September 2020, Volume XXXIV, Number 6
Redefining hospital malpractice
Expanded liability for independent contractors
By Besse McDonald, JD, and Julia J. Nierengarten, JD
n July 29, the Minnesota Supreme Court issued a decision in Popovich v. Allina Health System in which it determined, for the first time, that a plaintiff may assert a claim of vicarious liability (under which one party is held partly responsible for the unlawful actions of a third party) against a hospital based on the apparent authority of independent contractors providing care in the hospital. In reaching this conclusion, the Court clarified that there is no “hospitals-only exemption from the general rule of vicarious liability based on apparent authority,” and declared that the legal standard to establish an apparent-authority vicarious liability claim only required the plaintiff to demonstrate that the hospital held itself out as a provider of emergency medical care and that the plaintiff looked to the hospital, rather than to a particular doctor, to provide care.
Popovich arises out of the alleged negligent medical care from emergency room physicians and radiologists who worked at Unity and Mercy Hospitals, both owned by Allina Health System (Allina). The health system does not employ the emergency department physicians or radiologists at these hospitals, instead contracting with Emergency Physicians Professional Association and Suburban Radiologic Consultants to provide this medical care to the public.
The Supreme Court reversed the Court of Appeals decision.
In this case, the patient went to the Unity Hospital emergency department complaining of dizziness, loss of balance, and blurry vision. An emergency medicine physician attending to the patient ordered a head CT, which was reviewed by a radiologist. The patient was then discharged home. Later that morning, his condition worsened, and his wife called 911. The patient was unresponsive by the time paramedics arrived, and he was taken by ambulance to Mercy Hospital. An emergency medicine physician treating the patient ordered a variety of tests and imaging, including another head CT. The radiologist at Mercy Hospital compared the scan to the one taken at Unity earlier that morning, identifying abnormalities in the scans and noting increased swelling in the patient’s brain compared to the first scan from Unity Hospital. The patient was ultimately transferred to Abbott Northwestern for further care that evening. He was diagnosed with dissection of the left proximal vertebral artery with thrombus and had suffered a stroke, which has left him with serious and irreversible brain damage.
The patient’s wife sued Allina, Emergency Physicians Professional Association, the emergency room physicians, and Suburban Radiologic Consultants for medical malpractice. The lawsuit alleged, in part, that the patient suffered a stroke as a result of negligent care provided in the emergency departments of Unity and Mercy Hospitals. Allina moved to dismiss for failure to state a claim, arguing that Minnesota law prohibits a lawsuit against a hospital based upon the purported negligence of independent contractors. The district court granted Allina’s motion and dismissed the case. The plaintiff appealed, and the Minnesota Court of Appeals affirmed the decision, citing a 30-year precedent that a hospital could only be vicariously liable for the actions of a non-employee. The plaintiff then petitioned the Minnesota Supreme Court for review, which that court granted.
The Supreme Court reverses
The merits of the plaintiff’s claims were not before the Minnesota Supreme Court in Popovich. Instead, the Court was asked to determine whether the plaintiff could maintain the vicarious liability claim against the hospital system on a theory of apparent authority where the treating emergency room physicians worked as independent contractors; and, if so, what the “proper legal standard” for apparent authority vicarious liability is in this context. The plaintiff’s theory—vicarious liability based on apparent authority—was an issue of first impression, so the Court undertook a general review of vicarious liability under Minnesota law to determine whether such liability extends to hospital systems in a situation like this.
Minnesota recognizes vicarious liability under two different theories: respondeat superior, where an employer is vicariously liable for its employee’s torts committed within the course and scope of his or her employment; and apparent authority, where a business or person (known in this context as a principal) is vicariously liable for the torts of another business or individual (an agent, e.g., an independent contractor) because the principal has held out the agent as having authority to act on behalf of the principal or knowingly allowing the agent to act on behalf of the principal.
This second scenario (the only one at issue here) addressed whether an agent has apparent authority to act on behalf of the principal based on and determined by the principal’s conduct. The Popovich decision made clear that whether the principal has “control” over the agent “is irrelevant to whether there is vicarious liability based on apparent authority.”
The Court considered previous vicarious liability cases and concluded that, to the extent previous case law carved out a “hospitals-only exception from the general rule of vicarious liability based on apparent authority,” such opinions erroneously conflated respondeat superior vicarious liability with apparent authority vicarious liability. The Court rejected the hospital system’s argument that patients should be barred from asserting apparent-authority vicarious liability claims against hospitals because patients have “sufficient remedies for medical malpractice” claims. The Court pointed out that Minnesota recognizes apparent authority vicarious liability against principals for the acts or omissions of their agents in other contexts “despite the existence of other remedies.” The Court noted that hospitals have “a variety of methods” to address the risks associated with apparent authority vicarious liability, including establishing policies and monitoring the quality of care and allocating risk through agreements with independent contractors, whereas “the typical emergency room patient has significantly less bargaining power and little ability to predict or manage the risks of negligent medical care.”
The answer to the first question before the Court was yes, a plaintiff may assert a claim against a hospital seeking to hold it vicariously liable for the acts or omissions of an independent contractor under a theory of apparent authority.
Hospitals may reevaluate outward communication with the public.
The Court then moved to the second question before it: What is the applicable legal standard when a plaintiff asserts a claim against a hospital based on a theory of apparent authority vicarious liability? Under a theory of apparent authority, vicarious liability requires a plaintiff to show two things: that the principal “held out” the agent as having authority to act on its behalf or “knowingly permitted” the agent to act on its behalf; and that the plaintiff was aware of these representations of authority by the principal and relied on them. With respect to the first element, the Court pointed to the health system’s public advertisements stressing the quality of its emergency-room care, the nursing and physicians’ skills, the fully staffed nature of the emergency room, and its full-time radiologist “on staff.” The Court said that these “statements to the public . . . satisfy the element of holding out in claims against hospitals based on apparent authority.”
With respect to the reliance element, the health system argued that patient-plaintiffs should be required to show “actual reliance” on those representations in order to hold a hospital vicariously liable for independent contractors. This would require the patient to show that the patient would not have accepted care in the emergency room if he or she had known that the people staffing it were not actually agents or employees of the hospital. The Court rejected this argument, instead concluding that reliance focuses on the beliefs of the patient and considers whether the patient looked to the hospital, rather than to a particular doctor, to provide care. Therefore, in order to state a claim for apparent authority vicarious liability, a plaintiff need only show that “(1) the hospital held itself out as a provider of emergency medical care; and (2) the plaintiff looked to the hospital for care and relied on the hospital to select the personnel to provide services to the plaintiff.”
The Popovich court then applied this standard to the facts before it and concluded that the plaintiff’s complaint stated a claim for apparent vicarious authority by adequately alleging that the hospital held itself out as a provider of emergency medical care, and that the plaintiff went to the hospital seeking emergency care and relied upon the hospital to provide an appropriate provider. The Supreme Court reversed the Court of Appeals decision and remanded to the district court, where the medical malpractice litigation will continue under this theory of liability, among others.
What does this mean for hospitals and the independent physician groups that they contract with? Plaintiffs may assert vicarious liability claims against hospitals under a theory of apparent authority for negligent care provided by the hospital’s independent contractors. This, however, will not change the day-to-day practice of medicine and the clinical care provided to patients. Instead, this decision will likely impact the hospitals’ business collaborations and contractual arrangements with their independent contractors in various ways. For example, hospitals may reexamine indemnification provisions with independent contractors to require that the contractor defend and indemnify the hospital against claims arising from the independent contractor’s negligence.
Insurance coverage may also be revisited. Hospitals may require that independent contractors have sufficient liability coverage to ensure indemnification, and independent contractors should consider reviewing their coverage with their brokers and/or insurance coverage counsel to ensure coverage is adequate to support the indemnification agreement.
In addition, hospitals may reevaluate outward communication with the public to more clearly identify who is providing the care. For example, hospitals may consider installing signage informing patients that an independent group is contracting to provide the care. Patient-specific documents, such as intake and consent forms, could be used to more thoroughly describe the role and affiliation of each provider involved in the prospective patient’s care. Likewise, when identifying their services in marketing materials and their websites, hospitals may choose to make a clear delineation of who—either the hospital or independent physician groups—is providing specialty services such as emergency department care, radiology, or anesthesia. Hospitals may also reconsider which services can be provided through hospital-employed physicians rather than through independent physician groups.
The practical implications of Popovich are not yet clear. Hospitals may choose to take further measures to delineate for patients when independent contractors provide care, or they may instead choose to pursue other methods of protecting themselves from apparent authority-based vicarious liability claims. From a practice perspective, however, Popovich is unlikely to result in any change in the approach to clinical practice.
Besse McDonald, JD, is an attorney in the professional liability–health care practice group at the law firm of Meagher + Geer. Her experience includes defending clients in all phases of litigation, including preparation of initial pleadings, fact investigation, discovery, drafting dispositive and pretrial motions, and trial preparation.
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