Sword v. NKC Hospitals, Inc.

Decision Date31 January 1996
Docket NumberNo. 10A05-9408-CV-322,10A05-9408-CV-322
Citation661 N.E.2d 10
PartiesDiana SWORD and Carl Sword, Jr., Appellants-Plaintiffs, v. NKC HOSPITALS, INC., Alliant Health System, Inc. d/b/a Norton's Children's Hospital, Appellee-Defendant.
CourtIndiana Appellate Court

Appeal from the Clark Circuit Court; Daniel H. Donahue, Judge, Cause No. 10C01-9204-CT-126.

Derrick H. Wilson, Mattox & Mattox, New Albany, for appellants.

James M. Gary, Weber & Rose, P.S.C., Louisville, Kentucky, for appellee.

OPINION

BARTEAU, Judge.

Diana and Carl Sword appeal from the entry of summary judgment in favor of NKC Hospitals, Inc., Alliant Health System, Inc., d/b/a Norton's Children Hospital (hereinafter "Norton Hospital"), a Kentucky hospital.

ISSUE

We consolidate and restate the dispositive issues raised on appeal as:

1. Whether a hospital may be held liable for the negligent acts of an independent contractor.

2. Whether the trial court erred in determining that the Swords failed to demonstrate that their injuries resulted from the actions of an anesthesiologist.

FACTS

The facts taken in a light most favorable to the non-movants are as follows. The Swords selected Norton Hospital in Louisville, Kentucky as the medical facility in which Diana would deliver their first child. During labor, Diana received an epidural anesthetic which was administered by Dr. Luna, an anesthesiologist at Norton Hospital. Dr. Luna first attempted to insert a catheter into Diana's upper spinal cord near her neck, but was unsuccessful. Dr. Luna then administered the anesthetic by inserting the catheter into Diana's spine in her lower back.

Soon after delivering her healthy baby, Diana began experiencing headaches, sensitivity to light and loud noises, and numbness in her back.

DISCUSSION

In summary judgment proceedings, the party moving for summary judgment must show that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law. Once the movant establishes that no genuine issue of fact exists, the party opposing summary judgment must set forth specific facts indicating that there is a genuine issue in dispute. If the non-moving party fails to meet this burden, summary judgment in favor of the moving party is appropriate. Pierce v. Bank One-Franklin, NA (1993), Ind.App., 618 N.E.2d 16, 18, trans. denied.

Further, the party moving for summary judgment must designate to the trial court all parts of the matters included in the record on which it relies for the motion. The opposing party likewise must designate to the trial court "each material issue of fact which that party asserts precludes entry of summary judgment and the evidence relevant thereto." Ind.Trial Rule 56(C). Any doubt as to the existence of a factual issue should be resolved against the moving party, construing all properly asserted facts and reasonable inferences in favor of the non-movant. Cowe v. Forum Group, Inc. (1991), Ind., 575 N.E.2d 630, 633.

The Swords seek to hold Norton Hospital liable for the negligence of Dr. Luna, an anesthesiologist who practices medicine at Norton Hospital. The parties do not dispute that Dr. Luna was not an employee of Norton Hospital, and practiced medicine at Norton Hospital as an independent contractor. The trial court granted Norton Hospital's motion for summary judgment based upon Indiana law that hospitals may not be held liable for the negligence of independent contractor doctors. See Iterman v. Baker (1938), 214 Ind. 308, 15 N.E.2d 365; see also, South Bend Osteopathic Hosp., Inc. v. Phillips (1980), Ind.App., 411 N.E.2d 387, trans. denied; Ross v. Schubert (1979), 180 Ind.App. 402, 388 N.E.2d 623, reh'g dismissed, 396 N.E.2d 147, trans. denied; Huber v. Protestant Deaconess Hosp. (1956), 127 Ind.App. 565, 133 N.E.2d 864, trans. denied; Fowler v. Norways Sanitorium (1942), 112 Ind.App. 347, 42 N.E.2d 415, trans. denied. The Swords ask that we revisit this issue, and consider whether Norton Hospital may be held liable under the doctrine of apparent agency.

Apparent Agency

The Swords argue that Norton Hospital should be held liable for the negligence of Dr. Luna, despite the fact that Dr. Luna is an independent contractor, under the doctrine of apparent agency. Many courts have recognized such liability based upon either or both of two theories arising under the specter of apparent agency, in some cases confusing the two and misapplying the analysis. See D. Janulis & A. Hornstein, Damned If You Do, Damned If You Don't: Hospitals' Liability for Physicians' Malpractice, 64 Neb.L.Rev. 689, 696-702 (1985). The first theory is commonly referred to as ostensible agency, and is based upon Restatement (Second) of Torts, § 429, which states:

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.

The second theory is commonly referred to as agency by estoppel, and is predicated on Restatement (Second) of Agency, § 267:

One who represents that another is a 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.

The Swords invite us to adopt either of these Restatement provisions and find that Norton Hospital may be held liable for Dr. Luna's alleged negligence. While we decline to adopt either of the Restatement provisions at this time, we find that the Swords may state a claim against Norton Hospital under existing Indiana law.

Indiana recognizes the doctrine of apparent agency and follows the rule that a principal may be held liable by a third party for the negligence of one whom the principal holds out as its agent.

Like an actual agency relationship, an apparent agency is also initiated by a manifestation of the principal. However, the required manifestation is one made by the principal to a third party who in turn is instilled with a reasonable belief that another individual is an agent of the principal.... The essential element being there must be some form of communication, direct or indirect, by the principal, which instills a reasonable belief in the mind of the third party.

Hope Lutheran Church v. Chellew (1984), Ind.App., 460 N.E.2d 1244, 1248 (citing Stuteville v. Downing (1979), 181 Ind.App. 197, 199, 391 N.E.2d 629, 631; Burger Man, Inc. v. Jordan Paper Products, Inc. (1976), 170 Ind.App. 295, 312, 352 N.E.2d 821, 832, trans. denied; Storm v. Marsischke (1973), 159 Ind.App. 136, 138, 304 N.E.2d 840, 842). Our Supreme Court established long ago that a third party may hold a principal liable for the negligence of its apparent agent.

Where one represents to another that a designated person is his servant or agent, and induces the person to whom such representations are made to confide therein, and he acts upon the belief that such relationship does in fact exist, an action may be maintained for the servant's negligence, although the relationship of master and servant did not exist.

Growcock v. Hall (1882), 82 Ind. 202, 203-04. 1 Still, no Indiana case has ever applied the doctrine of apparent agency and found that a hospital may be held liable for injuries sustained by a patient as the result of the negligence of an independent contractor.

Indiana hospitals' insulation against liability for the negligence of independent contractor doctors may be traced to our Supreme Court's decision in Iterman, 214 Ind. 308, 15 N.E.2d 365. Therein, the Court recognized that, while other jurisdictions held hospitals accountable for independent contractor doctors's negligence under apparent agency, such an approach was not viable in Indiana because Indiana statutes prohibited hospital corporations from practicing medicine.

The right to practice medicine and surgery under a license by the state is a personal privilege. It cannot be delegated, and a corporation, or other unlicensed person, may not engage in the practice of medicine by employing one who is licensed to do the things which constitute practicing the profession.... There are cases holding that a corporation is estopped from denying that a physician is its agent, and that it is liable for the physician's negligence, where the corporation has contracted to diagnose or treat diseases.

An estoppel can only arise where the party claiming it has acted to his injury without full knowledge of the facts and without an equal opportunity to know the facts. It cannot arise out of a lack of knowledge of the law, since all have an equal opportunity to know the law, and are presumed to know it. The complaint charges that the corporation contracted to diagnose and treat plaintiff's ailments; that it was negligent in performing the contract. The defense is that the corporation made no such contract because it had no power to make it. An estoppel would deny the corporation the right to assert illegality.... There can be no estoppel on such a basis. Since the corporation could not legally practice medicine, the appellee was bound to know that whoever treated him was not acting for the corporation.

214 Ind. at 316-17, 15 N.E.2d at 370. In other words, the Iterman Court concluded that because hospitals could not practice medicine under Indiana law, no patient could reasonably conclude that those who were practicing medicine in hospitals were the hospitals's employees. This rationale has stood as a shield, protecting hospitals from liability for the negligence of health care professionals whom the hospitals hire as independent contractors.

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