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Vicarious Liability and the Hospital-Defendant… The Evolution of the Agency by Estoppel and Respondeat Superior Doctrines

By Bret C. Perry

The ever increasing competition for patients has led many hospitals to pursue aggressive marketing and advertising campaigns. These advertising campaigns are designed to imply that the hospital staff, nurses and physicians practicing in the facility provide excellent care and that the particular facility should be you and your family's hospital of choice. In concert with the competition for market recognition and patronage, legal implications arise when a claim for medical negligence is asserted due to the conduct of the nursing staff and physicians practicing within the facility. The legal implications being whether the hospital assumes liability for the conduct of the varying healthcare providers whether employees, agents or independent contractors.

Recently, Ohio courts have addressed and reconsidered the common-law legal principles of agency by estoppel and respondeat superior in determining whether the hospital-defendant can be held vicariously liable for the care and treatment provided by both employee and non-employee healthcare providers. These recent decisions have caused uncertainty within the plaintiffs' bar and an apparent increase in the number of healthcare providers being individually named in recently filed claims alleging medical negligence. Accordingly, a review of the principles underlying the agency by estoppel and respondeat superior doctrines as well as their application in conjunction with the recent legal decisions will prove invaluable in navigating the seas of uncertainty.

In Albain v. Flower Hosp. (1990), 50 Ohio St. 3d 251, at paragraph four of the syllabus, the Ohio Supreme Court recognized and adopted the following exception to hospital non-liability for the negligence of independent contractors holding that "[a] hospital may, in

narrowly defined situations, under the doctrine of agency by estoppel, be held liable for the negligent acts of a physician to whom it has granted staff privileges. In order to establish such liability, a plaintiff must show that: (1) the hospital made representations leading the plain-tiff to believe that the negligent physician was operating as an agent under the hospital's authority, and (2) the plaintiff was thereby induced to rely upon the ostensible agency relationship."

Following the Albain decision, the Ohio Supreme Court was again confronted with the issue of hospital liability for independent contractors in Clark v. Southview (1994), 68 Ohio St. 3d 435. The Ohio Supreme Court in Clark overruled Albain providing a less stringent test merely requiring that the hospital "holds itself out to the public as a provider of medical services" and that the patient looks to the hospital, not a particular doctor, for medical care. Id. at 444-445.

While the decision in Clark weakened the test necessary to establish hospital liability for the conduct of independent contractors, litigants seemingly ignored basic agency by estoppel principles and the concept of vicarious liability in the prosecution of claims against hospital entities. Specifically, litigants departed from basic agency principles asserting that a principal may be liable for the torts of an agent only when an actual agency relationship exists between the negligent tort-feasor (agent) as well as the hospital entity (principal).

Generally, "an employer or principal is vicariously liable for the torts of its employees or agents under the doctrine of respondeat superior, but not for the negligence of an independent contractor over whom it retained no right to control the mode and manner of doing the contracted-for work." Clark, at

438. In the absence of actual agency, courts have resorted to a fictional agency relationship to impose vicarious liability. Johnson v. Wagner Provision Co., 141 Ohio St. 584, paragraph four of the syllabus. An agent who committed the tort is primarily liable for his/her actions, while the principal is merely secondarily liable. Losito v. Kruse (1940), 136 Ohio St. 183. The liability for the tortious conduct flows through the agent by virtue of the agency relationship to the principal. If there is no liability assigned to the agent, it logically follows that there can be no liability imposed upon the principal for the agent's actions. Id.

In Comer v. Risko (2005), 106 Ohio St. 3d 185, the Ohio Supreme Court addressed the issue of whether a viable claim could exist against a hospital under a theory of agency by estoppel for the negligence of an independent contractor physician when the physician could not be made a party because the statute of limitations had expired. The Comer court held that a direct claim against a hospital premised solely upon the negligence of an agent who cannot be found liable is contrary to basic agency law. The Comer court explained that agency by estoppel is not a direct claim against a hospital, but an indirect claim for the vicarious liability of an independent contractor with whom the hospital contracted for professional services. If the independent contractor is not and cannot be liable because of the expiration of the statute of limitations, no potential liability exists to flow through to the secondary party, i.e., the hospital, under an agency theory.

Following the decision in Comer, the issue of hospital liability for the negligent actions of independent contractors seemingly was resolved, but left unanswered were questions relative to liability for the conduct of hospital employees, not independent contractors.

In Nat'l Union Fire Ins. Co. v. Wuerth (2009), 122 Ohio St. 3d 594, the Ohio Supreme Court addressed the issue of law firm culpability for the negligent actions of its partners and associates. In Wuerth the District Court dismissed plaintiff's claims because National Union had filed its complaint after the expiration of the one-year statute of limitations for legal-malpractice against the attorney responsible for initially handling the case and because National Union had no cognizable claims against the attorney handling the matter. The District Court further dismissed the claims for vicarious liability against the law firm. Id., at 912. Finally, the District Court determined that the law firm could not be held directly liable for legal malpractice because it is not an attorney and does not practice law. Id., at 913.

On appeal, the Ohio Supreme Court was asked to answer the following certified question: "Under Ohio law, can a legal malpractice claim be maintained directly against a law firm when all of the relevant principals and employees have either been dismissed from the lawsuit or were never sued in the first instance?" When answering this certified question, the Ohio Supreme Court addressed two limited issues: 1) whether a law firm may be directly liable for legal malpractice, and 2) whether a law firm may be held vicariously liable for malpractice when none of its principals or employees are liable for malpractice or have been named as defendants.

The Wuerth court analyzed these issues relying on precedent concerning medical malpractice issues holding that because only individuals practice medicine, only individuals can commit medical malpractice. This precedent concerning

medical malpractice is consistent with the general definition of "malpractice" in that "the term 'malpractice' refers to professional misconduct, i.e., the failure of one rendering services in the practice of a profession to exercise that degree of skill and learning normally applied by members of that profession in similar circumstances." Strock v. Pressnell (1988), 38 Ohio St. 3d 207, 211. Consistent with precedent, the Wuerth court explained that a law firm is a business entity through which one or more individual attorneys practice their profession. While clients may refer to a law firm as providing their legal representation or giving legal advice, in reality, it is in every instance the attorneys in the firm who perform those services and with whom clients have an attorney-client relationship. Thus, in conformity with decisions concerning the practice of medicine, the Wuerth court held that a law firm does not engage in the practice of law and, therefore, cannot directly commit legal malpractice.

The Wuerth court next confronted the issue of whether a law firm may be vicariously liable for legal malpractice when no individual attorneys are liable or have been named. Again relying on precedent addressing medical malpractice issues, the Wuerth court explained that an employer or principal is vicariously liable for the torts of its employees or agents under the doctrine of respondeat superior. Clark, supra. Based on the authority in Comer, the Wuerth court concluded that a law firm

may be vicariously liable for legal malpractice only when one or more of its principals or associates are liable for legal malpractice.

As expected, the Wuerth decision was quickly cited by the defense bar in support of the dismissal of medical negligence claims levied against hospital entities wherein the individual physicians, whether employees or independent contractors, were not named as individual defendants in the action. The argument asserted was simple: the hospital does not practice medicine and if the individual physicians or nurses are not parties to the action, the hospital entity cannot be vicariously liable for the allegations of negligence. In addition, questions remained as to whether this decision could be extended to all types of healthcare providers including physical therapists, laboratory personnel, licensed practical nurses and the like again leading to an increase in the number of individual healthcare personnel being named as individual defendants in actions alleging medical negligence.

Recently, the issues left unanswered in Wuerth were addressed by the Seventh District Court of Appeals in the matter of Taylor v. Belmont Cmty. Hosp., 7th Dist., 2010-Ohio-3986. In Taylor, plaintiff filed her medical malpractice lawsuit against the defendant-hospital based on the actions of its "employees." The employees were not sued, and the statute of limitations for claims against said employees had expired. The trial court granted summary judgment in favor of the defendant-hospital relying on the decision in Wuerth. On appeal, the Taylor court reversed the trial court's decision noting that for the wrong of a servant acting within the scope of his authority, there was a right of action against the master, the servant or both. The Taylor court concluded that the Wuerth case was inapplicable because a law partner's relationship with a firm was not that of "employer-employee." As to the portions of Wuerth that seemingly applied to the acts of law firm associates, the Taylor court refused to extend a case regarding law firm liability for the acts of partners and associates to the arena of hospital liability for the acts of its employees.

In analyzing the aforementioned decisions, the following principles underlying the doctrines of agency by estoppel and respondeat superior are of significant importance in the defense of hospital-defendants. First, a determination must be made as to the employment status of the healthcare providers at issue, i.e., independent contractor or employee of the hospital. If the alleged negligent healthcare provider was an independent contractor, the analysis set forth in Clark is applicable and the doctrine of agency by estoppel will provide for the hospital's vicarious liability should it be established that the hospital "holds itself out to the public as a provider of medical services" and that the patient/plaintiff looked to the hospital, not a particular doctor, for medical care. In addition, the requirements set forth in Comer must similarly be established in that agency by estoppel is not a direct claim against a hospital, but an indirect claim for the vicarious liability of an independent contractor with whom the hospital contracted for professional services. If the independent contractor cannot be liable because of the expiration of the statute of limitations, no potential liability exists to flow through to the secondary party, i.e., the hospital.

In the event that the alleged negligent healthcare provider is an employee of the hospital facility, the decision in Taylor seemingly provides that the doctrine of agency by estoppel is immaterial and instead, the doctrine of respondeat superior applies providing that the "master" is liable for the wrongs of his "servant" acting within the course and scope of his authority. In accordance, and following Taylor, if the negligent healthcare provider is an employee, there is no requirement for the individual healthcare providers to be named as defendants in the complaint because the doctrine of respondeat superior provides that the hospital facility is directly liable for the conduct of its employees.

While the seas remain uncertain relative to the application of the aforementioned decision as evidenced by the increasing number of physicians, nurses and ancillary healthcare providers being individually named in medical negligence actions, defense counsel must be cognizant of the basic legal principles of agency by estoppel and respondeat superior in order to adequately formulate a defense as well as assert the applicable affirmative defenses unique to each theory of recovery. In order to do so, determining the employment / independent contractor status of each potentially liable individual is of utmost importance otherwise your hospital-client could potentially be exposed to liability where none exists.