Interpretation of medical malpractice civil liability insurance policy

Mace v Justice and Forensic Health Network; The Geo Group Australia Pty Ltd v AAI Limited t/as Vero Insurance [2016] NSWSC 803 relates to a cross claim by Geo against its insurer Vero, following settlement of a claim by Mr Mace against Geo and two other defendants.

Geo had obtained insurance cover from Vero, for claims resulting from the conduct of “healthcare services” specified in the insurance policy, namely the “provision of medical services and treatment including services and treatment provided by psychologists and counsellors”: [73].

Vero’s case was that a claim about Geo’s failure to have one of its psychologists or counsellors assess the risks which Mr Mace presented, on his admission was not something which occurred in the conduct of healthcare services. It submitted that Mr Mace’s real complaint was that in the four days that he had been an inmate at Parklea, Geo had failed to recognise that he was displaying symptoms of acute mental illness and failed to refer him for treatment. That, it said, was not something for which it had insured Geo: [74].

Vero’s case was not accepted, with the court noting at [75] – [78]:

  1. ….Geo not only had a duty to Mr Mace, it was contractually obliged not only to have on its staff psychologists and counsellors able to assess inmates to determine whether they presented risks of self harm or mental illness, but to have them actually undertake such assessments, by the systems it had devised to ensure that occurred. It was also then contractually obliged to address the risks so identified in relation to particular inmates, including Mr Mace. Such assessments were amongst the healthcare services it had employed psychologists and counsellors to provide to inmates, as was the treatment which that staff then provided to inmates so identified.
  2. An insurance policy such as this has to be interpreted to give it a business like interpretation, as discussed in McCann v Switzerland Insurance AustraliaLtd (200) 203 CLR 579 at 589 at [22]. That requires attention to be paid to the language which the parties have used in their agreement, the commercial circumstances which the document addresses and the objects it is intended to secure. Vero contended that the background circumstances established that the parties’ objective intention was to insure Geo “for misadventures in the actual provision of healthcare services”. That was not, however, what was insured. Approaching the objective intention of the policy in this way, what was insured was for “misadventures in the conduct of the healthcare services” Geo provided inmates at the Centre.
  3. In order to trigger the policy there must be a causal connection between a claim and the conduct of the insured healthcare services Geo provided at the Centre. While undoubtedly there must be “a common sense evaluation of the causal chain” as discussed by Kirby J in Kooragang Cement Pty Ltd v Bates(1994) 35 NSWLR 452 at 463G per Kirby P; QBE Insurance Ltd v Nguyen [2008] SASC 138 at [151], what cannot be overlooked is the words used in the particular policy. Here the phrase used in the insuring clause is claims “resulting from”, not the “actual provision” of the insured services to a particular inmate, but from the “conduct” of those services. It follows that what was insured involved more than what occurred during the provision of the services of a particular psychologist or counsellor to a particular inmate. It included claims which resulted from how Geo conducted the provision of such services, in Mr Mace’s case, by failing to provide him with the services of its psychologists.
  4. The insured services were conducted by Geo in order that the risks which inmates posed at the Centre were assessed by the psychologists it employed on the inmate’s arrival, so that they could be managed in appropriate ways, including by the provision of further services to the inmate by its psychologists and counsellors. The services were so conducted in order that Geo could address the risks in respect of which Geo owed inmates a duty of care and in order to need its contractual obligations. Mr Mace’s claims against Geo were concerned with its failure to undertake such an assessment and to provide him with such further services. That was a claim “resulting from” its “conduct” of the insured “Healthcare Services”.


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