Vicarious Liability and Independently Contracted Emergency Physicians

Is a hospital liable for the acts of independent contractor physicians?

John Shufeldt, MD, JD, MBA, FACEP, FCLM, Chief Executive Officer, NextCare, Inc., Attending Physician/Vice Chair, Department of Emergency Medicine, St. Joseph's Hospital and Medical Center, Partner, Shufeldt Law Firm

How can a hospital be sued by a plaintiff's attorney when the alleged negligence was committed by the independently contracted emergency physician? A competent plaintiff's attorney, when suing an emergency physician, will typically try to include the hospital so that his/her client has access to another source of funds.

There are several legal theories, derived from agency law, under which a hospital may be liable for the acts of an independent contractor physician who provides care in its emergency department. Legal theories, such as respondeat superior, apparent agency, ostensible agency, agency by estoppel, and nondelegable duty, are being used by plaintiff's attorneys to enjoin hospitals in claims against independent contracting physicians.

The general rule is that a principle (hospital) is only liable for its agents (employees) and not for the torts committed by its independent contractors (emergency medicine physicians). There are exceptions to this general rule, which include: when the principle is exerting so much control over an agent that the independent contractor status is negated; when the principle delegates a nondelegable duty; or when the contractor is performing an inherently dangerous activity.1 It is generally accepted that hospitals cannot avoid liability simply based on their contractual relationship with the provider.2

Respondeat Superior

Respondeat superior is a legal theory, derived from agency law, where the master is liable for the negligent acts of its servant even though the master has no fault.3 The Restatement of Agency § 220 lists the technical elements required for the master-servant relationship to exist. In part, these elements include: 1) the extent of control which, by the agreement, the master may exercise over the details of the work; and 2) the skill required in a particular occupation.

Because of these requirements, plaintiffs have difficult hurdles to overcome to establish hospital liability under this theory. For example, the plaintiff has to prove the elements of malpractice (duty, breach of duty, causation, and damages) against the physician and then go on to prove an agency relationship existed between the hospital and provider; that the provider was the hospital's servant; and that the provider was acting within the scope of the relationship when the tort was committed.

In Adamski v. Tacoma General Hospital (Wash. Ct. App. 1978), the plaintiff, while playing basketball, suffered an open fracture. It was alleged the ED physician did not properly open and clean the wound, which resulted in the plaintiff having to seek further care. The plaintiff brought suit against the treating physician, the ED group, and Tacoma General Hospital, alleging that: 1) the ED physician's treatment was below the standard of care; 2) the ED physician was acting as an agent of the hospital; and 3) the hospital's employed nurses were negligent. The court ruled that because of their skill and training, physicians were not subject to the control of lay boards; therefore, they could not be servants or employees in the manner required by the doctrine of respondeat superior. For a number of years, the courts followed the rule from the Tacoma General case until Bing v. Thunig (NY 1957), in which the court reasoned that other highly skilled professionals were not being excluded from the doctrine of respondeat superior and that there were no valid reasons to exclude physicians.

Because of the difficulty encountered in satisfying the strict requirements under Restatement of Agency § 220, the courts have developed other avenues whereby hospitals can be held responsible for the negligent actions of their employees and their independent contractors. Even before the Bing ruling, the court in Brown v. La Societe Francaise de Bienfaisance Mutuelle, opined that if the hospital paid a doctor a salary, the doctrine of respondeat superior is applicable. It is under this theory that courts today generally hold hospitals liable for the negligent acts of their employed house staff.

Various legal doctrines are used by plaintiffs' attorneys to hold hospitals liable for the acts of their independent contractors. These doctrines include apparent (ostensible) agency or agency by estoppel and nondelegable duty.

Apparent Agency

For a plaintiff to prove that the hospital was vicariously liable for the acts of its independent contractor physicians, the facts would have to show that the hospital "holds itself out" as the employer of the independent contracting physicians and encourages patients to believe that the physicians are the hospital's agents. This is called apparent agency, ostensible agency, or agency by estoppel. For example, if a hospital advertises that "our" emergency physicians are the best in the state, a patient could logically assume that the physicians are actually employed by the hospital and because of that belief chose that hospital over its competitors.

The most common cases are those in which the agent has "apparent authority" to bind the principle that results from the principles' affirmative manifestations.4 The landmark case in which this theory was elucidated was Gizzi v. Texaco, Inc.5 In this case, Texaco was held liable for the acts of an independent contractor/dealer because of the following representation to the public, "You can trust your car to the man who wears the star." The dealer sold a car that had defective brakes to someone who was injured because of the defect. Although Texaco was not in the business of selling cars, and made no money from the transaction, they were still held liable because management knew the dealer was engaged in this business of selling cars and because of the advertisement. Courts using the principles of apparent agency to impose liability generally site one of two sections of either the Restatement (Second) of Agency or the Restatement (Second) of Torts. Section 267 of the Restatement (Second) of Agency states:

One who represents that another is his servant or another agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.6

The other source for the imposition of liability comes from the Restatement (Second) of Torts. Section 429 states:

One who employs an independent contractor to perform services for another which are accepted in the reasonable belief that the services are being rendered by the employer or be his servants to liability for physical harm caused by the negligence of the contractor in supplying such services, to the same extent as though the employer were supplying them himself or by his servants.7

Courts, in applying either principle, rely on several factors. One factor would be: Did the hospital make representations which would lead a reasonable person to conclude that the negligent party was the hospital's employee or agent? To arrive at their conclusion, the court will review advertisements from the hospital to determine if the hospital is "holding itself out" as a care provider.8 Another factor would be: Did the patient rely upon this representation? The court will evaluate whether the patient believed the hospital was a provider of care as opposed to simply a location or venue of care.9

Courts apply either section (Agency or Torts) with inconsistent stringency, making it difficult to predict which way a court will rule when evaluating a plaintiff's claim of negligence under an apparent agency theory.

Nondelegable Duty

Simply stated, a nondelegable duty theory means that regardless of whether or not an agency duty exists, the hospital is essentially strictly liable as a matter of public policy inasmuch as the hospital cannot shirk liability by employing independent contracting physicians. The oft-employed analogy is an airline using independently contracted pilots to avoid responsibility in case of an airline crash. Thus far, this concept has been applied in only a few cases, all dealing with emergency medicine. The leading case is Jackson v. Power. In this case, Mr. Jackson fell off a cliff and was airlifted to Fairbanks Memorial Hospital. Because of this fall, Mr. Jackson suffered injury to his kidney which was not initially identified. Because of the delay, he suffered irreparable damage to his kidneys. The Alaska Supreme Court opined that, "a nondelegable duty is an established exception to the rule that an employer is not liable for the negligence of an independent contractor."10 The court concluded that a hospital, "may not shield itself from liability by claiming that it is not responsible for the results of negligently performed health care when the law imposes a duty on the hospital to provide health care ... We simply cannot fathom why the liability should depend upon the technical employment status of the emergency room physician who treats the patient."11 The questions still unanswered are whether this concept will extend beyond the emergency department and whether other states will adopt this theory. Jackson has been expressly rejected in Texas and Missouri. In those states that have accepted the nondelegable duty theory, there is little a hospital can do to limit its liability. In these states, no matter the perception of the patient, or whether or not a hospital held itself out as a care provider, the hospital essentially has strict liability for their independently contracted emergency physicians.

Summary

What can a hospital do, given the aforementioned, to mitigate the possibility of being held liable under an apparent agency theory? The most logical area is to concentrate on the marketing message. When the hospital, through its marketing message, transitions from a venue for care into a care-giving entity, it gives the impression that the hospital employs and thereby controls the physicians. In addition, when the hospital bills for the emergency services either as a separate item or as part of a global billing statement, it implies to the patient that the physician group and the hospital are one in the same.

The over-reaching interpretations that some courts have employed to enjoin hospitals has certainly affected the rising cost of medical malpractice insurance. To combat this, some state legislatures12 are debating laws limiting the application of agency theory when it is applied to independently contracted emergency physicians.

References

1. Restatement (Second) of Torts § 414, 424, 416

2. Zaremski M, Spitz M. "Liability of Hospitals as an Institution: Are the Walls of Jericho Tumbling Down?" Forum 1980;16(2):225.

3. Clark v. Southview Hosp. & Family Health Ctr., 628 N.E. 2d 46, 48 (Ohio 1994).

4. Pepkowski v. Life of Indiana Ins. CO., 535 N.E.2d 1164-67 (Ind. 1989).

5. Gizzi v. Texaco, Inc. 437 F. 2d 308 (3d Cir. 1971).

6. Restatement (Second) of Agency § 267 (1957).

7. Restatement (Second) of Tort § 429 (1965).

8. Sword v. NKC Hospitals, Inc., 714 N.E. 2d 151 (Ind. 1999). (The hospital advertised that it was the "most technically sophisticated birthplace in the region." An independent contractor anesthesiologist inserted an epidural that caused a persistent headache. In this instance, the hospital, because of its advertising, may have created the appearance that the physicians were actually employees.)

9. Id.

10. Jackson v. Power, 743 P.2d 1376 (Alaska 1987).

11. Id.

12. Illinois, Oklahoma, Georgia, Alaska, West Virginia, and Washington