The court’s legal analysis in a recent case delves into the clarification of the insurer’s liability in a professional negligence scenario. The crux of the matter lies in the insurance policies procured by the doctors involved, rather than the hospital itself. The court’s examination sheds light on the nuances of such policies, highlighting the lack of privity of contract between the insurer and the hospital. This analysis brings forth a crucial aspect of liability and indemnification in cases of professional negligence.
Facts
- The appellant conducted an eye camp where cataract surgeries were performed on 112 patients.
- The District Forum awarded compensation to twenty-four complainants for professional negligence during the surgeries.
- The insurance policies were obtained by the doctors from the insurer to cover claims of negligence.
- An Enquiry Committee appointed by the State Government found negligence in the surgeries.
- Consumers complained of negligence due to the use of non-sterilized appliances, contaminated medicines, and inferior quality lenses.
- The District Forum relied on the report of the Enquiry Committee to conclude negligence.
- The appellant deposited Rs 42 lakhs before the District Forum as per the court order, which was withdrawn by the claimants.
- NCDRC did not find the appellant insurer liable solely based on the deposit without specific allegations of negligence against the doctors.
- The hospital has appealed against the NCDRC’s decision.
- An interim order was passed by the court on 20th February 2015 during the proceedings.
- The District Forum rejected the insurer’s argument about liability due to non-involvement of doctors in the proceedings.
- Liability of both hospital and insurer considered joint and several, but the award enforceable only against the insurer.
- State Commission upheld the Forum’s decision while clarifying that liability on the hospital remains unaffected.
- Expert Committee’s report established negligence by doctors and staff of the hospital.
- Despite the findings, the hospital did not challenge the award.
- The NCDRC noted liability on the hospital based on professional indemnity policies obtained by doctors.
Also Read: Court’s Jurisdiction in Re-appraising Arbitrator’s Findings
Arguments
- Mr. Manoj Swarup, learned senior counsel, represented the appellant.
- The NCDRC observed no negligence on the part of the 6 doctors, which was challenged by the learned senior counsel.
- The doctors participated in the proceedings by filing affidavits.
- Submission made on behalf of the first respondent that the hospital was entitled to claim against the insurer as a beneficiary of the insurance policies.
- No privity of contract between the insurer and the hospital
- Professional indemnity policies were obtained by the doctors, not the hospital
- No insurance cover for the hospital or staff
- NCDRC justified in entertaining the revision and ruling that the insurer was not liable to indemnify the hospital
Also Read: Contrary Directions in Issuance of Letter of Intent
Analysis
- The District Forum and the State Commission made a manifest error in their findings regarding negligence against the hospital.
- The State Commission’s order specifically holds the hospital responsible for negligence.
- Insurance policies were procured by the doctors, not the hospital.
- Specific findings include improper sterilization of equipment, lack of proper staff training, and use of contaminated medicines during cataract surgeries.
- The hospital’s claim for indemnification from the insurer is questioned in light of the negligence findings.
- The NCDRC had valid grounds to exercise revisional jurisdiction.
- The insurance policies were for professional indemnity, covering claims of professional negligence against the doctors, not the hospital.
- Dismissal of the appeals by the NCDRC is upheld with no fault found in their findings.
- Appellant is permitted to pursue legal action against other potentially negligent parties.
- Court does not provide any findings or observations on other parties’ negligence.
- NCDRC’s intervention was justified to address the issue of joint and several liability not applicable to insurers of policies not obtained by the hospital.
Also Read: Application for Stay in Civil Suit Rejected: Court’s Legal Analysis
Decision
- Amount deposited in pursuance of interim order has been permitted to be withdrawn by patients.
- Confirmation of amount disbursed to original claimants.
- Disposal of appeals in the above terms.
Case Title: M/S SHETH M.L.VADUWALA EYE HOSPITAL Vs. ORIENTAL INS.CO.LTD. AND ORS. (2021 INSC 867)
Case Number: C.A. No.-007611-007634 / 2021
