Foundation trusts have access to two indemnity schemes designed for the NHS but should ask whether this would be enough in every event, says Jeremy Roper

In 2008 the Royal Marsden Hospital suffered a devastating fire. During the recovery process it slowly became clear that there is uncertainty about what cover trusts have in place for such disasters.

Foundation trusts have access to two principal indemnity schemes designed for the NHS: the NHS Litigation Authority clinical negligence scheme for trusts for clinical matters and the risk pooling scheme for non-clinical.

With something as destructive as a fire, the risk pooling scheme would be the route to recompense but it limits trusts to £1m for property claims.

The total value of a trust’s estate will be hundreds of millions of pounds. A large fire could cause far more damage than the standard £1m cover.

The question to address urgently is whether the risk pooling cover is sufficient or whether commercial top-up cover should be obtained.

Department of Health guidance is murky, especially for foundation trusts. The DH has said it would look case-by-case at any requests for additional payment in the event of, for example, a large fire. There is no guarantee of a DH or strategic health authority bailout.

The Royal Marsden had property top-up cover but it was not enough for the reinstating of the buildings to the standards of the latest building regulations.

Paying for additional commercial top-up insurance will not readily appeal, especially if there is no guarantee that top-up cover will prove sufficient.

The revenue focused world of NHS providers also has to consider the question of business interruption. Again, taking the Royal Marsden fire as an example, the foundation regulator Monitor showed little leniency towards the trust in terms of its obligation to hit targets. A trust would still be expected to meet its financial targets on the basis that it was treating its usual number of patients.

When it comes to business interruption, the standard indemnity cover for trusts is, again, £1m per incident. Again, the cost could easily be higher, and obtaining top-up cover can be problematic because of the difficulty in anticipating the loss.

Personal cover

Another area for concern is personal cover for board members, senior managers and governors. When foundation trusts were first established, the NHS Litigation Authority wrote to foundations that its cover was as good as anything that could be achieved commercially. Since then, only a minority have sought top-up cover.

The liabilities to third parties scheme, which forms part of the risk pooling cover, does however have some gaps. If, for example, a trust set up a subsidiary company or operated its charity through a separate legal entity, any claims related to actions by trust officers on behalf of the subsidiary would probably not be covered.

As a general rule if the third parties scheme does not cover a trust to indemnify a director or officer in particular circumstances it is unlikely a commercial policy would either.

Another area of ambiguity relates to non-NHS providers of clinical services.

NHS patients will have the benefit of cover under the clinical negligence scheme even if the negligent treatment was provided by a non-NHS body. However, (except in the case of independent sector treatment centres which, under special arrangements, are allowed to benefit from their referring primary care trusts’ membership) non-NHS providers (including independent centre sub-contractors) treating NHS patients could still be liable if the litigation authority wanted to reclaim compensation under its rights of subrogation or if a patient pursued them directly.

Many acute trusts sub-contract clinical work to the private sector and, possibly, to clinicians who may be employed by the trust but who provide additional services outside of their NHS contracts. This can be particularly tricky because, although each consultant will have their own personal cover, the contract might be with a limited company they have formed.

Not surprisingly, clinicians in these circumstances are very reluctant to incur the cost of additional corporate cover (which they are likely to try to pass back to the trust) and this can give rise to last minute problems during contract negotiations.

Foundations should ensure insurance is not an issue left on the back burner. Carefully assessing vulnerabilities will at least allow trusts to make an informed decision about top-up cover.