In an appellate decision by the Court of Appeals of Maryland (“Court of Appeals”) on June 19, 2014, a large Maryland malpractice verdict in favor of a woman who lost a portion of her foot due to the alleged medical malpractice of her podiatrist, who was a listed provider through her managed care organization (“MCO”), was vacated because the podiatrist was neither an employee of the MCO nor its apparent agent.
The Underlying Facts
The 54-year-old Maryland medical malpractice plaintiff who had an eighth-grade education received Medicaid benefits through an MCO since 1997. The MCO’s provider directory listed providers within the MCO network, including approximately 4,000 specialty care providers, specialists, hospitals, and pharmacies, as well as approximately 80 primary care providers of which some, but not all, worked out of the MCO’s four “primary care centers” listed in the directory.
The MCO’s directory listed 38 specialists in podiatry within the MCO network, including the one chosen by the plaintiff for her foot pain due to a bunion on her foot. The plaintiff saw the podiatrist at his private office, which was not located at any of the MCO’s primary care centers. The podiatrist’s contract with the MCO (one of several MCOs in which the podiatrist participated) stated that the podiatrist was not an employee or agent of the MCO, and was an independent contractor.
At the time the woman was examined by the podiatrist in his office on July 17, 2008, he recommended surgery. On July 30, 2008, the surgery was performed at a hospital that did not participate in the MCO (the woman was discharged from the hospital the same day). During the first follow-up appointment at the podiatrist’s office on August 5, 2008, the podiatrist allegedly performed a cursory examination of the woman’s foot, only partially unwrapping the woman’s bandages, and told the woman to return for a second follow-up appointment.
The second follow-up appointment took place on August 12, 2008, at which time a nurse unwrapped the woman’s bandages and noticed gangrene. The woman was sent to the hospital where she had medical tests over a three-day period. She was transported to another hospital, where she had a portion of her foot amputated and a bypass performed on her leg, which resulted in a scar from her thigh to her ankle. She was discharged from the hospital after three days.
The woman subsequently filed a medical malpractice lawsuit against the podiatrist, the MCO, and others, claiming that the podiatrist was negligent in performing her surgery and was negligent in providing adequate post-surgery physical examinations, causing her to develop gangrene and resulting in the partial amputation of her foot. She also alleged that the podiatrist failed to obtain her proper informed consent for the surgical procedure because the podiatrist failed to inform her that she suffered from a circulatory condition that obstructs blood flow to her legs and that would likely place her at material risk of significant injury from the surgery.
The defendant podiatrist, who unbeknownst to the plaintiff did not have medical malpractice insurance at the time of her surgery, failed to respond to the medical malpractice lawsuit and an order of default was entered against him. Subsequently, a default judgment was entered, with the damages to be determined by a Maryland medical malpractice jury on a later date.
The Maryland medical malpractice jury that heard the case awarded $64,000 for economic damages and medical expenses, and $3,000,000 for non-economic damages, which was reduced to $714,000 under Maryland’s cap on non-economic damages in medical malpractice cases. The jury also determined that the MCO was liable to the plaintiff under the theory of apparent agency.
What Is Apparent Agency?
Ordinarily, one who engages an independent contractor is not vicariously liable for the negligence of the contractor. However, there are some exceptions, including vicarious liability under the theory of “apparent agency.” Apparent agency is an equitable doctrine, whereby a principal is held responsible for the acts of another because the principal, by its words or conduct, has represented that an agency relationship existed between the apparent principal and its apparent agent (“one who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such”).
In a prior case, the Court of Appeals had held that a hospital could be held vicariously liable for the alleged negligent actions of an emergency room physician who was an independent contractor and not an employee of the hospital because of the physical proximity of the emergency room to the hospital and the absence of any signs indicating that the emergency room was not part of the hospital, which facts were sufficient to constitute a representation by the hospital that it employed the negligent physician: a jury could conclude that a patient’s belief that the physician was an employee of the hospital was reasonable (“all ordinary expectations would be that the Hospital emergency room, physically a part of the Hospital, was in fact an integral part of the institution. It is not to be expected, and nothing put [the decedent] on notice, that the various procedures and departments of a complex, modern hospital … are in fact franchised out to various independent contractors”).
The doctrine of apparent agency has both subjective and objective elements: a plaintiff must show that the plaintiff subjectively believed that an employment or agency relationship existed between the apparent principal and the apparent agent, and that the plaintiff relied on that belief in seeking medical care from the apparent agent. But the plaintiff must also show that the apparent principal created or contributed to the appearance of the agency relationship and that the plaintiff’s subjective belief was “justifiable” or “reasonable” under the circumstances, which is an objective test.
In its June 19, 2014 decision, the Court of Appeals stated that while there is no reason to preclude application of the theory of apparent agency in the context of a MCO and a network physician, and the plaintiff presented sufficient evidence to satisfy the subjective element of apparent agency, the only representations by the MCO concerning its relationship with the defendant podiatrist are the listing of the defendant podiatrist in the provider directory, the referral forms that permitted the plaintiff to see the defendant podiatrist through the MCO under the Medicaid program, and some general passages concerning providers in the MCO’s member handbook.
The Court of Appeals stated that the provider directory itself effectively relieves any reader of the notion that all network participants are employees of the defendant MCO, due to the sheer number of physicians, the range of hospitals, medical centers and private offices, and the inclusion of entities such as Walmart, Giant Food, and Rite Aid on the list of network providers, which would preclude any reasonable belief of agency based on those documents. Plus, there was no evidence that the plaintiff relied on those documents in concluding that the defendant podiatrist was employed by the defendant MCO.
Furthermore, the plaintiff was treated in the defendant podiatrist’s private office not connected with the MCO’s primary care centers and the hospital where the initial surgery was performed was not part of the MCO’s network of hospitals.
The Court of Appeals held that regardless of whether the plaintiff subjectively believed that the defendant podiatrist was an employee of the defendant MCO and relied on that belief in seeking medical care from the podiatrist, there was insufficient evidence to create a question for the jury because the plaintiff’s reliance was not justifiable given the actual representations made by the defendant MCO concerning its relationship with the defendant podiatrist and the other circumstances of the case. However, the Court of Appeals stated in a footnote to its decision, “Had [the defendant podiatrist] maintained his office and treated [the plaintiff] at one of the [defendant MCO’s] Medical Centers, our conclusion might well be different.”
Wilhelmina Bradford v. JAI Medical Systems Managed Care Organization, Inc., September Term 2013, No. 30. You can read the Court of Appeals decision in this case by clicking here
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