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Medical indemnity and GP companies

The MDU's Dr John Holden says practices and GPs with companies need corporate negligence cover.

Practices could run into trouble if locum staff are not covered
Practices could run into trouble if locum staff are not covered

More practices are forming groups and considering setting up as limited companies to offer additional enhancements to mainstream primary care that might traditionally have taken place in a secondary care setting.

Practice groups organising themselves into companies can also bid for contracts from PCTs and other NHS bodies.

Corporate indemnity
There are many challenges for GPs involved in starting up such companies, not least ensuring they obtain corporate indemnity cover in addition to personal professional indemnity.

This is because GPs' individual indemnity arrangements will not cover their company if it is sued because of a failure in a company procedure or the actions of a staff member for whom it has vicarious liability.

A company structure differs from the traditional partnership model in that it is a legal entity that is formed that can be sued in its own right. Therefore the MDU is advising its members and other GPs thinking about forming a clinical company to consider their professional indemnity needs.

GPs setting up companies also need to be aware of their professional and ethical responsibilities. In its specific guidance on Management for Doctors (2006) the GMC says that 'if you work as one of a group of independently contracted GPs, you have an individual responsibility to make sure that the practice has appropriate systems in place to deal supportively with problems in your own or your partners' conduct, performance and health' (paragraph 29).

GPs working in practices or practice groups establishing companies must also be careful to ensure patient care and safety is their first concern and that they declare any financial or commercial interests that could influence or be seen to influence their judgment (paragraphs 20 and 55).

The two examples illustrate how a company could be held liable in future. So do make sure that your company and its doctors have adequate corporate indemnity cover in place. Check with your medical defence provider.


A locum practice nurse working under the direction of company managers, saw a woman who wished to have her ear syringed.

The patient explained that she had just finished a course of penicillin for an abscess in her ear. The nurse syringed the ear and two days later the patient returned complaining that her ear had been incompletely syringed and the same nurse repeated the procedure.

The patient returned again, complaining of a sore ear and the nurse referred her to one of the company's GPs. She told the GP that during the syringing procedure she had felt excruciating pain and dizziness. On examination the patient was found to have a perforated eardrum and antibiotics were prescribed.

Fortunately she made a good recovery but sued the nurse and the GP-owned company since it was vicariously liable for the actions of the nurse. It transpired that the nurse had not carried out the procedure for many years and the company managers had not checked her competency before delegating the procedure.



A heavy smoker in his fifties saw a salaried GP, working in a practice which was one of three practices run by a corporate body.

The man had a cough which had been troubling him for four weeks. The GP examined him, prescribed a course of antibiotics, arranged for a chest X-ray and asked him to return for review in two weeks, and to contact the practice for the result.

The report noted a shadow on the lung and suggested the possibility of malignancy. The result was filed in the medical records and when the patient did not return as requested, the GP did not contact him. There was a six-month delay before he returned, when a referral was made and subsequently, evidence of metastatic lung carcinoma was found.

A claim was brought against the individual GP and also against the GP-owned company for not having a system in place for following up positive test results.

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