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NHS Litigation Authority defends its agreement with after-the-event insurer

30 September 2008

THE CHIEF EXECUTIVE of the NHS Litigation Authority (NHSLA) has defended an agreement made with after-the-event insurer FirstAssist.

Conservative MP John Baron wrote to health secretary Alan Johnson saying he was concerned that the accord was “highly advantageous” to FirstAssist, since it allowed the insurer to set the premiums the NHS agreed to pay.

“I am also concerned that the existence of an accord such as this has a negative influence on the price competitiveness of

the insurance market as a whole,” said Baron.

“If other insurers are aware that the NHSLA has agreed to pay certain (potentially inflated) premiums, does this not give other insurers a reason to keep premiums high also?”

Details of the accord, which was signed in 2005, were revealed by Baron through a freedom of information request.

Steve Walker, chief executive of the NHSLA, said the accord with FirstAssist aimed to avoid the “ruinously expensive satellite litigation surrounding CFAs which embroiled so many parties at that time”.

He added: “In that respect, the agreement has been successful to date.”

Walker suggested that the NHS would be prepared to offer a similar arrangement to other insurers.

“As an agreement between two parties, it cannot apply to any other insurer,” he said. “But that is not to say we would discourage any other insurer from discussing something similar.”

Walker said the freedom of information request was not how the agreement was discovered.

“It was a request about the agreement,” he said. “By definition, that means the questioner already knew of its existence, as did others, including whoever advised John Baron.”

Parliamentary under secretary for health services Ann Keen has since replied to the Conservative MP on behalf of Alan Johnson.

In her letter, she said the accord had “virtually eliminated” the need for expensive and protracted satellite litigation.

“If no agreement can be reached, referral to a costs judge remains an option,” she said.

Baron has written back, complaining that her letter had failed to address some of his questions.

“These are monies that could be spent on patient care, and their expenditure must be subject to public scrutiny and accountability,” he said.

However, Peter Smith, managing director of FirstAssist, described the accord as a “simple expedient to put down in writing how, if there is a dispute, it can be resolved amicably”.

He said: “It is a gentleman’s agreement, not a binding contract.

“There were a series of test cases by a number of parties, including the NHSLA, challenging one of our products. We wanted to avoid disputes over the payment of premiums.”

Smith said that the accord enabled clients to receive their damages promptly, and removed the need for solicitors to withhold money to cover the cost of the insurance premium, as this was paid directly to FirstAssist.

Smith said the agreement had worked well, and the two parties had needed to discuss only a few cases.

“In no way is it anti-competitive,” he added. “Either party can walk away if it is not working effectively.”

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Risk & Compliance Termination Tribunals & Courts Clinical negligence