The Aged Care Act, initiated following recommendations from the Royal Commission into Aged Care Quality and Safety, was enacted last November. Key reforms under this act include enhanced regulatory scrutiny, stricter penalties for non-compliance, and the establishment of "associated provider" rules, all of which may significantly affect insurers and their aged care clients.
Clyde & Co clarifies the role of associated providers, who deliver services on behalf of aged care providers. These associated providers are now included under the New Aged Care Act, making registered providers liable for their actions. This means that the responsibilities of replacement workforces, such as nurses and staff in aged care facilities, will be held accountable as aged care workers.
Mica Cole, special counsel at Clyde & Co, explains that it is common for insurance policies to cover liabilities contracted out to third parties. The new legislation, by linking the actions of associated providers to the liability of aged care providers, may generate a need for specialised insurance products.
The legislation also places direct accountability on directors for the quality and safety of services provided in aged care. Clyde & Co suggests that directors' and officers' insurance policies may need to be revised to include liabilities arising from the actions of associated providers. The changes could also influence claims related to management liability, statutory liability, and other liability policies, which are anticipated to provide indemnity under the new system.
Aon emphasises the importance of adjusting professional services exclusions on Directors and Officers (D&O) policies to account for failures in providing supervision. This adjustment ensures that legitimate management claims related to oversight functions are adequately covered for indemnity.
As these reforms take hold, insurers and aged care providers alike will need to reassess their risk management strategies and ensure compliance and coverage adjustments are in place to mitigate new liabilities under the act.
