The recent Court of Session judgement of Annabelle Bell v Alliance Medical Limited and Others raises key questions relating to insurance for employees to protect against wrongdoings carried out by them during their employment. The decision has implications for the professional indemnity, public and employer liability spheres and the wider insurance market. In particular, it raises the issue of whether employees need to obtain their own insurance to protect themselves should their employer claim a right of relief against them.
The pursuer raised a medical negligence action for injuries sustained to her arm during an MRI scan. The action was raised against Alliance Medical Limited (“Alliance”). Alliance was contracted by Forth Valley Health Board to be responsible for the operation and management of the MRI unit. The individual radiographer said to have been negligent was Mrs McColl. Both Alliance and Mrs McColl disputed that there had been negligence. It was accepted that, if there had been negligence, Alliance was vicariously liable for Mrs McColl’s actions, which were in the course of her employment. That is non-controversial.
The novel feature of this case was that Alliance introduced Mrs McColl as a Third Party (Part 20 equivalent in England & Wales). It argued that Mrs McColl owed an implied duty to exercise due care, which had been breached if Ms Bell’s claim was upheld, and that this entitled Alliance to a full indemnity from Mrs McColl.
The court held that negligence was established and agreed that Alliance was entitled to exercise its common law right to seek an indemnity from Mrs McColl. This meant that responsibility for paying the sum of £700,000 in damages (the level of damages having been agreed in advance) fell to Mrs McColl personally and not to her employers. Mrs McColl had insurance via the Society of Radiographers but, as the court noted, she was not required to hold insurance, and this was not a legal condition of Alliance recovering from her under its right to indemnity. Uninsured employees are therefore exposed to this risk.
Mrs McColl argued that she in turn was entitled to a contribution from the Health Board, however this failed on the basis that such a contribution would allow her to benefit from her own breach of duty.
The court pointed out that the decision is not a departure from the existing law but merely a clarification of the position. Much emphasis was placed on a general principle deriving from the 1957 House of Lords case of Lister v Romford Ice and Cold Storage Ltd, which established that it was an implied term of the employment contract that an employee exercise due care, and if the employee committed a breach of that duty and the employer thereby suffered damage, they were entitled to recover damages from the employee. It was held that, despite the relative age of the Lister decision, this general principle remains the law of Scotland and must be applied to this case to allow Alliance to recover from its employee.
Generally, employers and insurers have tended not to seek to enforce rights of indemnity or contribution against employees where employers were found vicariously liable for their negligence. This case marks a clear departure from that practice. It remains to be seen whether other employers or their insurers will take a similar approach going forward. There is no reason of legal principle to prevent them from doing so.
The court did point out that there may be policy reasons against this shifting of the economic burden of insuring against negligent acts from employers to employees. However, the court considered itself bound by existing law as expressed in Lister.
Mrs McColl argued that Lister should be limited to allowing indemnity for intentional wrongdoings. However, the court held that there was no legal basis for such a distinction.
The end result was that Mrs McColl was left personally liable for the full damages award (albeit, as it happened, with the benefit of insurance cover).
There is no reason in principle why the same result would not apply to employees in other sectors and professions, unless contracts exclude or limit employers’ right to seek indemnity. This will likely remain the position unless or until the issue is appealed to the Supreme Court or becomes the subject of legislation.
In the meantime, employees should consider the potential need for insurance to protect against negligent acts carried out in the course of their employment. Depending on the circumstances, various insurances may be relevant, including professional indemnity and public liability. It may be that insurance is available through employees’ professional bodies or other work-related societies, such as was the case for Mrs McColl. Insurers of corporates and employees alike should also consider the ramifications of the decision for potential claims relating to indemnities and contributions, and any impact on the fixing of premiums.