loss of goodwill, loss of market, etc ;
      4. arising out of all personal injuries such as libel, slander,false arrest, wrongful eviction, wrongful detention.,defamation, etc. and mental injury, anguish or shock;
      5. arising out of fines,penalties, punitive or exemplary damages ;
      6. directly or indirectly occasioned by happening through or in consequence of war, invasion, act of foreign enemy, hostilities (whether war be declared or not),civil war, rebellion, revolution, insurrection or military or usurped power ;
      7. directly or indirectly caused by or contributed by :-

        1. ionising radiations or contamination by radioactivity from any nuclear fuel or from any nuclear waste from the combustion of nuclear fuel;
        2. the radioactive, toxic , explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof;

      8. arising out of genetic injuries caused by X-ray treatment/diagnosis or treatment /diagnosis with radioactive substances, in respect of professional services rendered by the Insured prior to the Retroactive Date in the Schedule.
      9. the deliberate conscious or intentional disregard of the insuredís technical or administrative management of the need to take all reasonable steps to prevent claims ;
      10. injury / death to any person under a contract of employment or apprenticeship with the Insured when such injury / death arises out of the execution of such contract.

    It may be noted that the amount paid as premium for obtaining a Professional Indemnity Insurance Policy qualifies as deductible expense under Sec. 36 of the Income Tax Act.

    The doctors /hospitals may contact the Insurance Companies or their Agents for obtaining more information on the subject.

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