Aged care providers face increased risk under laws that take effect on November 1, with implications for long-tail liability products, industry and legal experts say.

Broker Aon says insurance adjustments “may be necessary to ensure comprehensive risk transfer”, while law firm Clyde & Co says insurers need to carefully consider the terms of any additional coverage “so as not to absorb a disproportionate number and broader scope of new claims”.

The Aged Care Act passed in November last year, drawing on recommendations from the Royal Commission into Aged Care Quality and Safety.

Key changes including stricter regulatory oversight, penalties for non-compliance, new statutory duties and the introduction of “associated provider” rules have potential impacts for insurers and their aged care clients.

Clyde & Co says associated providers deliver services on behalf of aged care providers.

“Registered providers will be vicariously liable for the actions of their associated providers, whether they are registered or not. This is likely to include replacement workforces of nurses and staffing in aged care facilities,” the law firm said.

“Workers of an associated provider are considered to be aged care workers under the New Aged Care Act and will be subject to the same obligations as registered providers’ employees.”

Clyde & Co special counsel Mica Cole said: “It is not uncommon for insurance policies to cover liabilities that have been contracted out to third parties of an insured.

“The new Aged Care Act, in inherently tying the actions of associated providers to aged care providers’ own liability, may create demand for a specialised form of insurance.”

The law firm says the act places direct accountability on directors for the quality and safety of aged care services.

“The scope of directors’ and officers’ insurance, which is designed to indemnify insured directors for personal liability arising from statutory governance requirements, may need to be amended to specifically include liabilities arising from the actions of associated providers.

“The obligations imposed by the act will also have the potential to impact claims under management liability, statutory liability, professional indemnity, and public and products liability policies. Existing insurance policies such as these are likely capable of providing indemnity under the new regime.”

Aon says that with the statutory duty changes, it is important that professional services exclusions on D&O policies are written back for a failure to provide supervision. “This will ensure that genuine management claims relating to oversight functions are properly captured for indemnity.”