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14 September 2010
A recent collegiate federal court resolution states that insurance companies can be held jointly liable with professionals that form part of their medical assistance network. In cases where the insurer requires insureds to obtain medical care from its chosen physicians, it jointly bears any liability arising from such treatment.
Neither the Insurance Contract Law nor the Federal Law on Insurance Institutions and Mutual Companies regulates the liability of insurance institutions beyond the scope of policy terms. However, the Federal Civil Code provides that an individual or entity that causes damage to another person is bound to make good the damage or indemnify the other party.
The code also imposes liability on individuals or entities with respect to the wrongdoing of persons within their custody, care or employment. However, the code specifies that such liability arises mainly in respect of:
In none of these cases is liability imposed on an individual or entity for damages caused by agents who are not representatives or employees, such as physicians in an approved network, who are neither employees nor agents of the insurers that appoint them.
However, the ruling addresses the fact that in restricting an insured's ability to receive medical care from his or her chosen physician or other medical professional, insurers are in effect responsible for selecting and supervising the quality of the services provided by professionals in a network that the insurer has created. The court's reasoning is simple: the insurer selects the physicians in its list and must take appropriate supervisory measures to ensure that such physicians comply with minimum requirements.
In addition, the ruling states that joint liability also arises from the restriction imposed on insureds that prevents them from receiving medical care from physicians outside the network who may be willing to charge standard fees agreed by the insurers.
Although the decision creates precedent, it is not binding on all courts. A collegiate court may yet reach an opposing conclusion, in which case the Supreme Court of Justice will need to resolve the contradiction and set out a binding position.
However, insurers must consider the issue of potential liability in selecting physicians to provide services to insureds within their network, and should establish appropriate monitoring methods to ensure that insureds receive a high-quality service. Moreover, indemnity clauses in the corresponding agreements must be negotiated to give insurers recourse against physicians whose actions give rise to damages.
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