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Vicarious liability: Risk and insurance considerations for healthcare providers using agency staff

Employers can be liable for their employees' actions. This applies to agency workers if they are legally considered employees. It's important for healthcare providers to define responsibilities and document arrangements with the agency.
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By Philip Dearn , 

Healthcare Industry Practice Leader, UK

17/07/2024 · 5 minute read

Agency staff are an established part of many healthcare providers’ business models. Various UK healthcare industry subsectors, such as the NHS, care providers, and private hospitals, often use agency staff. However, if not managed well, employer vicarious liability is an area of risk for healthcare providers who employ agency workers.

Vicarious liability

Vicarious liability is a legal principle whereby employers are liable for their employee’s actions or omissions. However, it does not apply to all staff. Generally, businesses are held vicariously liable for the actions of their employees, but not for the actions of independent contractors, such as consultants.

This distinction can become blurred for secondees and agency workers. In these situations, there are often two “candidates” for vicarious liability — the business (the agency) that provided the employee and the business (the user business) that received them.

This distinction is further complicated if the agency worker is legally an employee of the agency. Typically, the following legal tests can be used to resolve issues surrounding the liability of agency workers:

  • Which business controls how the employee carries out their work?
  • Which business is the employee more integrated into?

To help define responsibilities before services begin, it is vital for both the user business and the agency to contractually agree and document practical arrangements for:

  • Day-to-day supervision.
  • The direction and control of the work agency workers are carrying out.

Are agency workers covered by the healthcare user businesses employer’s liability insurance?

For health and safety purposes, agency workers are considered employees. Businesses cannot transfer health and safety responsibilities to another person or business. Additionally, the costs incurred for agency workers should be declared as part of the wage roll to an employer’s liability insurers.

If a business is vicariously liable, can it recover losses from negligence by staff or agency workers?

In some cases, a wrongful act that gives rise to vicarious liability will breach the employee’s contractual obligation to use reasonable skill and care. In theory, this can enable employers to make employees personally responsible for paying damages to the injured party.

The employer will decide whether to proceed with this course of action and they will consider whether the employee can pay the damages. Employers are often reluctant to pursue a permanent member of staff in this way, particularly if the wrongful act was an honest mistake. Furthermore, such actions could have detrimental implications for broader employee relations.

To recover losses arising from negligence, a self-employed contractor or an agency worker is an employee. Typically, self-employed contractors and agencies will hold insurance. If an agency worker is deemed to have not used reasonable skill and care and this has resulted in injury to a patient or service user, the employing healthcare providers’ insurers may either seek to deflect a claim to the agency or subrogate against the individual or agency.

Prior to the contract agreement and agency workers commencing their duties, healthcare providers should ensure that the agency supplying staff can maintain appropriate levels of cover, especially in the event of a claim. The agency supplying staff should secure sufficient coverage that includes wordings to cover the activities of agency staff in a healthcare setting, such as bodily injury coverage, for example. Additionally, the type and level of cover held by the receiving business is also important.

Further risk and insurance considerations for healthcare providers

  • Typically, credentialing is the responsibility of the agency providing agency staff. It is prudent for healthcare providers receiving agency staff to ensure the credentials are appropriate for the role and there is a record.
  • Issues can arise with claims defensibility. To defend a claim, the insurer requires a clear and robust audit trail that demonstrates that an agency worker completed an induction course and received the required training for the role they have been hired to fulfil.
  • It is important healthcare providers maintain contact with agency workers, even after they have completed their contract. Contact is particularly crucial for patient/service user claims, or in situations where an agency worker may be a witness.
  • When declaring an estimated wage roll, businesses need to include agency costs. 
  • Healthcare providers hiring nurses or medical professionals as agency workers should ensure they hold appropriate coverage regarding their professional activities. Coverage should also satisfy the requirements of professional bodies, such as the Royal College of Nursing and the General Medical Council, for example.

Next steps

Healthcare providers often have to move quickly to source agency staff. It is imperative that appropriate insurance is in place to protect both the business and the agency worker, and to fulfil contractual obligations. 

To discuss the above issues, please contact your Marsh adviser or get in touch.

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