Petrovich v. Share Health Plan of Illinois, Inc

Brief Fact Summary. Plaintiff died from tongue cancer. She alleged that Dr. Kowalski, and thus her HMO, Share Health Plan of Illinois, Inc. (Defendant) under the theory of vicarious liability, was negligent and tardy in diagnosing her aliment. However, her doctor is not an employee of Defendant, but rather an independent contractor.

Synopsis of Rule of Law. As a general rule, no vicarious liability exists for the actions of independent contractors. Vicarious liability may nevertheless be imposed for the actions of independent contractors when an agency relationship is established under either the doctrine of apparent authority, or the doctrine of implied authority.

Facts. Plaintiff alleged that her treating doctor, Dr. Kowalski and her HMO, Defendant, were responsible for the negligent and tardy diagnosis of her tongue cancer. Plaintiff died during trial. Defendant did not employ Dr. Kowalski but operated as “a financing entity that arranges and pays for health care by contracting with independent medical groups and doctors.” Doctors in Defendant’s network are required to complete an application and meet with Defendant’s approval. Doctors were compensated on a per patient basis. Defendant maintained its quality assurance program. Plaintiff’s handbook does not mention that Dr. Kowalski is an independent contractor but instead refers to him as “your Share physician.” Defendant’s primary care physicians are required to approve patients’ medical requests and make referrals to specialists. Dr. Kowalski did not feel constrained by Defendant in making medicinal decisions. Plaintiff believed that Dr. Kowalski was an employee of Defendant.

Issue. Is Defendant vicariously liable for the negligence of its independent-contractor physicians?

Held. Yes. Plaintiff is entitled to a trial to determine whether or not Defendant is vicariously liable under the doctrine of apparent and/or under the doctrine of implied authority.
* HMO accountability is essential to counterbalance the HMO goal of cost-containment. To the extent that HMOs are profit-making entities, accountability is also needed to counter-balance the inherent drive to achieve a larger and ever-increasing profit margin.
* As a general rule, no vicarious liability exists for the actions of independent contractors. Vicarious liability may nevertheless be imposed for the actions of independent contractors when an agency relationship is established under either the doctrine of apparent authority, or the doctrine of implied authority.
* Under the doctrine of apparent authority, a principle will be bound not only by the authority that is actually give to another, but also by the authority it appears to give. When the principle creates the appearance of authority, a court will not hear the principal’s denials of agency.
* To establish apparent authority against an HMO for physician malpractice, the patient must prove: (1) that the HMO held itself out as the provider for health care, without informing the patient that the care is given by independent contractors; and (2) that the patient justifiably relied upon the conduct of the HMO by looking to the HMO to provide health care services, rather than a specific physician. Apparent authority is a question of fact, and thus an appropriate determination to be made by a jury.
* Plaintiff must also prove the element of “justifiable reliance” to establish apparent authority against an HMO for physician malpractice. This means that the patient acted in reliance upon the conduct of the HMO, consistent with ordinary care and prudence. When a person selects the HMO and does not rely upon a specific physician, then that person is relying upon the HMO to provide health care. A person is also relying on an HMO when, as in Plaintiff’s case, she has no choice but to enroll with a single HMO and does not rely on a specific physician. In this case, Plaintiff did not select Defendant as her HMO. Plaintiff’s employer selected Defendant. Plaintiff then selected Dr. Kowalski from a list of physicians that Defendant provided her. There is a reasonable inference that Plaintiff relied upon HMO to provide her health care services.
* The cardinal consideration for determining the existence of implied authority is whether the alleged agent retains the right to control the manner of doing the work. When an HMO effectively controls a physician’s exercise of medical judgment, there is implied authority. In this case, Plaintiff argues that the facts and circumstances show that Defendant exerted sufficient control over Doctor so as to negate their status as independent contractors. The facts and circumstances presented are properly left to a jury to determine the issue of implied authority.

Discussion. In its opinion, the court makes clear that the label of “independent contractor” does not always shield an HMO from medical malpractice under the theory of vicarious liability. An HMO may be held vicariously liable for the negligence of its independent-contractor physicians under both the doctrines of apparent authority and implied auth