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Companies May Be Liable in Indiana Malpractice Cases Despite Complex Corporate Arrangements

On Behalf of | Aug 6, 2019 | Medical Malpractice

Even when complex corporate arrangements between independent health care providers and medical facilities exist, companies may not be protected from liability in Indiana medical malpractice cases. In February 2019, a federal jury in Indiana returned a $15 million verdict in a medical malpractice case, holding a third-party imaging center liable for the negligence of an independent radiologist under the theory of apparent agency.

Understanding Liability in Indiana Malpractice Cases

In some cases, physicians and health care staff at hospitals, imaging facilities, and other medical offices and clinics are employees of the facilities where they provide services. Alternatively, doctors and medical staff may also operate as independent contractors, carrying their own liability insurance and acting only on their own authority.

Generally, health care facilities are responsible for the actions of their employees or agents when they are acting within their scope of employment. They may not be liable for the actions of independent contractors or non-employee providers and staff, however, unless it could be construed that the providers are rendering services for or under the direction of the facility. In these cases, third-party facilities may be held liable for damages based on the theory of apparent agency.

What Is Apparent Agency?

Apparent agency occurs when someone reasonably believes that another has the authority to act on behalf of an entity or another person. This type of presumed authority can be found even when the apparent agent has been granted no such power. Contracted medical providers may be considered apparent agents of the facilities in which they are providing services if patients could reasonably presume they are acting on behalf of the facility. Apparent agency may also arise when a medical provider’s conduct could lead third parties to logically believe they are rendering services on behalf of the facility.

U.S. Court of Appeals Affirms Malpractice Verdict

The U.S. Court of Appeals recently affirmed a district court’s ruling holding an Indiana imaging facility liable for a non-employee physician’s failure to diagnose cancer. The patient filed a lawsuit against the diagnostic imaging facility alleging an independent radiologist neglected to identify and diagnose cancer in a CT scan. As a result of the missed diagnosis, the patient claimed her condition went undiagnosed and untreated for more than a year, reducing her survival chances.

The diagnostic imaging facility denied liability, arguing that it is merely a management company for a medical group that provides administrative services, including arranging facilities, equipment, and billing. The company claimed theirs was simply a contractual relationship with the radiologist rendering services out of the facility and not on its behalf. The courts ruled in favor of the patient, however, awarding $15 million to the victim and her husband on the basis that the facility is liable under the theory of apparent agency.

Recovery Limitations Under the Indiana Medical Malpractice Act

The Indiana Medical Malpractice Act governs negligence claims against qualified providers in the state and offers protections to medical professionals and patients. Under the Act, for acts of medical malpractice that occur after June 30, 2019, medical malpractice damages are capped at $1.8 million. Health care providers are responsible for the first $500,000. The Patient’s Compensation Fund pays any remaining damages, up to an additional $1.3 million.

Qualifying Providers and Limitations on Damages

Under the Indiana Medical Malpractice Act, health care professionals and facilities that take the necessary steps are considered qualified providers. For the purposes of the act, health care providers include individuals, partnerships, limited liability companies, corporations, facilities, and institutions that are legally authorized or licensed to render health care or professional medical services as a physician, specialist, registered or licensed nurse, hospital, or health facility, or as an officer, agent, or employee of the individual, partnership, corporation, facility, or institution. To become qualified, medical providers must submit proof of financial responsibility and pay a surcharge to the Indiana Department of Insurance. The funds from the surcharge go into the patient’s compensation fund.

Only providers who opt-in to receive the protections of the act have their damages capped. All others are subject to the general laws relating to negligence and personal injury claims. Since the imaging center in the recent case was not a qualified provider, the cap on damages, which was just $1.25 million at the time, did not apply.