The United States Court of Appeals for the Fourth Circuit (“Appellate Court”) decided in its opinion filed on December 6, 2016 that a nurse employed by a staffing agency and assigned to work at a hospital qualified as an “employee” of the hospital under the hospital’s medical malpractice insurance policy, and therefore was covered for acts of medical negligence under the hospital’s medical malpractice insurance policy.
The dispute that was originally filed in the United States District Court for the District of Maryland was between a medical malpractice insurance company that issued a professional liability insurance policy to the hospital and a medical malpractice insurance company that issued a professional liability insurance policy to the agency that provided the nurse to the hospital, as to which policy was responsible to pay for the agency nurse’s medical negligence that occurred at the hospital.
In 2012, a former patient brought a medical malpractice action against the hospital and several of its doctors and nurses. One of the defendants was a nurse who had been placed by the agency at the hospital. The medical malpractice insurance company for the hospital refused to defend the agency nurse, claiming that she was not an employee of the hospital. The agency’s medical malpractice insurance company thereafter undertook to defend the agency nurse, ultimately settling the case against her for $2.5 million and incurring nearly $500,000 in defense costs.
The agency’s medical malpractice insurance company thereafter filed its lawsuit alleging that under the terms of the hospital’s medical malpractice insurance policy, the agency nurse qualified as an employee of the hospital and thus a “protected person” entitled to coverage under that policy. The U.S. District Court judge disagreed, relying on the terms of the staffing agreement between the hospital and the agency that provided that agency-provided workers were not employees of the hospital within the meaning of the policy, and the agency’s medical malpractice insurance company appealed.
The Appellate Court Holding
The Appellate Court held that because the evidence contained in the record establishes that the agency nurse is the hospital’s employee under the right-to-control and the borrowed-servant standards, she is a “protected person” who qualifies for coverage under the medical malpractice policy issued to the hospital that covered doctors and nurses who were employed by the agency and placed by the agency to work at various medical facilities.
The Appellate Court Opinion
The hospital’s medical malpractice insurance company, which is wholly owned by the company that owns the hospital, issued the hospital the professional liability insurance policy at issue in this case. The policy provides coverage to the hospital and to other persons or entities who meet its definitions of “protected person.” A provision in the policy provides that the hospital’s present and former employees, students and authorized volunteer workers are protected persons “while working or when they did work for you within the scope of their duties.” The policy does not define “employee,” nor does it incorporate or otherwise refer to the staffing agreement between the agency and the hospital.
However, another provision of the hospital’s medical malpractice insurance policy provides that “[P]ersons working for you on a per diem, agency or contract basis are not protected persons.”
Right To Control
The Appellate Court held that the agency nurse qualifies as the hospital’s “employee” under the right-to-control test – i.e., one who works in the service of another who has the right to control the details of the work is the employee of the entity with the right to control.
The Appellate Court noted that under the staffing agreement between the hospital and the agency, the hospital is responsible for “orient[ing] [Agency practitioners] to [their] job description responsibilities and all policies and procedures necessary to meet [Hospital] performance standards.” The hospital has the right under the staffing agreement to “float” Agency practitioners to areas to which they were not originally assigned and to immediately terminate any practitioner who refuses to float.
The staffing agreement also gives the hospital the right to “dismiss any Practitioner at any time if [the Hospital] determines that a Practitioner is unsatisfactory.” No agency staff supervises the practitioners on site at the hospital or provides medical-care instructions to the practitioners. The hospital dictates the type of care to be provided to patients by agency practitioners; whether agency practitioners or direct-hire employees are involved, the hospital expects the same level of care to be provided to patients. If an agency practitioner refuses to comply with hospital directions, the hospital may immediately terminate the practitioner.
The Appellate Court stated that hospital’s medical malpractice insurance company’s decision to use different language in different sections of the policy when addressing the coverage available to “employees” must be understood as an intentional decision, and the Appellate Court must respect this decision and apply the policy in a way that gives effect to the full “Worker Protection” clause in the general liability section and to the full “Worker Protection” clause in the professional-liability section. The Appellate Court decided that the only way to do that is to conclude that the term “employee” as used in the policy includes agency-provided hospital workers as well as direct-hire hospital workers. Accordingly, because the professional-liability section of the policy extends “protected person” status to hospital workers without excluding agency provided workers, the Appellate Court held that the agency nurse is a protected person under the professional-liability section of the policy.
The Appellate Court stated that the primary purpose of the hospital’s medical malpractice insurance company’s policy was to provide insurance coverage for the hospital and its direct-hire employees; nonetheless, the policy used language whose ordinary meaning includes agency-provided employees as additional insureds, and the contract between the hospital and the agency simply has no impact on the hospital’s medical malpractice insurance company’s independent obligation to provide the coverage undertaken in the policy.
Source Interstate Fire and Casualty Company v. Dimensions Assurance Ltd., No. 15-1801.
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