Hospital Liability for the Actions of Independent Contractors

10.06.2020 Written by Christopher L. Riegler

A recent appellate case has an important impact on vicarious liability claims for non-employed physicians. The case has not been appealed as of this date (so there is some chance the Indiana Supreme Court could change the law). If your Hospital has not yet taken steps to notify patients an independent contractor/non-employee is providing care, the Hospital will be liable for the actions of its independent contractors. Below Katz Korin Cunningham provides comments about the recent case and how it may impact your Hospital’s liability for non-employed physicians.

Typically, a hospital is responsible for the negligent actions of its employees if the employees acted in the scope of their employment. Hence, if just the Hospital is named in a case it could legally be liable for the actions of any employee. That means it can be legally liable for its physicians, nurses, healthcare technicians, dieticians, dietary support, x-ray technicians, housekeeping, etc. Historically, if an independent physician was named the Hospital would not be responsible since it involved a non-employee. That changed in 1999 in the Sword case. The Indiana Supreme Court in Sword determined, in essence, that if the Hospital selects the independent contractor physician to provide care via on call lists, rotations, or other manner of selection, then unless the Hospital tells the patient that provider is not an employee the Hospital can be liable for the negligent actions of the non-employee. Since the Sword opinion, KKC has provided advice and fought many legal battles to defeat the Hospital’s responsibility for non-employees. The best weapon in the fight is written notice the non-employee is not an employee. Notice is best provided by admission/consent documents. That is, during admission the patient is told specifically in writing that the ED physicians, radiologists, pathologists and anesthesiologists (and any other class such as hospitalists, critical care specialists, etc.) are not employees. Notice can also consist of different name tags, jackets, signs, verbal notice (which is charted) and other manners of notice. Cases since Sword have broadened the Hospital’s liability for non-employees and made it clear specific notice is required.

The latest case is Jernagan v. IU University Health a/k/a IU University Health ACO. This court of appeals’ decision was entered on September 28, 2020. In this case, Jernagan, the patient, went to the hospital for surgery by Dr. Stephen Ritter. The anesthesiologist, Dr. Michael Miller, was not an employee and during registration, Jernagan was given a business card from the anesthesiologist’s group which was not IU. Jernagan alleged he was injured during surgery and filed a claim against IU and Dr. Ritter. After the injury, Jernagan’s wife had discussions about what happened with Dr. Miller. Dr. Ritter was later dismissed, and IU filed a motion for summary judgment. Jernagan opposed the motion and claimed Dr. Miller (who was not named in the lawsuit) was an agent of IU, and therefore IU was responsible for his actions even if he was not named in the lawsuit. There was no panel opinion about Dr. Miller’s care since he was not a defendant in the lawsuit. The motion for summary judgment was denied by the court. Later, after additional discovery was conducted, a motion for judgment was again filed by IU. This time, summary judgment was granted in favor of IU and Jernagan appealed. The issue: was IU responsible for the actions of Dr. Miller under Sword? The answer was, “yes.”

The court noted a hospital will be liable for the actions of independent contractor physicians when it held itself out as the provider of care, unless it gives “meaningful” notice to the patient it is not the provider of care via the independent contractor. If meaningful notice is provided to the patient, the hospital may avoid liability. The court then analyzed the facts presented by Jernagan. First, it found the written notice provided in the admission documents did not provide clear notice about the relationship between IU and Dr. Miller. The written notice must be specific and not ambiguous – language that the physician “may be” an independent contractor was not sufficient. Second, was the business card provided sufficient notice? After all, it noted Dr. Miller’s employer was not IU. The court determined it was up to a jury whether the card was sufficient notice, and the court then held that IU could be liable for the actions of Dr. Miller even though he was not involved in the lawsuit. As a result, the jury would have to determine if IU gave meaningful notice about Dr. Miller; and whether Dr. Miller was in the scope of his duties (or, “apparent” employment). The court reversed the trial court’s decision about apparent agency. The trial would go forward against IU for the actions of Dr. Miller.

The fix to this issue is easy: change the admissions/consent documents to specifically tell the patient which physicians in the hospital are not employed. For example, “The ED physicians, the pathologists and the anesthesiologists are not employees of the Hospital…..” Moreover, the non-employed physician should be required by contract to wear separate name tags, different lab coats and required to verbally inform the patient clearly they are not employed by the hospital – if this becomes the business habit that is strong evidence notice was given.

The attorneys at Katz Korin Cunningham have been fighting this issue since 1999. Please feel free to contact Kim Schroder, Jarrod Malone, Katie Cordell or Chris Riegler should you have any questions or desire further guidance.


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