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The Many Facets of Vicarious Liability 

Published in The SCPIE Companies GMQ – Second Quarter 2004

 By Barbara Worsley

Can your medical group be held liable for the misdeeds of others? Absolutely. Even practicing textbook medicine won’t protect it against liabilities stemming from its clinical and business associations with other physicians and healthcare professionals.

The legal concept of vicarious liability allows liability for a wrongdoing to be extended beyond the original defendant to persons or entities who have not committed a wrong, but on whose behalf the defendant acted. Vicarious liability is based on the historical legal doctrine of respondent superior: Let the master answer for the torts (civil wrongs) of his servants.

For example, a physician could be held liable if the office receptionist carelessly left a medical record lying open in the waiting room, and an HIV diagnosis was revealed to others.

Ostensible Agency Liability

Several theories of vicarious liability have evolved over the years. One is ostensible agency: This liability focuses on patients’ reasonable expectations and beliefs based on the providers’ conduct rather than on actual contracts between healthcare providers.

It is common for medical groups that are trying to keep pace with patient demand to bring in an independent contractor to help. It is also common to cut overhead expenses by making space available in the office suite for another physician. The problem is, the group can be found liable for any malpractice on the part of independent physicians if patients believe they are members of your group or practice.

Joint and Several Liability

In California, each defendant in a lawsuit can be held individually liable for damages awarded against all defendants – as situation based on a theory of law called the rule of joint and several liability. As a result, a practice could pay the price for an independent contractor’s malpractice.

In 1986, Proposition 51 removed the joint and several liability doctrine only with respect to noneconomic awards, such as those for pain and suffering, which are limited to $250,000 under the Medical Injury Compensation Reform Act. But Proposition 51 did not change joint and several liability for economic damages, which can be substantially higher.

Consider the following scenario: Dr. B., an ob/gyn acing as an independent contractor, rents office space from ABC Medical Group. She uses the same staff as other physicians, wears a name tag with the name of the medical group printed on it and uses the same stationery. Together, these factors lead her patients to believe that she is a member of the group.

What happens if Dr. B. is found negligent in the care and treatment of a patient whose child was born with neurological defects, and a jury awards $6.9 million in economic damages to the plaintiff? Because of all the factors just listed above, Dr. B. is found to be an ostensible agent of ABC Medical Group; therefore, the group is ordered to satisfy a large part of the judgment against her.

Shared Liability

According to the doctrine of joint and several liability, defendant found liable in a malpractice lawsuit share among themselves the total amount awarded to the plaintiff. However, since not all parties have the same liability coverage, the defendants with the

greatest amounts of insurance – the “deep pockets” – may find themselves paying the most money.

When a primary defendant in a lawsuit carries insufficient insurance, other codefendants, even if they’re only minimally involved in the case, may be looked upon as deep pockets for purposes of claim resolution.

Vicarious liability can create situations whereby two or more physicians, each represented by a different medical liability carrier, are named as defendants in a single claim. When this occurs, each carrier’s ability to control both the directions and quality of the defense is seriously compromised because there may be competing interests in the case.

The “All or None” Rule

While you cannot eliminate vicarious liability altogether where a formal partnership or group exists, one way to safeguard against it is to ensure that all physicians in the group carry the same limits of liability from the same professional liability carrier.

The “All or None” rule – followed by most carriers, including SCPIE – reflect this simple guideline. It greatly minimizes the potential for deep pocket scenarios and ensure that if a vicarious liability claim does arise, there aren’t multiple carriers involved in defending different interests in the claim.

The rising number of physicians electing to go without professional liability coverage increases your likelihood of participating in healthcare delivery with an uninsured colleague. The fact is that uninsured physicians face the same chances of being sued as those who are insured.

In terms of effective risk management, carefully consider the potential consequences of practicing alongside those whose claim exposure you may ultimately be forced to underwrite. Though you might be totally innocent of any negligence, a plaintiff’s attorney will work diligently to show that at least part of the alleged harm was the result of your acts or omissions,

Remember that in California, if you are held to be even 1% responsible for a patient’s injuries and you are the only inured physician among the defendants, you could pay most or all of the damages. ■

Barbara Worsley is Vice President of Risk Management for The SCPIE Companies