Dunn v. Praiss

• Decision Date: 18 April 1995
• Citation: 656 A.2d 413,139 N.J. 564
• Parties: , 63 USLW 2704, 51 A.L.R.5th 799 Linda B. DUNN, individually, and as the Administratrix ad Prosequendum of the Estate of Carey Dunn, Plaintiff, v. Donald E. PRAISS, M.D., and Martha Brumbaugh, M.D., Defendants. Joel E. MARMAR, M.D., and South Jersey Urologic Associates, Defendants-Respondents, v. HEALTH CARE PLAN OF NEW JERSEY, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 564

139 N.J. 564

656 A.2d 413, 63 USLW 2704, 51 A.L.R.5th 799

Linda B. DUNN, individually, and as the Administratrix ad

Prosequendum of the Estate of Carey Dunn, Plaintiff, v.Donald E. PRAISS, M.D., and Martha Brumbaugh, M.D., Defendants.

Joel E. MARMAR, M.D., and South Jersey Urologic Associates,Defendants-Respondents, v.HEALTH CARE PLAN OF NEW JERSEY, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Jan. 18, 1995.

Decided April 18, 1995.

Richard A. Grossman, Brick, for appellant(Grossman & Kruttschnitt, attorneys; Herbert Kruttschnitt, III, of counsel; Eli L. Eytan, on the brief).

Stephen M. Greenberg, Roseland, for respondents(Stern & Greenberg, attorneys; Mr. Greenberg and Jeffrey Speiser, on the brief).

The opinion of the Court was delivered by O'HERN, J.

This appeal concerns the concurrent duties of a health maintenance organization (HMO) and the physicians who contract with the HMO to deliver medical services.

Traditionally the prohibition on the corporate practice of medicine stemmed from a perceived need to protect the public from the commercial exploitation of the practice of medicine."It has been said to be against public policy to permit a 'middleman' to intervene for profit in establishing the professional relationship between members of the medical profession and members of the public."Michael A. Dowell, The Corporate Practice of Medicine Doctrine Must Go, HealthSpan, Nov. 1994, at 7, available in WESTLAW, HealthSpan Database, * 4.

Ever-increasing complexity and costs have brought about vast changes in the delivery of medical services.Today, most would not recognize Norman Rockwell's portrait of the family doctor.The 1973 Health Maintenance Organizations Act, N.J.S.A. 26:2J-1 to -30 (HMO Act), authorized the creation of corporate HMOs.The HMO Act states that such organizations "shall not be deemed to be practicing medicine" and exempts such organizations from licensure relating to the practice of medicine.N.J.S.A. 26:2J-25c.Although it grants immunity to certain HMO employees, the HMO Act does not confer immunity from medical malpractice lawsuits on the HMO itself.Robbins v. HIP of New Jersey, 264 N.J.Super. 572, 625 A.2d 45(Law Div.1993).

[A] potential exists for HMOs to be held liable for medical malpractice based on one or more of several tort theories: (1) vicarious liability on the basis of respondeat superior or ostensible agency; (2) corporate negligence based upon negligent selection and negligent control of the physician; and (3) corporate negligence based upon the corporation's independent acts of negligence, e.g. in the management of utilization control systems.Contract law might also be utilized to hold HMOs liable for malpractice based on breach of contract or breach of warranty.See Oakley and Kelley, HMO Liability for Malpractice of Member Physicians: The Case of IPA Model HMOs, 23 Tort and Insurance Law Journal 624, 626 (1988).

[Raglin v. HMO Illinois, Inc., 230 Ill.App.3d 642, 172 Ill.Dec. 90, 93, 595 N.E.2d 153, 156(Ill.App.Ct.1992).]

This case implicates the first and third of those theories.A physician-provider who has been found guilty of medical malpractice seeks contribution from his HMO on the basis of its independent breach of contractual duty to a patient-subscriber of the HMO.We hold that such a claim may be asserted but is procedurally barred in the circumstances of this case.

I

In May 1982Carey Dunn, a Philadelphia Navy Yard worker, experienced swelling and pain in his scrotal area.A private physician treated him, and his condition improved with antibiotics.Later that year Dunn joined the Health Care Plan of New Jersey (HCP).Dr. Martha Brumbaugh became Dunn's primary physician at HCP.The "official description of benefits" under the plan said (emphasis added):

This Plan is a group-practice prepayment plan, sometimes called a Health Maintenance Organization or HMO.It offers more than health insurance alone * * *.

* * * * * *

Plan members receive health care from a large number of well qualified, highly trained physicians.When a new member joins HCP he or she will select a "primary physician" or "family doctor" from the HCP Medical Staff.This doctor becomes the member's personal physician and assumes responsibility for coordinating the member's total health program.

In December 1982 Dunn's symptoms recurred.In January 1983 Dr. Brumbaugh diagnosed a recurrence of epididymitis (inflammation of the tissues surrounding the testicle).She referred Dunn to Dr. Donald Praiss of South Jersey Urologic Associates(SJUA), a group that contracted with HCP to provide services to HCP subscribers.Dr. Praiss diagnosed an atrophic (shrunken) testicle with persistent hydrocele (collection of fluid) and a possible hernia.He sent Dunn for a scrotal scan, which showed some type of mass, but did not determine its composition.These are the crucial dates:

2/14/83 .Scrotal scan revealed mass.Dr. Praiss ordered no further

tests to determine if the mass was cancerous, but

scheduled a return appointment.

2/22/83 .Dr. Joel Marmar(another SJUA physician) examined Dunn and

told him to note any change in the size of the mass

through self-examination.Dr. Marmar ordered no further

tests and scheduled no return appointments.Neither the

scrotal scan results nor the SJUA physicians' evaluations

reached Dr. Brumbaugh, who had no further contact with

Dunn.

11/28/83 .Dunn, complaining of a "full feeling" in his chest, saw Dr.

Brumbaugh, who ordered medication and various tests.

12/83 .Oncological tests disclosed testicular cancer that had

spread to the liver.

After extensive chemotherapy, Dunn died on April 30, 1985.

Carey Dunn's widow, Linda Dunn, sued HCP, Dr. Brumbaugh, Dr. Marmar, Dr. Praiss, and SJUA.She asserted claims of medical malpractice against the individual physicians, and against HCP as their principal.She also asserted independent claims against HCP, including breach of contract based on Dr. Brumbaugh's failure to review and follow up the urologists' reports.Dr. Marmar and SJUA asserted cross-claims for contribution and indemnification against their codefendants.

The case was tried to a jury in June and July 1990.At the end of plaintiff's case, HCP moved to dismiss all claims against it, both the claims based on respondeat superior and the claims of independent liability.The trial court dismissed all of the claims against HCP, as well as the claims against all of the other defendants, except for Dr. Marmar and his group, SJUA (collectively, Dr. Marmar).

After the trial court dismissed plaintiff's claims against HCP, plaintiff's counsel asked the court whether Dr. Marmar's cross-claims against HCP would be dismissed.

[Plaintiff's Counsel]: I'm just assuming this dismisses that cross-claim and all facts alleged by Dr. Marmar against the HCP as well?I assume it's all inclusive, they are not still going forward to prove facts that it was HCP and not they that didn't fail to discharge the responsibility?

The Court: I didn't consider the cross-claim.

[Dr. Marmar's counsel]: I would state for the record, I have no evidence that HCP would have done anything deemed negligent.I would not submit any evidence on that.The only thing seems to me, if counsel for the plaintiff is correct, ultimately that there was some vicarious responsibility, your Honor's comments today, they would share in that liability that we ultimately bear in this case I think takes care of that.

The Court: All I say, they may be bound if, you have to look at * * * [Pappas v. Santiago, 66 N.J. 140(1974) ], they were invited if they want to continue and the law says they can continue in the participation of the trial where you are continuing along with the theory of damages because quite conceivably if there is an award and they have been let out and there's a tort feasor still remaining, they may be on the rug for damages, so they still have a right to participate in the trial if they want to.

[Dr. Marmar's counsel]: I understand.

[Emphasis added.]

The trial court did not further address the cross-claims but instead asked HCP whether, pursuant to Pappas v. Santiago, 66 N.J. 140, 145, 329 A.2d 337(1974)(codefendant who prevails at separate trial on liability issue is entitled to participate in trial on damages, since he will be bound by damages fixed if favorable liability ruling is reversed), it wished to continue to participate in the trial on the issue of damages even though it was no longer a party.HCP declined.Dr. Marmar concedes that the cross-claims were effectively dismissed at that time, though the court entered no such order.

The case proceeded to trial against Dr. Marmar.The jury returned a verdict in favor of plaintiff in the sum of $2,904,240.54 apportioning ten percent fault to the decedent and ninety percent to Dr. Marmar.

Plaintiff appealed, claiming that HCP had been improperly dismissed as a party, and that HCP was not only liable as Dr. Marmar's principal but also had direct liability for breach of contract.Dr. Marmar cross-appealed (1)the trial court's denial of certain expert testimony on the liability issues and (2) various damage issues, most notably the issue in Tenore v. Nu Car Carriers, Inc., 67 N.J. 466, 482, 341 A.2d 613(1975)(holding that introduction of evidence prepared by expert witnesses purporting to show an injured plaintiff's aggregate damages is improper).Dr. Marmar did not appeal the dismissal of his cross-claims against HCP.

The Appellate Division held that HCP was vicariously liable for Dr. Marmar's actions on a theory of respondeat superior or agency, and that it was therefore not necessary to analyze plaintiff's contract theory.It affirmed the liability judgment but remanded for retrial on damages only because of trial errors:

Plaintiff has requested that we overturn the trial judge's determination to dismiss plaintiff's claims against the HMO.Plaintiff has couched her argument in...