Today’s correspondent:

… received an update from a nursing employer regarding cover by their organisational insurance to advise we are covered except for…

  • dishonest, fraudulent or criminal acts;
  • services rendered by a health care professional while under the influence of intoxicants or narcotics;
  • any failure to render services competently or at all because of such influence, or where such service was within the knowledge or connivance of a director, administrator supervisor or manager of XXXXXXXXXXXX;
  • claims arising out of infringement or alleged infringement of Intellectual Property Rights;


  • in relation to sexual conduct arising from, or alleged to relate to, actual or attempted sexual relations, sexual contact or intimacy, sexual harassment or sexual exploitation whether under the guise of treatment or not, or in the course of treatment or not.

I’m surprised that insurance would exclude these, but I would imagine though that notwithstanding any insurance coverage for health professionals that those exclusions would not absolve an employer vicariously from liability?

It’s true that insurance does not determine liability including vicarious liability.  Where the patient suffers harm or loss he or she may sue.

  • If they sue the employee and the employee’s misconduct was so far removed from their employment, if they were on a ‘frolic of their own’ then it is the employee alone who is liable.
  • If the employee’s negligence or misconduct was part of his or her employment – even doing an authorised act in an unauthorised way, then the employer will be vicariously liable and will have to make good the losses unless there is insurance.
  • The patient may also sue the employer/agency for their direct negligence – failures in the way the business is operated, procedures and policies etc. That is creating the environment where harm occurs. This is direct liability where the employer/agency is liable.
  • The employer/agency may have insurance. What the insurance covers is a matter of contract where the insurer can agree to meet some risks but not others. Where there is insurance the insurer will pay. Where there is no insurance the employer or the employee cannot pass the risk so they are liable.

The presence or absence of insurance does not determine if there is liability to the patient, just who will pay.  I’ll try and explain with a diagram:

liability and insurance

The presence or absence of insurance does not determine whether there is a duty of care or liability (see Imbree v McNeilly [2008] HCA 40 Gleeson CJ but note cf Kirby J).

Turning then to the questions asked, one might think that the sort of conduct that is excluded by the insurer is also the sort of conduct that would not attract vicarious liability but that is not necessarily true; it depends on all the circumstances. In New South Wales v Lepore [2003] HCA 4, when considering whether a school was vicariously liable for the sexual misconduct of their staff, Gleeson CJ said (at [1]) ‘If a teacher employed by a school authority sexually abuses a pupil, is the school authority liable in damages to the pupil? No one suggests that the answer is “No, never”…’ (See also Prince Alfred College Incorporated v ADC [2016] HCA 37).

The critical issue is that the presence, or absence of insurance does not determine where liability lies.  That is important because in the culture of ‘teach by fear’ people are often told ‘if you do as we say you’ll be covered by your agency but if you do x or y our insurance doesn’t cover that and so you’ll be personally liable’ – as if vicarious liability and providing insurance that ‘covers’ members is a sign of goodwill rather than the law.   A member is protected in circumstances where their employer/agency is vicariously liable.  The insurance is something the agency takes out to protect itself (it being liable for the misconduct of employees) not to protect the employees or volunteers.


My correspondent is correct, the terms of insurance coverage offered by an insurer does not determine the scope of an employer’s/agency’s vicariously liability.  If the agency is vicariously liable for conduct that is excluded by the insurer, then it is the agency that will have to pay any damages from its own budget.