Your Colleague’s Keeper: Vicarious Liability

We continue with our series of general educational articles penned by one attorney, an MD, JD, giving you a view of the world through a malpractice plaintiff attorney’s eyes. This attorney is a seasoned veteran.  The series includes a number of pearls on how to stay out of harm’s way. While I do not necessarily agree with 100% of the details of every article, I think the messages are salient, on target, and fully relevant.  Please give us your feedback – and let us know if you find the series helpful. Finally, these articles are not intended as specific legal advice. For that, please consult with attorney licensed to practice in your state.

Vicarious liability is the legal term that describes a situation in which someone who themselves did nothing personally wrong is still legally responsible for someone else’s wrongful actions.

In the setting of medical malpractice litigation, it is how groups and facilities become defendants when the allegation of direct malpractice applies only to a physician.

Let’s look at how that can come about.

1. Respondeat superior

This doctrine, which basically translates to “the master answers”, began in feudal England when nobles would send their serfs out to wreak havoc on their rivals and would then try to claim that they bore no personal responsibility for the damages done, but it no longer carries any requirement that the “master” have any wrongful intent or have ordered the “servant” to do anything. In fact, it is applied now in cases where those elements are specifically absent.

It now describes the legal principle that a party in charge must answer for the wrongful conduct of its agents carried out in the course of their employment. This is because the employer benefits from the actions of its agents and is also in a position to control their conduct.

It is very important to note that in this setting the control aspect does not apply as it does when there is a claim of negligent supervision. That is a direct tortious act by the employer – a personal failure to carry out their end of the obligation to ensure proper care by those they hire.

Vicarious liability, however, arises as a result of the employment relationship itself. In fact, even if the employer did all that they could to prevent the harm, that would be mitigating evidence. But it would not bar the application of the legal principle bringing them into the case. In other words, even expressly forbidding certain conduct by your employees does not extinguish the potential for vicarious liability for you.  It can reduce the obligation for damages significantly, however.

What must be present to assign vicarious liability is that the wrongful act must be committed within the scope of the employment because it is from that employment that the issues of capacity for control of the agent by the employer and the agent acting for the employer’s benefit derive.

This requires that the work must:

(i) be the kind of act that the agent was hired to perform

(ii) occur within the time and space limitations of the employment

(iii) be conducted with the intention to serve the employer.

Therefore, a hospital is responsible for the nurse who negligently administers the wrong dose of a drug while working in the ICU or the doctor who negligently fails to order a needed CT on a patient in the ER. But it is not responsible for that nurse, at home, negligently diagnosing a neighbor’s child with stomach flu when they were actually in a diabetic crisis, or for negligence the doctor commits while moonlighting at another facility. It is also not responsible if that nurse negligently spills hot coffee on a visitor in the hospital cafeteria or if that doctor, on the way to the hospital, negligently causes a car accident.

The necessity that the party against whom vicarious liability is sought to be imposed must have been in the position to control its agent is also a limiting issue when dealing with independent contractors – because that essential element is now absent.

Again, this must be distinguished from a personally committed tort by the employer. A claim of negligent hiring/retention could apply if, for example, a hospital hired and then kept on an independent anesthesiology group that had a very poor track record. That comes under the non-delegable duty of a medical employer to ensure competent medical care for its patients and failure to fulfill it would be a direct breach of that duty. It is therefore distinct from vicarious liability, which arises from an imputed responsibility for the agent’s misconduct.

Whether a person or entity is actually “independent” is therefore going to be an issue, the potential defendant facing vicarious liability denying it and the plaintiff seeking to impose vicarious liability claiming it. It becomes a specifically fact-based inquiry into whether, despite what a contract might nominally say, under the totality of the circumstances the claimed independent actor was not really independent at all.

The first matter that would be considered is “apparent authority”.

What this means is that if the employer or facility presents the contractor as having the authority to act for it, the patient can rely on that.

The hospitalist who comes from an outside group but wears an ID from the hospital and tends to the patient on the hospital floor and is seen by the patient to be writing orders that hospital nurses follow therefore has apparent authority as an agent of the hospital.

It is not incumbent on the patient to inquire as to the independence of the person or group rendering care to them, and so unless the employer or facility makes the relationship clear the patient can rely on the staff being proffered to them as being actual employees.

Beyond that, other matters that would be considered by a court in the medical setting would include such considerations as:

– Whether there is an exclusivity contract with the employer or facility

– The percentage of time and actual hours worked for that employer or facility

– The contractor’s ability to select or reject patients

– Who provides support personnel and supplies

– Who handles the billing for services

– Whether the work is subject to regulations, policies and procedures set by the employer or facility

– Whether the contractor participates in administrative functions of the employer or facility

– Whether the employer or facility could fulfill necessary requirements under other regulations (e.g.; a need to have an anesthesiologist supervise CRNA’s in order to satisfy a state or insurer mandate) or could promote itself as “full service” without the involvement of the contractor

It should be also be noted that, even if independence is actually established, the employer or facility can still be potentially held vicariously liable if the patient literally had no choice as to who delivered the care. This typically occurs when private groups staff hospital ER’s.

This all having been said, it must be remembered that the malpractice claim against the primary defendant must still be proven as to all its elements – a duty to the patient arising from the physician-patient relationship, a breach of that duty by a failure to meet the standard of care, and damages resulting from that breach – in order to hold the employer or facility vicariously liable. There is also no bootstrapping of an intrinsically deficient primary malpractice claim to a solid vicarious liability claim.

So, what can you do to protect yourself from a respondeat superior-based vicarious liability claim?

Obviously, as an employer or a facility administrator you need to maintain appropriate vigilance over those work for you. You will be deemed to have control so you need to actually use the control you have.

You also need to make clear – in writing! – who works for you and who does not. Your silence and the patient’s reasonable assessment that someone is under your aegis is enough to bring you into a case.

Vicarious liability concerns should also definitely be addressed in your malpractice coverage because unless you are a solo practitioner with no employees you are at risk for being held vicariously liable for someone’s conduct.

The premium increase to cover your employees is generally minimal and having that coverage can save your practice and should definitely be taken out.

The situation of a contracted individual or group is more complicated since even if they are covered by the same company they are not covered on your policy and if they are covered by a different company then there is no need for the two companies to coordinate, and, in fact, they are likely to be fully adverse. Therefore, if the use of a contracted individual or group is essential to you, you should look into having vicarious liability coverage for them added to your policy.

2. Joint activity

This must first be distinguished from the similar sounding legal issues of “joint liability” and “joint and several liability”. Those relate to how a plaintiff may seek payment and how defendants may apportion it. In joint liability the defendants are each liable up to the full amount of the obligation (in distinction from “several liability”, in which each owes only its own portion) and in joint and several liability the claimant can pursue one defendant for the full amount and that defendant must then seek contribution from the others.

Joint activity, however, is a predicate for establishing vicarious liability through a common venture that the defendants participated in.

It most often occurs in the setting of partnership, where each partner is liable for the acts of other partners as well as for the acts of the partnership. This will be expressly addressed in the partnership agreement, and so all partners enter into the potential liability obligations knowingly.

However, an implied relationship can still be found in a joint undertaking that can create a basis for vicarious liability even if there is no formal contract to create such a shared obligation. In fact, such “ostensible agency” can be found in situations in which the doctor never intended such to be the case at all.

This usually occurs in the office-sharing setting.

Consider the facts from an actual case:

Dr. A, a family practitioner, treated Mr. Patient initially, but then stopped seeing him. Mr. Patient continued to see Dr. B, a surgeon who shared office space with Dr. A. Dr. B failed to detect developing endocarditis, which eventually left Mr. Patient with devastating injuries. Mr. Patient then sued Dr. B for failing to diagnose him and also sued Dr. A and his corporation, TownName Medical Associates, claiming vicarious liability for Dr. B’s malpractice. He alleged that Dr. A had an apparent professional relationship with Dr. B based on the appearance of a joint practice.

Dr. A moved for Summary Judgment, a motion in which the court is asked to dismiss the claim from the outset as having no basis. He stated that Dr. B sublet office space from him but was neither his partner nor his employee and was not a part of TownName Medical Associates, of which Dr. A was the sole officer, director and shareholder.

However, that motion was denied.

In his opinion, the judge held that the actual issue was whether Dr. A and Dr. B “were apparently engaged in the joint practice of medicine, thereby giving rise to an ‘ostensible agency’ resulting in vicarious responsibility” on the part of Dr. A for Dr. B’s negligence. The judge then cited as “evidence of a far more extensive relationship” between the two physicians than simply sharing office space that both of their names were listed under “TownName Medical Associates” on the office sign and on office documents including patient registration forms, that they shared the same telephone and fax numbers, that the records of another doctor who treated Mr. Patient showed them listed jointly as the referring physicians, and – very critically – that Dr. A billed Mr. Patient’s HMO for work done by Dr. B.

Dr. A was therefore kept in the case and was released only when Dr. B settled in full. Had Dr. B not done so, Dr. A would have gone to trial with him and would have shared in any verdict.

What is apparent is that, whether as part of a deal between them to associate without legally joining each other as partners, or merely as a matter of convenience, Dr. A had granted to Dr. B some very significant elements of a joint enterprise that exceeded a mere sublet, and that conduct was sufficient to create a basis for vicarious liability.

So, what can you do to avoid ending up in Dr. A’s shoes?

To begin with, take particular note of the fact that Dr. A being incorporated did not prevent the vicarious liability claim.

Incorporation as a PC is a great way to make sure that the PC, not you personally, is liable. However, that only addresses what happens after a successful vicarious liability claim is made. It does not block the claim itself.

Similarly, a limited liability corporation or partnership that makes a physician shareholder/partner liable only for his or her own negligent acts and for those of the people under his or her direct control is also an excellent liability-limiting vehicle but it would not block a vicarious liability claim directed to the specific physician.

The critical lesson to take away from the cautionary tale of Dr. A is that no matter what your contract with your colleague says, or if you have no contract at all because the whole association is very informal, what courts will look to is what a patient, who of course does not have access to inside information, could reasonably perceive about your professional relationship.

Therefore:

– Make it expressly clear to patients that you and your colleague are separate. This is particularly important if you refer to each other. This can be most easily done with a sign in your waiting room that says that you are not partners and are not responsible for each other’s patients. A form that says the same, and that the patient signs, and that then goes in their chart, is also a good idea.

– Use separate office signs and name plates, phone and fax numbers, e-mail addresses and stationary.

– Do not pay for each other’s supplies or each other’s staff.

– Do not bill for each other’s work.

Finally, and most importantly, have any associations you engage in with colleagues who are not your partners or members of your practice group reviewed by a healthcare law attorney to look for pitfalls that you may have missed.

In summary: Courts will extend liability to physicians and groups and facilities for the negligent conduct not only of employees and associates but of those whom patients reasonably believed to be employees or associates. It is therefore essential to exercise due control of those actually in your employ and to clearly distinguish yourself from those who are not. Let us know your thoughts below.

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