McClellan v. Health Maintenance Organization of Pennsylvania

• Decision Date: 10 March 1992
• Parties: Ronald M. McCLELLAN and Harold Shotel, Co-Executors of the Estate of Marilyn M. McClellan, Deceased, Appellants, v. HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA a/k/a HMO PA Foundation and United States Healthcare of Pennsylvania, Inc. d/b/a HMO Pennsylvania, Appellees. Ronald M. McCLELLAN and Harold Shotel, Co-Executors of the Estate of Marilyn M. McClellan, Deceased, Appellants, v. Joseph A. HEMPSEY, D.O.
• Court: Pennsylvania Superior Court

Page 1053

604 A.2d 1053

413 Pa.Super. 128

Ronald M. McCLELLAN and Harold Shotel, Co-Executors of the Estate of Marilyn M. McClellan, Deceased, Appellants, v. HEALTH MAINTENANCE ORGANIZATION OF PENNSYLVANIA a/k/a HMO PA

Foundation and United States Healthcare of

Pennsylvania, Inc. d/b/a HMO

Pennsylvania, Appellees.

Ronald M. McCLELLAN and Harold Shotel, Co-Executors of the Estate of Marilyn M. McClellan, Deceased, Appellants, v. Joseph A. HEMPSEY, D.O.

Superior Court of Pennsylvania.

Argued September 26, 1991.

Filed March 10, 1992.

Brian D. Rosenthal, Philadelphia, for appellants.

David F. Simon, Blue Bell, for Health Maintenance & U.S. Healthcare, appellees.

Before ROWLEY, President Judge, and McEWEN and TAMILIA, JJ.

McEWEN, Judge:

This appeal has been taken from an order which sustained the preliminary objections in the nature of a demurrer filed by Health Maintenance Organization of Pennsylvania and United States Healthcare of Pennsylvania (hereinafter appellees) and dismissed the complaint against appellees with prejudice. ¹

Marilyn McClellan, appellants' decedent, a 39-year-old teacher employed by the School District of Philadelphia, was the wife of appellant Ronald M. McClellan and the mother of three young children. Sometime prior to June of 1985 Marilyn McClellan contracted, through her employer, the School District of Philadelphia, with Health Maintenance Organization of Pennsylvania, an HMO operated by appellees, for health care coverage for herself and her family.

HMOs, authorized by the Health Maintenance Organization Act, Act of December 29, 1972, P.L. 1701, No. 364, § 1, as amended, 40 P.S. §§ 1551 et seq., are defined as "an organized system which combines the delivery and financing of health care and which provides basic health services to voluntarily enrolled subscribers for a fixed prepaid fee." 40 P.S. § 1553. Appellees allege in their brief that HMO PA is a modified IPA model HMO ² "in which the HMO contracts with the independent, private physicians as independent contractors." A primary care physician is assigned to each subscriber and is the "physician who supervises, coordinates, and provides initial and basic care to members; initiates their referral for specialist care; and maintains continuity of patient care." 28 Pa.Code § 9.2.

Marilyn McClellan selected Joseph A. Hempsey, D.O., as her family's primary care physician from the list of participating physicians provided by HMO of Pennsylvania. Appellants allege that Dr. Hempsey removed a mole from Mrs. McClellan's back on October 28, 1985, and, even though Mrs. McClellan had related to Dr. Hempsey that the mole had recently undergone a marked change in size and color, Dr. Hempsey discarded the mole without obtaining a biopsy or other histological exam. Appellants claim that as a result of Dr. Hempsey's failure to submit the tissue sample for testing, Mrs. McClellan's malignant melanoma was not timely diagnosed or treated, and Mrs. McClellan died on January 1, 1988.

Appellants commenced a medical malpractice action against Dr. Hempsey, and later instituted suit against appellees, alleging that the negligence of appellees in selecting and retaining Dr. Hempsey as a primary care physician contributed to the condition which caused the death of Mrs. McClellan. Appellants also sought to hold appellees liable for breach of contract and misrepresentation based upon the express representations made by appellees concerning the competency of their primary care physicians and the availability to subscribers of consultation and treatment by medical specialists whenever warranted through primary care physician referrals. The two actions were consolidated and appellees filed preliminary objections in the nature of a demurrer to the complaint. The trial court sustained the demurrer ³ and this appeal timely followed. ⁴

Appellants contend that the order must be reversed and the complaint reinstated since the amended complaint, contrary to the conclusion of the trial court, sets forth valid causes of action in assumpsit and trespass based upon:

1) ostensible agency;

2) corporate negligence;

3) breach of contract/breach of warranty; and

4) intentional misrepresentation or fraud.

Appellants also argue that the complaint properly includes a claim for punitive damages and that none of the claims set forth in the amended complaint are preempted by ERISA. ⁵ After a careful review of the record, we find that the procedural posture of this case compels reversal of the trial court order and reinstatement of the complaint. ⁶

A trial court, in ruling upon preliminary objections in the nature of a demurrer, employs the same standard applied by this Court:

A demurrer can only be sustained where the complaint is clearly insufficient to establish the pleader's right to relief. Firing v. Kephart, 466 Pa. 560, 353 A.2d 833 (1976). For the purpose of testing the legal sufficiency of the challenged pleading a preliminary objection in the nature of a demurrer admits as true all well-pleaded material, relevant facts, Savitz v. Weinstein, 395 Pa. 173, 149 A.2d 110 (1959), and every inference fairly deducible from those facts, Hoffman v. Misericordia Hospital of Philadelphia, 439 Pa. 501, 267 A.2d 867 (1970); Troop v. Franklin Savings & Trust, 291 Pa. 18, 139 A. 492 (1927). The pleader's conclusions or averments of law are not considered to be admitted as true by a demurrer. Savitz v. Weinstein, supra.

Since the sustaining of a demurrer results in a denial of the pleader's claim or a dismissal of his suit, a preliminary objection in the nature of a demurrer should be sustained only in cases that clearly and without doubt fail to state a claim for which relief may be granted. Schott v. Westinghouse Electric Corp., 436 Pa. 279, 259 A.2d 443 (1969); Botwinick v. Credit Exchange, Inc., 419 Pa. 65, 213 A.2d 349 (1965); Savitz v. Weinstein, supra; London v. Kingsley, 368 Pa. 109, 81 A.2d 870 (1951); Waldman v. Shoemaker, 367 Pa. 587, 80 A.2d 776 (1951). If the facts as pleaded state a claim for which relief may be granted under any theory of law then there is sufficient doubt to require the preliminary objection in the nature of a demurrer to be rejected. Packler v. State Employment Retirement Board, 470 Pa. 368, 371, 368 A.2d 673, 675 (1977); see also Schott v. Westinghouse Electric Corp., supra [436 Pa.] at 291, 259 A.2d at 449.

MacGregor v. Mediq, Inc., 395 Pa.Super. 221, 225-26, 576 A.2d 1123, 1125 (1990), quoting County of Allegheny v. Commonwealth, 507 Pa. 360, 372, 490 A.2d 402, 408 (1985) (emphasis supplied). Accord: Kyle v. McNamara & Criste, 506 Pa. 631, 634, 487 A.2d 814, 816 (1985); Mudd v. Hoffman Homes for Youth, Inc., 374 Pa.Super. 522, 524-525, 543 A.2d 1092, 1093-1094 (1988). Thus, even though less than a model pleading, the complaint in the instant case may not be dismissed unless this Court is convinced that, as a matter of law, no recovery is possible under the facts as pled.

I. CLAIMS BASED UPON NEGLIGENCE.

Appellants sought, in their complaint, to state a cause of action in negligence utilizing theories of ostensible agency and corporate negligence.

(a) Ostensible Agency.

As to the theory of ostensible agency, resolution of the question of whether the defendant, Joseph Hempsey, D.O., could properly be found by a jury to be the ostensible agent of the appellees is controlled by the holding of this Court in Boyd v. Albert Einstein Medical Center, 377 Pa.Super. 609, 547 A.2d 1229 (1988). This Court there concluded that the trial court had erred in entering summary judgment in favor of the defendant HMO ⁷ where there "existed a question of material fact as to whether participating physicians are the ostensible agents of HMO." Id. at 610-11, 547 A.2d at 1229. We agree with appellants that the factual allegations of their complaint are sufficient to withstand a demurrer since the defendant Dr. Hempsey could properly be found by a jury, depending upon the evidence produced at trial, to be the ostensible agent of appellees.

The theory of ostensible agency, first applied by this Court in Capan v. Divine Providence Hospital, 287 Pa.Super. 364, 430 A.2d 647 (1980), as noted by our Supreme Court in Thompson v. Nason Hospital, 527 Pa. 330, 338, 591 A.2d 703, 707 (1991), has been defined as follows:

Pennsylvania courts have determined that the two factors relevant to a finding of ostensible agency are: (1) whether the patient looks to the institution, rather than the individual physician for care and (2) whether the HMO 'holds out' the physician as its employee. Also instructive is the definition of apparent or ostensible agency in the Restatement (Second) of Agency, Section 267, which provides:

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.

Boyd v. Albert Einstein Medical Center, supra, 377 Pa.Super. at 619-20, 547 A.2d at 1234.

The amended complaint filed by appellants provided, in relevant part:

a) that at all relevant times, the appellees were acting by and through their agents, servants, employees and/or ostensible agents who, in turn were acting within the course and scope of their employment. [Paragraph 5]

b) that the appellees assigned and/or referred each individual subscriber to the care of a "primary care physician". [Paragraph 6]

c) that appellants' decedent was provided with a directory of primary care physicians from which she was required to choose a "primary care physician". [Paragraph 43]

d) that appellants' decedent was assigned and/or referred to Dr. Joseph Hempsey as her "primary care physician". [Paragraph 14]

e) that no member of the HMO operated by appellees could consult with or come under the care of a specialist who participated in the HMO...