Coverage required for third-party liability insurance of healthcare providers
According to Polish and EU law, performance of certain services requires civil liability insurance. Such an obligation is imposed on entities performing healthcare activities, for which Polish law has specified the minimum amount of coverage. Can such coverage be exhausted by a medical loss?
The nature of the sum assured or insured
One of the elements of property insurance is the sum insured (or sum assured), constituting the upper limit of liability of the insurance company. (The concepts of “sum assured” (suma gwarancyjna) and “sum insured” (suma ubezpieczenia) are almost identical; the sum assured occurs in the third-party liability insurance, the sum insured in other types of insurance (e.g. property insurance).)
This sum sets the upper limit of the policyholder’s liability for, among other things, the insured’s property damage. On the other hand, damage is actual material harm. If the material harm amounts to less than the sum insured, the insurer will compensate it at actual value. However, if the material injury is higher than the sum insured, the insurer will compensate it to the extent equivalent to the sum insured and is free from liability to the remaining extent (Administrative Court in Białystok judgment of 26 January 2018, case no. I AGa 28/18).
The sum insured (or assured) is correlated with the insurance premium, i.e. the higher the sum, the higher the insurance premium for the insurance cover provided. A given sum is valid for a given insurance period, usually an annual one, since third-party liability insurance is short-term insurance. Thus, when renewing the insurance, the insured may decide to increase the sum in the next insurance period, or reduce it (which may result in underinsurance). Additionally, contractual provisions under which the insurance company sets sublimits for specific insured events are not uncommon.
In Poland, third-party liability insurance has a minimum ceiling for the sum assured, set by law. The Regulation of the Minister of Finance of 29 April 2019 on Compulsory Third-Party Liability Insurance of Entities Performing Medical Activities is relevant for healthcare providers. For example, for an independent public healthcare institution providing stationary and round-the-clock medical and hospital services, this will be EUR 100,000 with respect to one event, and EUR 500,000 with respect to all events, the effects of which are covered by the third-party liability insurance policy of the healthcare institution. To put it another way, the insurance company will then cover no more than five events, if each exceeds EUR 100,000.
It may seem that this amount of the sum assured provides relative peace of mind and security for policyholders from the medical sector. However, the accumulation of various types of claims of the injured party or a low sublimit of the sum for a single event may lead to a state where the insurer refuses to pay further benefits due to exhaustion of the sum assured. In particular, this includes compensation for unimaginable harm, pensions awarded, or claims by third-parties (the injured party’s immediate family members).
Unimaginable harm
In medical malpractice, “unimaginable harm” is relatively rare, but is nevertheless not excluded in court practice. By its nature, it is extremely difficult to predict and determine the amount of compensation. As pointed out in the legal literature, this is particularly because, by definition, no one is able to imagine the suffering of the subject affected by such harm. For example, a child just a few years old suffers respiratory arrest resulting in complete and irreversible loss of consciousness and all higher life functions; the child will then spend his or her entire life, probably a short one, on a ventilator. By definition, unimaginable suffering necessarily translates into the impossibility to compensate for it with a cash benefit (M. Gutowski (ed.), Civil Code, vol. 2: Commentary, Art. 353–626 (2nd ed., Warsaw 2019)).
In the case of unimaginable harm, the courts have an unusually high degree of discretion in determining the amount of compensation, where the compensatory function takes precedence. This obliges the court to take into account, among other things, the intensity of the harm suffered: its type, nature, duration of physical and mental suffering, its intensity, the irreversibility of adverse health effects, the degree and permanence of the disability, as well as the loss of prospects for the future and the accompanying sense of helplessness caused by the need to rely on the care of others, and the feeling of alienation from society (Supreme Court of Poland judgment of 21 May 2020, case no. V CSKP 114/21, Lex no. 3220006).
Additionally, the compensatory function of the benefit requires the benefit to be realistic, in the sense that the amount represents an economically appreciable value for the injured party. Therefore, the benchmark for such an assessment should be the financial standards and the standard of living in the country where the injured party’s life affairs are centred (Supreme Court judgment of 17 December 2020, case no. III CSK 149/18, Lex no. 3105671). This is especially important for medical facilities providing medical services to patients from abroad (especially from rich countries).
Thus, it can be seen that compensation for medical malpractice may be awarded in an amount that alone can exhaust the sum assured or substantially approach the upper limit.
Pension
Any injured person who, as a result of medical malpractice, has suffered partial or total incapacity for gainful employment, or whose needs have increased or whose future prospects have diminished, is entitled to a pension, which may also be covered under third-party liability policy.
In court practice, a compensatory pension (for lost income) is most often awarded. Its purpose is to compensate for the harm suffered by an injured person as a result of medical malpractice, consisting of the loss of earnings and other economic benefits that the injured person would have achieved if they had not suffered a disruption to their health. However, as noted by the Supreme Court, this type of pension cannot be determined in isolation from the actual earning potential of the injured party if he or she had not suffered the injury (Supreme Court judgment of 4 July 2002, case no. I CKN 837/00, Lex no. 56891).
A compensatory pension is awarded for the period of the injured person’s incapacity to work, i.e. if the incapacity is permanent, then a pension for lost earnings should be awarded for the rest of the person’s life. If the incapacity is only temporary, the compensation is due for the period from the incident to the date of the injured person’s return to work. Significantly, the amount of the pension for lost earnings can vary, i.e. decrease or increase, depending on the injured person’s situation and prospects.
As indicated, in the case of an award of a pension and compensation, the third-party liability insurance will cover such benefits; nevertheless, in the context of the amount of the sum assured, the amount of the pension may be crucial. If the injured person had high earnings, that may cause a substantial award to quickly exhaust the sum assured.
For example, assume that with a sum assured of PLN 500,000, the injured party (as a result of medical malpractice) was awarded compensation of PLN 350,000 and a pension of PLN 5,000 per month. In this state of affairs, the insurance company will pay the compensation and begin paying the pension, but it will only pay the pension for the first two and a half years. After this period, the sum assured will be exhausted and the insurance company’s liability will cease. The insured healthcare entity will have to start paying the pension on its own.
Third-party claims
On 19 September 2021, the parliament added Art. 4462 of the Civil Code, according to which, in the case of a serious and permanent bodily injury or causing a health disturbance resulting in the inability to establish or continue a family relationship, the court may award the closest members of the injured party’s family an appropriate amount as financial compensation for the harm suffered. Commentators explain that the purpose of this amendment was to remove doubts present in the legal literature and the case law as to whether it is permissible to compensate for non-financial damage in a situation where the claimants are relatives of the directly injured party, and the harm itself consists in the close relatives’ inability to maintain family ties with the injured as a result of the latter suffering serious bodily injury or health disturbance (J. Ciszewski et al. in J. Ciszewski et al., Civil Code: Updated commentary (LEX/el. 2022), Art. 4462).
Thus, the impacts of medical malpractice may also be indirectly felt by members of the injured person’s immediate family, which entitles them to compensation claims. When correlated with the injured party’s original claim and combined with other claims, these types of claims may also result in exhaustion of the sum assured.
Potential regulatory changes and summary
The above considerations lead to the conclusion that entities providing healthcare services should be interested in concluding third-party liability insurance with an increased sum assured.
On one hand, there is an observable trend in Poland toward awarding higher compensation for harm associated with medical malpractice, which in the case of unimaginable harm can amount to a million zlotys or more. On the other hand, in the context of the possibility of awarding a pension, a low sum assured is risky, insofar as the obligation to provide benefits may ultimately be borne by the entity responsible for the medical malpractice.
Finally, it should be noted that compensation (and other related benefits) is intended to serve a compensatory role, but must not lead to punitive measures against the entity bearing the remedial obligation. This is a strongly undesirable phenomenon that can lead to further negative effects.
These conclusions may become even more relevant with the passage of the anticipated Patient Quality and Safety Act and the accompanying Medical Events Guarantee Fund. Currently, this solution is being piloted through the Immunisation Guarantee Fund. According to the Patients’ Ombudsman, implementation of this approach will enable protection of patients’ interests “in such a way that patients who have suffered harm may easily receive the due amount of compensation, in an uncomplicated manner, cheaply and quickly, without lengthy court proceedings and without the risk of losing.”
Mateusz Kosiorowski, adwokat, Insurance practice, Małgorzata Sokołowska, Life Science & Healthcare practice, Wardyński & Partners
