“Resulting from” in an insuring clause may indicate wider coverage

In Julie Somerville’s last post (28 June) she mentioned that June has been a busy month for the NSW Supreme Court with several decisions delivered that are of interest to those in the medical indemnity industry. Schmidt J’s decision in Mace v Justice Health; Geo Group v Vero is one of those decisions. The case is of particular interest for the manner in which the Court interpreted the insuring clause of the Medical Malpractice Civil Liability Policy following a detailed analysis of tender documents, contractual arrangements and operational systems.

Mr Mace was an inmate at Parklea Correctional Centre. He had a history of self harm and was schizophrenic, yet was not adequately assessed on arrival at Parklea for risks of self harm. Within several days of arrival he suffered injuries after throwing himself off a landing within the Centre. Mr Mace settled his claim with The State of NSW, Geo Group  and Justice Health. Geo Group cross claimed against Vero seeking indemnity under the Medical Malpractice Civil Liability Policy it had issued to Geo Group (“the policy”).

The policy provided indemnity for claims “resulting from the conduct of the Health Care Services“. Health Care Services was defined to be “the provision of medical services and treatment including services and treatment provided by psychologists and counsellors“.

Vero considered that the insuring clause was not triggered. Vero argued that Mr Mace’s claim was that the correctional staff failed to recognise that he was suffering from symptoms of acute mental illness and failed to refer him to the psychologists or counsellors for treatment. Therefore the claim arise from the  failures of the correctional staff and not as a result of the actual provision of services by the psychologists or counsellors.

Schmidt J did not agree.

Why? Because when the Vero policy was interpreted to give it a business like interpretation as required by McCann v Switzerland Insurance Australia, Schmidt J considered the at the intention of the policy was to provide cover for “misadventures in the conduct of the healthcare services” and not simply the “provision of services by  a particular psychologist or counsellor to a particular inmate.”

Of particular interest is the breadth of the evidence that Schmidt J considered when considering the objective intention of the policy. In addition to considering the phrase “resulting from” in the insuring clause, and the scope of questions contained within the proposal form, Schmidt J considered ancillary documents that evidenced the relationship between Geo Group and Justice Health.

Geo, as a result of a successful tender, had only recently taken over the provision of correctional and healthcare services at Parklea. In its tender documents Geo assumed that Justice Health would provide medical screening to inmates.

However, subsequent to the  tender, Geo Group entered into a Tripartite agreement with Justice Health and the Corrective Services Department whereby Geo agreed that its psychologists and counsellors would assess inmates to determine whether they presented risks of self harm. This agreement was a expansion of the services Geo offered to provide in its tender submission.

Further, Geo Group implemented operational systems to ensure that those assessments took place. Unfortunately it appears that that Mr Mace’s assessment did not take place.

Schmidt considered that failure by Geo to undertake Mr Mace’s initial assessment to determine whether referral to a psychologist or counsellor was necessary was a failure that “resulted from” Geo’s conduct of the healthcare services despite the fact that no professional service had yet been provided by a psychologist or a counsellor.

If you have any questions in relation to policy interpretation please contact Julie Somerville.

If you wish to keep up to date with issues and developments relevant to professionals follow Julie on LinkedIn.

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