By Edward D. Shoulkin, JD, and Tamara J. Smith, JD

Hospitals, medical practice groups, and other healthcare entities often find themselves named as defendants alongside physicians in lawsuits alleging physician malpractice. In many cases, the plaintiff patient claims that the physician was an “agent, servant, or employee” of the hospital or practice group, and the healthcare entity, therefore, should be held vicariously liable for the physician’s acts or omissions.

According to Black’s Law Dictionary, “vicarious liability” is “the imposition of liability on one person for the actionable conduct of another, based solely on the relationship between the two persons; indirect or imputed legal responsibility for the acts of another; for example, the liability of an employer for the acts of an employee, or, a principal for the torts or [actions] of an agent.”

As a general rule, a hospital or practice group may be held vicariously liable for the negligence of a physician whom it employs. Conversely, the acts or omissions of a physician working as an independent contractor usually will not result in the imposition of vicarious liability against the hospital or practice group.

Vicarious liability claims are distinct from direct claims alleging that the healthcare entity itself was negligent. Consider, for example, a patient who seeks to hold a hospital liable for failing to suspend or restrict the privileges of a surgeon who injured the patient during a surgical procedure. Although the surgeon may be named as a codefendant in the lawsuit, the claim against the hospital is based on its own alleged negligence in failing to supervise or restrict the physician prior to the performance of the surgery. By contrast, vicarious liability claims derive solely from the “master-servant” relationship between the two providers. They are not based on any independent negligence on the part of the healthcare entity.

Proving vicarious liability
Vicarious liability claims in medical cases are founded on the notion that the healthcare entity, as the principal, has the right to “direct and control” the method by which the physician renders treatment and, consequently, has a duty to ensure that appropriate treatment is rendered. A plaintiff asserting such a claim bears the burden of proving not only that the physician was an agent, servant, or employee of the entity and, thus, was subject to its “direction and control,” but also that the physician was acting in the course and scope of his or her employment at the time of the alleged malpractice.

The second prong of this analysis—“course and scope of employment”—simply means that the physician was acting in furtherance of the employer’s interests or within the job function. For example, a physician employed by a practice group generally sees patients of the practice within the group’s offices. Thus, the physician is acting in the course and scope of employment with respect to treating the practice’s patients in its offices. Treating a family friend outside of the practice group, however, is most likely not acting in the course and scope of employment. The practice group, as the physician’s employer, could be held vicariously liable for negligent care rendered in the first scenario, but not in the second.

Most vicarious liability disputes, however, are decided based on the more fundamental question of whether the physician was an agent, servant, or employee of the principal and, thus, subject to its direction and control. The answer depends on the facts of each case, as well as on the law of the controlling jurisdiction.

Defining the relationship
In some states, the courts will presume the physician is subject to the control of the principal if the principal and physician define their relationship as one of employer-employee (such as within a written employment agreement). In most states, however, the courts apply a direction-and-control analysis. The critical issue in this analysis is whether the healthcare entity had the right to direct and control the physician’s work, not whether it actually exercised such control.

Frequently, even the physician and the principal will dispute the nature of the relationship. To determine whether the principal had the right to control the physician’s activities, the courts examine a number of factors, which may include the following:

• What are the terms of the contract between the physician and the principal, including any provisions that specify whether the physician is an employee or independent contractor?
• Does the principal provide the physician with a salary and benefits, which are commonly provided in an employer-employee relationship?
• Does the principal have the power to select and discharge the physician?
• Does the physician practice only at one entity or at or for several entities?
• Does the healthcare entity handle and collect the physician’s patient billings through its system and in its name, with the power to determine the physician rates charged?
• Are the equipment, supplies, and/or support staff utilized by the physician supplied by the entity?

If the principal does not control the time, method, or manner of the services performed by the physician and does not provide direct compensation to the physician, the physician is generally regarded as an independent contractor. For example, a surgeon selected by a patient to perform a procedure typically is considered to be an independent contractor with respect to the hospital at which the surgeon has staff privileges, and the hospital would not be vicariously liable for the physician’s alleged malpractice. On the other hand, residents working at a hospital are generally viewed as employees and the hospital may be held vicariously liable for any negligence.

Exceptions to these general rules exist. For instance, a court may still hold a hospital vicariously liable for a physician who is an independent contractor under certain circumstances, such as emergency department malpractice. In these cases, some courts have allowed the vicarious liability claims to proceed, noting that the patient sought treatment from the hospital and relied on the hospital to staff the emergency department with competent physicians. Claims based on these theories are sometimes referred to as “ostensible agency” or “apparent authority” claims.

Why assert vicarious liability?
Tactical considerations usually motivate a patient’s decision to include the purported employer as a vicarious liability defendant. For example, a corporate entity often has more extensive insurance coverage than the individual physician. This “deep pocket” makes the assertion of a vicarious liability claim attractive to a plaintiff who believes that the claim has a substantial verdict or settlement value.

In addition, the perception exists that juries may be less sympathetic to corporate entities and thus more likely to return a verdict in favor of the plaintiff. Indeed, it is not unusual in some jurisdictions for a plaintiff to reach a settlement agreement with one or more individual defendants in a medical liability case and then proceed with the remainder of the case against the defendant hospital.

Law in the controlling jurisdiction may also provide incentives and disincentives to the assertion of a vicarious liability claim against a provider. If a state has a statutory cap limiting the potential liability of charitable institutions, such as not-for-profit hospitals, vicarious liability claims against those entities tend to be few and far between.

Orthopaedic surgeons who are named in a medical liability lawsuit that includes a healthcare entity alleged to be vicariously liable for care provided to a patient should consult with their attorneys. The plaintiff’s vicarious liability claim will necessarily prompt questions from the attorney about the relationship between the surgeon and the healthcare entity. The answers will assist in the defense and enable the attorney to provide advice on the legal and tactical issues that apply to the jurisdiction in which the case is filed.

Edward D. Shoulkin is a partner with the firm Taylor, Duane, Barton & Gilman, LLP, which is located in Boston and in Providence, R.I.; Tamara J. Smith is a senior associate in the Boston office.