Are you liable for a colleague's mistake?

"Vicarious liability" and "ostensible agency" sound like obscure legal theories, but they can land you in court. Here's how to protect yourself.

By Berkeley Rice
Senior Editor

You may not be your brother's keeper, but don't be too surprised if you're sued because a patient is angry with a colleague. And don't be surprised if it costs you. Several recent cases prove that you can be found liable when another physician blunders.

Consider what happened to Suresh Chandani, a family practitioner in Fishkill, NY. In September 1997, he treated Eugene DiBenedetto for hemorrhoids. Chandani found that DiBenedetto also had a high PSA level and referred him to urologist Pinaki Ray. Chandani had no further contact with the patient.

Ray examined DiBenedetto, recommended a prostate biopsy, and performed the procedure in his office. Ray also put him on antibiotics before and after the surgery. At a follow-up visit, where DiBenedetto reported no problems, Ray told him the biopsy results were negative. The following month, however, DiBenedetto called Ray and reported blood in his urine, telling him he was then under the care of Hari Chakravorty, a general surgeon who shared office space with Chandani.

From October through December of that year, DiBenedetto made several visits to Chakravorty, who allegedly failed to detect endocarditis. As a result, the patient suffered bacterial endocarditis, a stroke, and congestive heart failure. He was hospitalized several times, required an aortic valve replacement, and is now partially paralyzed.

DiBenedetto filed a malpractice suit against urologist Ray (which was later dismissed) for allegedly causing the infection, and against Chakravorty for allegedly failing to diagnose it. He also sued Chandani and his corporation, Fishkill Medical Associates.

The suit claimed that Chandani was "vicariously liable" because he and Chakravorty had an apparent professional relationship. In part because Chakravorty shared office space with Chandani, he "appeared" to be in joint practice with him, says the patient's attorney. Given that appearance, Chandani could be held liable for DiBenedetto's injuries under the theory of apparent or "ostensible agency."

Chandani moved for summary judgment, arguing that while Chakravorty sublet office space from him, he was neither his partner nor his employee, and had no other financial relationship with him. In fact, Chandani was the sole officer, director, and shareholder of Fishkill Medical Associates.

In September 2001, however, the trial judge denied Chandani's motion to be dismissed from the suit. "The real issue," the judge wrote in his opinion, was whether Chandani and Chakravorty "were apparently engaged in the joint practice of medicine, thereby giving rise to an 'ostensible agency' resulting in vicarious responsibility on the part of Dr. Chandani . . . for the alleged negligence of Dr. Chakravorty."

The judge cited the following facts as "evidence of a far more extensive relationship" between the two physicians than merely sharing office space:

• The office sign listed both names under "Fishkill Medical Associates."

• The two physicians shared the same telephone and fax numbers.

• Patient registration forms contained both their names under "Fishkill Medical, PC."

• The records of urologist Ray show "Chandani — H. Chakravorty" as referring physicians.

• Chandani billed the plaintiff's HMO for services rendered by Chakravorty.

• DiBenedetto claimed that he had sought treatment from Chakravorty at Fishkill Medical Associates because of his prior relationship with Chandani.

Based on this, the judge ordered the case to go to trial. Chakravorty settled before trial, however, and the plaintiff then dropped the claim against Chandani with no liability and no payment.

When an assistant is an independent contractor

Howard Freilich, a Philadelphia gastroenterologist, also got caught up in a case involving negligence by a colleague—this time a nurse anesthetist. It began in 1997, when Freilich detected a polyp during a sigmoidoscopy he performed on Mary Parker. In January 1998, Freilich did a colonoscopy in his office, assisted by Robert Shaw, a registered nurse anesthetist.

Before the procedure, Parker had a brief conversation with Shaw, but wasn't informed that he was an independent contractor, and not Freilich's employee. Shaw sedated Parker with intravenous medication, using a catheter in her right forearm. Freilich then performed the colonoscopy. That evening, while taking a shower at home, Parker discovered the IV port, still imbedded in her arm, and removed it herself.

About six months later, she filed a malpractice claim against Shaw, Freilich, and his group, Northeast Gastroenterology Associates. Parker accused Shaw of negligence for failing to remove the IV port, thereby causing permanent injury (median neuropathy) to her arm. That claim resulted in an uncontested default judgment against Shaw.

Before trial, Freilich argued that he bore no direct liability for Parker's injuries, and the judge dismissed that count. But Parker's suit also accused Freilich of indirect liability, claiming that since Shaw appeared to be Freilich's employee, the gastroenterologist was therefore liable for Shaw's negligence under the doctrine of ostensible agency.

During the trial in January 2001, Freilich moved for dismissal of the indirect liability claim, arguing that, until then, Pennsylvania courts had applied the doctrine of ostensible agency only to hospitals and HMOs—not to doctors. The judge agreed, and dismissed the case.

Parker appealed, claiming that Freilich had done nothing to correct her "foreseeable misimpression" that Shaw was his employee. In June 2002, the appellate court reversed the lower court's ruling on Freilich, and sent the case back for trial—where it's still pending—on the issue of ostensible agency.

You're responsible for those you employ

"As a general rule, an employer is not liable for torts committed by an independent contractor," wrote the appellate judges in the Freilich case. But there's an exception when a patient would reasonably conclude that the contractor is actually an employee. In such cases, the employer is "subject to liability for physical harm caused by the negligence of the contractor in supplying such services."

The appellate judges realized that few patients would be familiar with the doctrine of ostensible or apparent agency: "In situations where the doctor performing the procedure on a patient in his office utilizes the services of an independent contractor nurse, it would be absurd to require such a patient to be familiar with the law [of ostensible agency] and so to inquire of each person who treated him whether he is an employee of the doctor or an independent contractor.

"It is not an undue burden to require doctors who use the services of independent contractors for the performance of in-office medical procedures to expressly inform the patients of the independent contractor status of the assistant. The patients should also be informed that the doctor is not liable for the assistant's negligence."

The judges recognized that such information might well affect a patient's decision to undergo the procedure in the doctor's office rather than at a hospital. But ". . . we see no reason why the doctor should not be liable to the same extent as a hospital for the harm suffered by a patient as a result of this procedure."

Since Freilich had not told his patient that Shaw was an independent contractor, she might have agreed to undergo the procedure under the "reasonable belief" that Shaw was Freilich's employee. Since that belief would support a claim based on ostensible agency, the appellate judges concluded that her case against Freilich deserved to be heard at trial.

"The moral of these two cases is that separate practices must be made clearly separate to their patients," says James Lewis Griffith Sr., a malpractice attorney in Philadelphia. "If two independent physicians are sharing office space, they should have separate signs, billing systems, telephone numbers, and stationery. If they share the same waiting room, a posted notice should spell out the fact that they're not partners, and that they're not responsible for each other's care.

"And any doctor who uses an outside assistant should demand that this person hand the patient a notice indicating that he's a separate legal entity, with no corporate or financial relationship to the doctor's practice. The doctor should also have each patient sign an acknowledgment that he understands the assistant's independent status, and also understands that the doctor assumes no legal responsibility for the assistant's care."

How to avoid vicarious liability

The cases described in the accompanying article present only two situations in which doctors can be held vicariously liable. Similar claims could arise from the negligence of covering physicians, or from negligent referrals to specialists, if you knew or should have known that they weren't qualified. In several states, appellate courts have ruled that a surgeon who leaves a post-op patient in the care of a colleague can be held vicariously liable for the colleague's negligence under the doctrine of apparent agency.

Medical group partnerships create another form of vicarious liability called "joint and several liability," says Lee J. Johnson, a Mount Kisco, NY, attorney who specializes in risk management. "In most states, each physician-partner can be held liable for the medical decisions and acts of a partner, even if the others were never involved in the patient's treatment."

One way to avoid vicarious liability is to set up the practice as a professional corporation. Then, it's the PC—not the other shareholder-physicians—that may be held liable for the negligence of an individual physician employee.

Another option in some states, says Johnson, is to create a "limited liability partnership or corporation," under which each doctor-partner is personally liable only for his own negligent acts, or for those by others under his direct control or responsibility.

Liability is less clear when doctors engage in informal co-ventures that involve sharing expenses, office space, and coverage. In such situations, as with the Chandani case described in the accompanying article, courts may find one doctor vicariously liable for the negligence of another if the plaintiff has reason to believe—accurately or not—that their arrangement is a partnership.

Johnson recommends having an experienced health care attorney look at your group's legal structure. If your relationships with colleagues put you at risk for vicarious liability, ask your attorney to review your malpractice policy to make sure you're covered.

Berkeley Rice. Are you liable for a colleague's mistake?.

Medical Economics

Jun. 20, 2003;80:33.