Direct Liability Theories

• Statutory Liability in California, CC 3428
• Elder Abuse Act California WIC 15600
• Negligent Supervision, etc.
• Negligence per se
• Negligent Staffing
• Medically inappropriate decisions
• Bad Faith Cost-Containment
• Breach of the Implied Covenant of Good Faith and Fair Dealing
  • HMO Bad Faith Articles by Scott Glovsky
  • Obligations of Insurer
  • California Definition of Unfair Insurance Claims Settlement Practices
  • Hughes v. Blue Cross of Northern Calif.
  • Ace v. Aetna, a disability case.
  • Hints re Discovery
• Unfair Business Practices under Calif. BPC 17200
  • Mass. Mutual v. Sup. Ct (Karges), 4th AD, D036986 . (4/29/02)
  • State Farm v. Sup. Ct. (Allegro), 45 Cal.App.4th 1093, 1103 (1996)
  • Samura v. Kaiser FHP, 17 Cal.App.4th 1284, 1299 (1993)
• Interference with Doctor/Patient Relationship
  • Heller v. Norcal, 8 Cal.4th 30,45 (1994)
• Intentional Misrepresentation
  • Sanchez v. Lindsey Morden, 72 Cal.App.4th 249,254 (1999)
  • Orient Handel v. U.S. Fidelity, 192 Cal.App.3d 684, 692 (1987)
• Negligent Misrepresentation
  • Davis v. Blue Cross of No. Calif., 25 Cal.3d 418, 428 (1979)
  • Westrick v. State Farm, 137 Cal.App.3d 685, 692 (1982)
• Intentional Infliction of Emotional Distress
  • Fletcher v. Western Nat'l Life, 10 Cal.App.3d 376, 394 (1970)
  • Little v. Stuyvesant Life, 67 Cal.App.3d 451-461 (1977)
• Civil RICO
  • Dana Corp. v. Blue Cross, 900 F.2d 882, 884 (6th Cir. 1990)
• Breach of Implied Warranty of Quality
  • Untested, but an interesting theory
  • See the article by Wm. S. Brewbaker III, at Law & Contemporary Problems, Vol. 60 No 1&2, p.117, Duke Univ. School of Law

Vicarious Liability Theories

• Agency
• Ostensible Agency
• Joint Enterprise
• Contractual Non-delegable Duty
• Statutory Non-delegable Duty
• Though the California Knox-Keene act, (HSC #1371.25) may appear to rule out vicarious liability, it was held in McCall v. Pacificare that the HMO can be vicariously liable for acts of its agent. The act only prevents HMOs from requiring indemnification from its doctors.
• May not be preempted by ERISA
• "Corporate Practice of Medicine" Doctrine

Miscellaneous Tactics

It may be possible to obtain discovery of insurer's handling of similar claims. Pfizer v. Sup. Ct. (Cal. Ct. of Appeal)

• Statutory Liability in California, CC 3428
  • California HMO members have a powerful new tool as of 1/1/2001, in Civil Code Section 3428 which makes an HMO liable for all damages resulting from a breach of the duty to exercise ordinary care in making its decisions.
  • Since this rule applies only to HMOs, it should be useful even against ERISA HMOs, since insurance regulations aren't preempted by ERISA.
  • Nevertheless, it has some shortcomings:
    • It doesn't provide for attorneys' fees
    • No damages for emotional distress if the plaintiff dies
    • Requires exhaustion of independent review process
    • Requires "substantial harm"
    • If applicable, the Elder Abuse Act circumvents these problems
• California Elder Abuse Act, WIC 15600
  • Thanks to an article by Sharon Arkin, CAOC Forum, 4/01, p.28, for this outline
  • Plaintiff: anyone 65 or older, OR any "dependent adult" 18-64 (eg: totally disabled)
  • Defendant: "care custodian", includes "any...person providing health services" WIC 15610.17
    And Knox-Keene defines an HMO as "Any person who undertakes to arrange for the provision of health care services to subscribers..." HSC 1345(f)(1)
    So an HMO can be a defendant.
  • Types of Abuse covered:
    • "Deprivation of goods or services necessary to avoid physical harm or mental suffering" WIC 15610.07.
      Mental suffering is further defined as "fear, agitation, confusion, severe depression, or other forms of serious emotional distress that is brought about by...deceptive acts performed or false and misleading statements made with malicious intent..."
    • Financial Abuse, including wrongfully and knowingly retaining personal property.
      And health care benefits are personal property (Estate of Mitchell, 76 Cal.App.4th 1378, 1392 (2000))
    • Neglect, ie "failure to exercise reasonable care", (WIC 15610.57(a))
      including "failure to provide medical care for physical and mental health needs"
      by any person "having care or custody" of the plaintiff.
      This has been held to include health practitioners and care custodians (as above) (Mack v. Soung, 80 Cal.App.4th 966, 973 (2000))
  • Types of Damages available:
    • All usual actual and consequential damages, by preponderence of the evidence
    • Attorneys' fees and costs, and emotional distress (subject to MICRA cap), by clear and convincing evidence
    • Punitive Damages
• Negligent selection, retention, employment, supervision, screening, monitoring, & evaluation.
  Especially if HMO selects the consultant

  Cases re Hospitals:

  Elam v. College Park Hospital, 132 Cal.App.3d 332

  Hospital is liable for malpractice by Agents, Ostensible Agents, and Independent members of the Staff! Even if MD was selected by patient!

  Is this weakened by "Any Willing Provider" laws?

  Cases re HMOs:

  Harrell v. Total Health Care, 781 SW2d 58 (MO 1989)

  McClellan v. HMO of PA, 442 PA Suer. 504 (1995)

• Negligence per se by violating laws, eg: Bergeson Bill in California.
• Negligent Staffing
  Does HMO force 'family' doctors to do procedures beyond their training & competence, in order to avoid referral to expensive specialists?
• Medically inappropriate decisions, Bad Faith:

  Usually Denial of Coverage. HMO says benefit is:

  Experimental,

  Medically unnecessary, or

  Not covered.

  Wickline v. Calif., 239 Cal Rptr 810(Ct.App 1986)

  UR-forced early discharge led to injury.
  "Third party payors of health care services can be held legally accountable when medically inappropriate decisions result from defects in the design or implementation of cost containment mechanisms as, for example, when appeals made on a patient's behalf for medical or hospital care are arbitrarily ignored or unreasonably disregarded or overruled."
  But Plaintiff Lost because:
  MD had sole discharge responsibility,
  decision was within accepted standard of care, and
  MD didn't appeal MediCal's UR decision.

  Wilson v. Blue Cross of So.Cal, 271 Cal.Rptr.876 (1989)

  Policy allowed 30 hosp. days for depression. MD requested it. Gratuitous UR denied it. Pt. committed suicide after discharge.

  "The language in Wickline which suggests that civil liability for a discharge decision rests solely within the responsibility of a treating physician in all contexts is dicta." So court found BC's refusal to pay, a "substantial factor" in P's death.

  Note also poss. breach of contract.

  Williams v. HealthAmerica, 535 NE2d 717 (Ohio Ct App 1987)

  HMO refused referral to specialist. Patient paid & was successfully dx'ed & rx'ed. Court found statutory duty to administer a complaint system in good faith. Found evidence of Bad Faith by HMO.

• Bad Faith Cost-Containment
  An HMO's cost-containment system caused MD to give poor care.
  Theory was rejected in Bush v. Dake, No.86-25767 NM-2 (Mich.,Saginaw Cty Cir Ct, 4/27/1989) requires evidence of negligence and causation.

• Agency (also called "implied authority")
  • See Rest.2d of Agency s.220 for factors.
  • Excellent discussion in Petrovich v. Share Health Plan, Illinois Supreme Court, #85726, 9/30/99.
  • Case reviews in 51 ALR 5th 271 (1997)
  • Trends discussed in 43 Vill. L. Rev. 499 (1998)
  • For Employed MD's, agency should be clear-cut.
    eg: for HMO's using Staff model, eg: Kaiser
  • For Independent Contractor MD's

    May be treated as Employee.

    Regardless of what their contract says:

    Who has control over the physical details of the work?

    many of these are dictated by the HMO.

    MD works in a clinic run by the HMO.

    MD works regular hours set by HMO.

    HMO may overrule MD recommended care.

    HMO prescribes which MDs may be selected by members.

    Does MD work for anyone other than the HMO?

    Does MD receive income from other sources?

    Is income fixed regardless of workload?

    eg: capitation

    An HMO was found vicariously liable for the negligence of a medical consultant.

    Schlier v. Kaiser Hosp. 876 F.2d 174 (1989)

    ERISA doesn't preempt vicarious liability causes of action against HMOs.

    See Villazon v. Prudential, Florida Supreme Court, 2003

  • Where to look for Evidence of HMO Control:
    • HMO contract with members
    • HMO contract with providers
    • Member Handbook
    • Advertising Brochures
    • Physician Lists
    • Claims Forms
    • Financial Records
    • Depositions of HMO employees
• Ostensible Agency, (also called "apparent authority")

  An excellent review of this subject is found in Mejia v. Comm. Hosp. of San Bernardino

  General Considerations:

  HMO held out Dr. as competent & qualified

  HMO advertisements referring to doctors

  Lists of approved doctors

  Signs in MD's office referring to HMO

  MD's forms containing HMO name

  HMO selects or limits choice of consultants

  HMO runs the clinic

  Often applied to Hospitals, why not HMO's?

  eg: radiologists, pathologists

  Boyd v. Albert Einstein Med. Ctr. 547 A.2d 1229, 1234-35 (Pa. Sup. Ct. 1988)

  "...an HMO may be held liable for MP under an Ostensible Agency theory where a pt looks to the HMO for care & the HMO's conduct leads the pt to reasonably believe that he...is being treated by an employee of the HMO."

  Restatement (Second) of Torts Section 429:

  One who employs an independent contractor to perform services for another which are accepted in the reasonable belief that the services are being rendered by the employer or by his servants, is subject to liability for physical harm caused by the negligence of the contractor in supplying such services, to the same extent as though the employer were supplying them himself or by his servants.

  Restatement (Second) of Agency, Section 267:

  One who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.

  Comment (a) to Section 267:

  The mere fact that acts are done by one whom the injured party believes to be the defendant's servant is not sufficient to cause the apparent master to be liable; [rather,] . . . [t]he rule normally applies where the plaintiff has submitted himself to the care or protection of an apparent servant in response to an invitation from the defendant to enter into such relations with such servant.

  Restatement (Third) of Agency § 2.03 comment c (2006):

  Imputation of liability based on apparent authority prevents a principal from 'choos[ing] to act through agents whom it has clothed with the trappings of authority and then determin[ing] at a later time whether the consequences of their acts offers an advantage.'

  PA courts: two factors relevant to finding ostensible agency:

  (1) whether the patient looks to HMO, rather than MD for care, and

  (2) whether HMO "holds out" the physician as its employee.

  NJ court: five factors in deciding whether a doctor has been cloaked in "apparent authority":

  (1)Whether the hospital supplied the doctor

  (2) The nature of the treatment, such as whether it was in an emergency room

  (3) Whether there were any notices or disclaimers regarding the doctor's employment situation

  (4) Whether there had been any prior contact between the doctor and the patient

  (5) Whether the patient had any special knowledge about the relationship between the hospital and the doctor

  (Estate of Cordero v. Christ Hospital et al. , A-1289-07 (2008))

  One Court found ostensible agency of a consulting radiologist becasue HMO advertised "complete health care services"

  Decker v. Saini, Mich. Cir. Ct. 1991

• Joint Enterprise Theory
  Need to show:
  • Community of interest
  • Common Purpose
  • Joint control or right of control
  • joint proprietary interest
  • right to share in the profits
  • duty to share in the losses.
  
  Discover HMO/MD contracts
  Capitation would certainly seem to qualify!
  See:

  Tanner v. Sup. Ct., 696 P2d 693 (AZ 1985)

  Arango v. Reyka, 507 So2d 1211 (FL 1987)

  
  Cases contra:

  Raglin v. HMO Ill., 595 NE2d 153 (1992)

  HMO can't be held vicariously liable for MP when it didn't control MD's activities. BUT: see above re 'control'

  Chase v. IPA,Inc., 583 NE2d 251 (1991)

  IPA not vicariously liable for MD's malpractice.