Bonnie C. Coleman | Hodges & Davis Law Firm Northwest Indiana

In 1999, the Indiana Supreme Court first held that a hospital may be held liable under agency law for the tortious conduct of an independent contractor, when the independent contractor was not an employee.  Sword v. NKC Hospitals, Inc. 714 NE 2d 142 (Ind. 1999). In Sword, a patient sought medical services at a hospital for the birth of her child, thereafter suffering injuries due to an anesthesiologist’s negligence in administering an epidural.  Previously, Indiana courts held that since a hospital couldn’t practice medicine, it was not liable for the acts of independent contractors who were not employees.  However, the Indiana Supreme Court changed that precedent in Sword when it held that a hospital could be held liable, under agency theory, for the acts of a physician, even though he was an independent contractor.  The question to be asked was not whether an employment relationship existed, but rather “Would a reasonable person conclude under the facts and surrounding circumstances that the independent contractor was either an employee or an agent of the hospital?” 

After Sword, it had generally been presumed that in order for a hospital to be vicariously liable, the negligent actor must have some sort of employment, contractual or other legal relationship with the hospital.  Also, the ruling was generally thought to apply only to hospitals and not to other medical care providers.

Recently, the Indiana Supreme Court issued two rulings expanding the scope of vicarious liability in the health care arena.  The first of the two cases involved a patient’s claim against an MRI facility, alleging that the MRI facility should be held vicariously liable for the negligent acts of its independent contractor radiologist.  Arrendale v. American Imaging & MRI, LLC et. al., No. 21S-CT-370 (Ind. March 24, 2022).The MRI facility argued that it could not be held liable for the acts of the independent contractor radiologist because Sword did not extend the theory of vicarious liability to an outpatient diagnostic center, since it wasn’t a hospital that provides full service medical care.  The Indiana Supreme Court disagreed, finding that since the ruling in Sword, health care delivery had changed markedly, with many more services being performed in outpatient settings; and that both the Federal District Court and the 7th Circuit Court of Appeals had applied Sword to non-hospital medical entities.  The Court further remarked that many states applied vicarious liability to non-hospital entities in similar situations.  The case was remanded to the trial court for a determination as to whether an agency relationship existed between the MRI facility and the radiologist under the rationale in Sword.

In a companion case, the Indiana Supreme Court considered whether the agency relationship would only be found if a formal contractual or legal relationship existed between an Orthopedic Physician and a physical therapist.  Wilson v. Anonymous Defendant 1, Supreme Court case no. 21S-CT-371 (Ind. March 24, 2022).In Wilson, a patient received orthopedic services from a Physician, who sent him to a Physical Therapy Rehab Group located on the 2nd floor of the Physician’s office building.  In addition to the referral to the PT Group, the Physician provided other written information to the patient that referred to physical therapy services as being offered by a department, and the records and billing appeared to have come from the Physician.  As a result of the referral, the Patient was seen by a Physical Therapist of the PT Group, who performed a procedure on the patient, causing injury.  The Physician argued that there was no vicarious liability resulting from the Physical Therapist’s negligence because there was no contractual agreement or legal relationship between the Physician and the Physical Therapist or the PT Group.  The Indiana Supreme Court held that despite the potential lack of a contractual or legal relationship between the Physician and the Physical Therapist, the Physician may be held vicariously liable for the negligent acts of the Physical Therapist if communications to the Patient would lead the Patient to believe that there was an agency relationship.  A medical care provider, according to the Court, will not be allowed to avoid vicarious liability when the lack of an agency relationship is not readily apparent to the average health care consumer.  The matter was remanded to the trial court to determine if there was evidence of an apparent agency relationship.

In broadening the law to these circumstances, the Indiana Supreme Court has taken a much harsher approach toward health care providers who attempt to avoid liability for the acts of others that it has promoted.  In order to avoid the risk of vicarious liability, health care providers should be clear to disclose, when making referrals, that no agency relationship exists.  A lack of proper disclosure that could mislead a patient into assuming otherwise could likely be problematic.

Please note that this post is only a brief summary of the law as it relates to vicarious liability in the medical field and does not constitute legal advice nor does it establish an attorney/client relationship.  Should you have specific questions regarding the above, please contact Bonnie C. Coleman at Hodges and Davis, P.C.