Run Off Cover
When the PDA’s GP Practice based members scheme was first launched in 2016, it allowed pharmacists to enjoy up to £10 million of Professional indemnity and Legal Defence costs insurance from the first day that they started to work as a GP practice based pharmacist under one of the new NHS led GP Practice based scheme pilots, even though this may have been before they joined the PDA. This meant that any incidents that may have occurred whilst working in a GP practice which emerged after the members joined the PDA (historical liability risks) would have been covered under the PDAs scheme.
The government has decided however, that its Clinical Negligence scheme for GP Practice (CNSGP), which was established on April 1st, 2019 in England and Wales, will not provide any historical liability risks protection and this means that pharmacists who choose to rely on it will need to ensure that their historical liability risks exposure is protected through what is called a ‘Run Off’ indemnity scheme.
The approach taken by the government in the launch of the CNSGP has in effect re-defined how the PDA will have to provide indemnity protection in the future and also in how the PDA organises indemnity cover for historical liability risks.
The PDAs response to the CNSGP, is to create a new ‘wrap around’ scheme going forward. This provides Legal Defence Costs protection for the medico-legal risks not covered by the CNSGP, but because of the existence of the CNSGP which enables the expensive claims for compensation to be paid by the government, it provides only a very small amount of professional indemnity limit (£250,000). This approach allows the PDA to handle claims and set the defence strategy for the pharmacist. This ‘wrap around’ scheme approach, enables the costs for PDA membership to be significantly reduced.
What is ‘Run Off’ Insurance?
It is required by GP Practice based pharmacists in England and Wales only, who have worked clinically in a GP practice under an NHS scheme prior to April 1st, 2019. This is because claims that emerge from work undertaken prior to the commencement of the Clinical Negligence Scheme for General Practice (CNSGP) on April 1st are excluded by the CNSGP. Such claims may emerge some considerable time after the service was provided (called historical liabilities).
Run Off provides professional indemnity cover for pharmacists who had worked clinically as a GP Practice based pharmacist and provides protection against claims from services provided prior to April 1st, 2019 and after the original retro-active date described on their original GP practice-based insurance certificate.
‘Run Off’ cover – produced at the governments request
Because the CNSGP excludes any liabilities that may emerge from clinical work in a GP Practice prior to April 1st 2019, the government has asked the PDA to establish what is called ‘Run Off’ cover to protect the public from any errors and pharmacists from any claims emerging from these historical liabilities.
Claims from historical incidents can emerge at any time in the future, however the likelihood reduces significantly over time. As such, the cost of Run off cover is the highest in the first two to three years, it reduces very significantly thereafter. The PDA has produced two options for GP Practice based pharmacists in England and Wales who are affected by the CNSGP.
1. Traditional ‘Run Off’
A Traditional ‘Run Off’ insurance scheme which provides £5 or £10 million of cover to each pharmacist for each year for these historical liabilities. Because the ‘Run Off’ premiums do not provide for any protection for any current work, as such the risks of claims emerging over time recedes and the premiums reduce accordingly. Because each pharmacist carries their own full tier of £5 or £10 million protection however, the initial premiums are still relatively high.
The Traditional ‘Run Off’ scheme is only available to existing PDA members because they have contributed to the previous indemnity fund for claims.
2. A ‘members of scheme’ for ‘Run Off’.
- What is the ‘members of scheme’? An analysis of the historical risks claims profile against pharmacists working in GP practices (claims emerging some considerable time after an incident has occurred) has been undertaken. Following the advice of professional indemnity claims handlers and specialist underwriters experienced in primary care settings, the ‘members of scheme’ for ‘Run Off’ for pharmacists provides a combined insurance limit of £30 million per year in total to be shared by all members of the scheme which is subject to a maximum individual limit of £10 million per individual member.
- Can the £30 million insurance limit be exhausted? Yes – theoretically, this means that in a real crisis scenario, where more than £30 million of combined claims from historical liabilities occur in one year, then the scheme insurance limit would be exhausted leaving no further cover available for any other members in the scheme. However, if there are early signs of significant claims from historical incidents emerging after the launch of this scheme, then we would seek to acquire additional cover if available. Any additional cover in such a situation, may require further additional premiums to be paid.
- Why has a ‘members of scheme’ approach been offered? The PDA has arranged a more cost-effective scheme for members because on the advice of specialist claims handlers and underwriters, the risks of large numbers of claims emerging from historical incidents, whilst being real, are quite small. Consequently, the ‘members of scheme’ for ‘Run Off’ has been offered to members in an attempt to keep their costs to a minimum.
It remains entirely at your discretion as to whether you wish to consider purchasing this ‘members of scheme’ to make your ‘Run Off’ arrangements. You are urged to take into account the additional risk this presents in exchange for its lower costs as the alternative to a Traditional ‘Run Off’ or maintaining your ‘full comprehensive PDA membership’ which would make a ‘Run Off’ scheme unnecessary.
The PDAs ‘members of scheme’ for ‘Run off’ is available to both existing members of the PDA and also to those previously not in PDA membership. For PDA members, these ‘Run Off’ costs are lower, because the pharmacists have already contributed to the indemnity fund. For previously non-PDA members, these ‘Run Off’ costs are higher as they have previously not contributed to the indemnity fund for claims.