The Recent Extended Holding in Sword v. NKC Hospitals, Inc. Raises Liability Concerns for Non-Hospital Healthcare Facilities

By: Olivia N. Daily

The Indiana Court of Appeals recently extended the holding in Sword v. NKC Hospitals, Inc., 714 N.E.2d 142 (Ind. 1999), to diagnostic imaging centers in the opinion authored for Arrendale v. American Imaging & MRI, LLC, a/k/a Marion Open M.R.I, No. 20A-CT-2184 (Ind. Ct. App. 2021). The extension of this holding to diagnostic imaging centers represents significant liability concerns for non-hospital facilities, and as a result, providers to whom this holding applies may want to take proactive steps to insulate themselves from liability for the negligence of independent contractors.

Sword is a seminal case delineating the relationship between medical malpractice law and apparent authority, and is frequently cited in cases analyzing the application of the doctrine of respondeat superior and vicarious liability to hospitals that employ independent contractors. In holding that a hospital can be held vicariously liable for the negligence of an Independent-Contractor Physician, the Court in Sword adopted the interpretation of apparent agency set forth in Section 429 of the Restatement (Second) of Torts, in which the Court must consider the reasonableness of the patient’s belief that the hospital or its employees were providing care to the patient. Id  at 152. A hospital may abrogate liability for negligence of their independent contractors, however, by providing “meaningful written notice” about the independent contractors to the patient at the time of admission to the facility.

In Arrendale v. American Imaging & MRI, LLC, a/k/a Marion Open M.R.I, the Indiana Court of Appeals analyzed whether a diagnostic imaging center, amongst other healthcare providers, could be held vicariously liable for medical malpractice of an independent contractor. The Plaintiff in Arrendale was diagnosed with an arteriovenous fistula of the spine, and sued Marion Open MRI for failing to diagnose his condition when he had presented there for imaging several times between 2013 and 2015. The MRIs were reviewed by another Defendant, Dr. Boutselis, a radiologist who had an independent-contractor relationship with Marion Open MRI. The Court of Appeals determined that Marion Open MRI could be held vicariously liable for the negligence of Dr. Boutselis, despite his status as an independent contractor.

The Plaintiff in Arrendale alleged in their Complaint that Dr. Boutselis was an employee or agent of Marion Open MRI and that Marion Open MRI was therefore liable to the Plaintiff for the actions of Dr. Boutselis. Marion Open MRI moved for Summary Judgment, arguing that Dr. Boutselis was an independent contractor, and that the holding in Sword should only be applied to hospitals rather than outside facilities. The trial court in this case granted summary judgment to the Defendant on these grounds, and the Plaintiff appealed this decision.

The Court in its opinion takes notice of two amicus curiae briefs filed in this case by the Defense Trial Counsel of Indiana and the Indiana Trial Lawyers Association. ITLA, filing their amicus curiae brief on behalf of the Plaintiff, argued that “[t]here is no logical justification for imposing liability on hospitals for the medical malpractice of undisclosed independent contractors while allowing non-hospital healthcare facilities to escape liability under the same circumstances. . . Both hospitals and non-hospital health care facilities are only capable of acting with patients through the health care professionals it engages.” This logic is similar to that employed in Webster v. Center for Diagnostic Imaging, Inc., which is discussed in more detail below.

In contrast, the Defense Trial Counsel of Indiana filed their brief on behalf of the Defendant, Marion Open MRI. DTCI argued that vicarious liability for apparent agents of a healthcare provider should not be extended to diagnostic imaging facilities, and went one step further by arguing that hospitals, as full-service facilities, are different from institutions like the Defendant that provide specialized services. Because they provide full-service medical care, rather than specialized services, DTCI argues in its amicus curiae brief, hospitals should be treated differently under the law regarding apparent agency than diagnostic imaging centers.

Judge Magnus-Stinson’s Opinion in Webster v. Center for Diagnostic Imaging, Inc., No 1.16-cv-02677-JMS-DML, 2017 WL 3839377 (S.D. Ind. Aug. 31, 2017) also heavily influenced the Court of Appeals Opinion in this matter. In this case out of the Southern District of Indiana, Judge Magnus-Stinson noted that there are factual differences between a hospital (which provides full-service healthcare and holds itself out as such) and a diagnostic imaging center. However, she also found that for the Sword analysis, there is no “meaningful difference” between the two, and that “it is entirely possible for a reasonable, prudent patient to conclude from representations made by a medical center that the doctors and health care professionals that service patients within the center’s facilities are agents or servants of the center.” The Indiana Court of Appeals found this logic persuasive, and although Webster was not binding on the Court, it likewise found that there is little meaningful difference between a facility such as the Defendant and a hospital like the Defendant in Sword.

The Court determined that a patient presenting to a diagnostic imaging facility such as the Defendant could reasonably assume that the radiologist interpreting their imaging is an employee of the imaging facility, even if that radiologist is, in fact, an independent contractor. Because the patient could reasonably assume that the provider was an employee of the imaging center and the Defendant had not provided the Plaintiff with “meaningful written notice” that they may be treated by independent contractors, summary judgment was not appropriate. The Court reversed the summary judgment previously granted in this matter and remanded the case for further proceedings consistent with the Court’s decision.

This opinion, very simply put, means that non-hospital healthcare facilities that only provide specialized services also need to provide meaningful written notice under Sword when a patient may be treated by an independent contractor in the facility. In order to avoid being held liable for negligence of independent contractors, if they employ independent contractors, non- hospital facilities should require their patients to sign an informed consent form that indicates they may be treated by independent contractors that are not employees of the imaging center.

Additionally, non-hospital healthcare facilities wishing to avoid liability for medical malpractice may include indemnity and hold harmless clauses in their contracts with non-employee workers. Facilities could also ask to be included as an “additional insured” on any insurance policies held by their independent contractors. Either including indemnity clauses or providing “meaningful written notice” to patients would allow non-hospital healthcare facilities to abrogate vicarious liability for the potential negligence of independent contractors.

The Court’s recent holding in Arrendale should lead non-hospital healthcare facilities to take additional precautions if they employ independent contractors to treat patients. The extension of the holding in Sword to non-hospital facilities, such as diagnostic imaging facilities, could potentially represent a massive liability concern for such a facility if no proactive steps are taken to negate liability.

For questions about medical malpractice or vicarious liability claims, please contact Olivia Daily at odaily@dsvlaw.com or your DSV attorney.


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