Case Note & Summary
The appellant, M/s Sheth M L Vaduwala Eye Hospital, a charitable trust registered under the Bombay Public Trust Act, 1961, conducted an eye camp between 21 and 23 June 2000 where cataract surgeries were performed on 112 patients. The patients alleged negligence due to use of non-sterilized appliances, contaminated medicines, and inferior quality lenses, resulting in eye infections and loss of vision. The State Government appointed an Enquiry Committee which found total lack of aseptic precautions, unqualified OT staff, and improper sterilization. Twenty-four consumer complaints were filed by Jagrut Nagrik Trust against the hospital and the insurance company, Oriental Insurance Company Limited. The doctors who performed surgeries had obtained professional indemnity insurance policies from the insurer, but they were not made parties to the proceedings. The District Forum, relying on the Enquiry Committee report, awarded Rs 1,70,000 to each complainant with interest, holding the hospital and insurer jointly and severally liable, but directing enforcement only against the insurer. The hospital did not challenge this order. The insurer appealed to the State Commission, which dismissed the appeals, affirming the findings of negligence against the hospital. The insurer then filed a revision before the NCDRC, which set aside the orders of the lower fora insofar as they fastened liability on the insurer, holding that the policies were taken by the doctors and not by the hospital, and there was no specific finding of negligence against any doctor. The hospital appealed to the Supreme Court. The Supreme Court dismissed the appeals, holding that the NCDRC was justified in exercising its revisional jurisdiction because the lower fora had manifestly erred in fastening joint and several liability on the insurer when the policies were not obtained by the hospital and there was no privity of contract. The Court clarified that the dismissal would not prevent the hospital from pursuing remedies against other persons who may be negligent. The amount of Rs 42 lakhs deposited by the hospital and withdrawn by the claimants was confirmed.
Headnote
A) Insurance Law - Professional Indemnity Insurance - Privity of Contract - The insurer cannot be held liable to indemnify a hospital under professional indemnity policies obtained by individual doctors, as there is no privity of contract between the insurer and the hospital. The hospital was not a beneficiary of those policies. (Paras 14-15) B) Consumer Law - Medical Negligence - Joint and Several Liability - The District Forum and State Commission erred in fastening joint and several liability on the insurer when the finding of negligence was specifically against the hospital and its staff, not against the doctors who held the policies. The NCDRC correctly exercised its revisional jurisdiction to set aside that part of the order. (Paras 14-15) C) Civil Procedure - Revisional Jurisdiction - NCDRC - The NCDRC was justified in interfering in revision where the lower fora had manifestly erred in law by holding the insurer liable without any contractual basis. (Para 15)
Issue of Consideration
Whether the insurer can be held jointly and severally liable to indemnify the hospital for negligence of its staff when the professional indemnity insurance policies were obtained by the doctors and not by the hospital.
Final Decision
The Supreme Court dismissed the appeals, upholding the NCDRC order that the insurer is not liable to indemnify the hospital. The Court clarified that the dismissal does not prevent the hospital from pursuing remedies against other negligent persons, and confirmed that the amount deposited and withdrawn by patients stands.
Law Points
- Insurance law
- Professional indemnity insurance
- Privity of contract
- Joint and several liability
- Revisional jurisdiction of NCDRC
