Jones: Examining the evolution of hospitals’ vicarious liability

May 4, 2016
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By Angela M. Jones

Generally speaking, unless a hospital or its staff was charged with a specific breach of the standard of care, hospitals maintained a relatively comfortable position in vicarious medical malpractice actions. They kept their heads low, let the physicians argue their positions and remained on the periphery. The evolution of legal precedent regarding vicarious liability claims, however, has left hospitals shifting in their seats.

Prior to and through the 1980s, it was “general rule” that hospitals could not be liable for the actions of any physician, whether independent contractor or not. In the earliest cases, hospitals used their status as corporations to argue that they could not legally practice medicine; therefore, they could not be liable in the context of medical malpractice. Even as this argument disintegrated through the 1990s, the focus remained on whether the acts were committed by an employee of the hospital or an independent contractor: if an independent contractor, the hospital would not be held liable.

The climate changed considerably in 1999 when the Indiana Supreme Court, in Sword v. NKC Hospitals, Inc., expressly adopted and utilized the theory of apparent and ostensible agency articulated in the Restatement (Second) of Torts Section 429 (1968) to find that a hospital may be vicariously liable for the acts of its independent contractors. In doing so, the Supreme Court focused on the reasonableness of the patient’s belief regarding who was rendering the health care. In order to determine reasonableness, the court considered the “totality of the circumstances” including the actions/inactions of the hospital and any special knowledge the patient might have about the hospital’s arrangements with the physicians. The court went one step further and put the onus on the hospital to give notice to the patient “that [the hospital] is not the provider of care and that the care is provided by a physician who is an independent contractor and not subject to the control and supervision of the hospital.”

Perhaps the Supreme Court anticipated the sizeable wake that its decision would create. It specifically articulated a “loophole” for hospitals to avoid vicarious liability following the shift in precedent. The court held that “[a] hospital generally will be able to avoid liability by providing meaningful written notice to the patient, acknowledged at the time of admission.” Following this decision, and in heeding the advice of the Supreme Court, hospitals began implementing boilerplate patient registration forms in an attempt to provide “meaningful notice” to patients of the relationship between the hospital and its independent contractors.

For over a decade, hospitals wore this cloak of protection until the Court of Appeals took a stab at tightening this “loophole” in 2013. In Helms v. Rudicel, the plaintiff filed a lawsuit against her treating physician, a nurse practitioner, a clinic and a hospital. The hospital argued that it could not be vicariously liable because the clinic and its physicians were independent contractors. In support of this argument, the hospital designated a signed consent form which read, in pertinent part, that “many of the physicians and other health care providers . . . are not employed by [the hospital], but are independent contractors … .” The court decided the language “many of the physicians” was not sufficient to create the “meaningful notice” articulated by the Supreme Court in Sword because it left the plaintiff to guess which physicians were or were not employees of the hospital. In effect, the ambiguity in the form created a genuine issue of material fact as to whether the physician might have been an apparent agent of the facility.

The legal precedent created in Helms went largely unchanged until March 31, when the Court of Appeals decided Ford v. Jawaid. In Ford, the plaintiff brought a negligence claim against his treating physician and the hospital, along with a vicarious liability claim against the hospital. The hospital received a favorable panel opinion (the physician did not) and moved for summary judgment based upon the panel opinion and because the treating physician was an independent contractor. The plaintiff did not designate any expert testimony to refute the panel opinion, and the trial court granted summary judgment. Plaintiff appealed the decision. In overturning the trial court, the Court of Appeals held that expert testimony was not necessary on the vicarious liability claim because vicarious liability claims “do not seem to fall within the purview of the medical review panel.”

In light of this portion of the decision, it then became necessary for the court to complete an analysis regarding whether the patient received the requisite “meaningful notice” that the physician was an independent contractor. The hospital designated its patient registration form which, in part, advised that certain physicians “may be independent contractors and not employees or agents of [the hospital].” The court, reaffirming its earlier decision in Helms, decided this language was ambiguous enough to create a genuine issue of material fact as to the adequacy of the notice and whether the hospital is vicariously liable. As hospitals cannot rely on a favorable panel decision for vicarious liability claims, the court effectively made the analysis of “meaningful notice” even more meaningful.

What does this all mean? It means that hospitals will conduct a thorough review of their patient forms to determine if a court could find the language vague enough to create a genuine issue of material fact. Hospitals will likely revise these forms in order to specifically identify non-employee physicians. In the future, hospitals may require independent contractor physicians to have their patients sign specific consent forms before care is rendered at the hospital. Until there is legal precedent establishing what language is sufficient to protect a hospital from vicarious liability, there will be a battle of words and opinion whether “meaningful notice” was given to a patient. In the meantime, hospitals should be prepared to face this hurdle in malpractice/vicarious liability litigation as plaintiffs’ attorneys will undoubtedly heed the lessons from these cases and adapt their contentions accordingly to keep another applicable insurance policy in play.•


Angela M. Jones is an attorney at O’Neill McFadden & Willett LLP in Schererville, Indiana. She focuses her practice on the defense of doctors and medical facilities throughout Indiana. She also provides a variety of business-related services to clients in northwest Indiana. Jones can be reached at ajones@omwlegal.com or 219-322-0450. The opinions expressed are those of the author.