MCO’s are not vicariously liable for doctors’ malpractice

Bradford v. Jai Medical Systems Managed Care Organizations, Inc., — A.3d — (Md. 2014)

In this case, Maryland’s Court of Appeals ruled that an MCO assumes no vicarious liability for an affiliated physician’s malpractice.

This ruling isn’t new, especially in jurisdictions like Maryland that apply the Restatement of Agency 2d, § 267, according to which:

“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.”

Under this provision, an MCO becomes vicariously liable only when it holds the physician out as its agent or employee.

In the case at bar, the patient subjectively believed that he was treated by the MCO’s agent, but this belief was false and the MCO did nothing to instill it. The MCO’s representation concerning its relationship with the (grossly) negligent physician was the physician’s listing in the provider directory that listed nearly 4,000 specialty providers participating in the MCO’s network. None of these providers was identified as an agent or employee of the MCO.

This standard set of facts – held the Court – precludes vicarious liability. Importantly, the Court noted that “there is no reason to preclude application of the theory of apparent agency in the context of an MCO and a network physician.”

Notably, the Court would have reached the same decision if it were to apply the Restatement of Torts 2d, § 429 (as do courts in some other jurisdictions). Under the Restatement of Torts 2d, § 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.”

Hence, the patient could only succeed at ascribing vicarious liability to the MCO if he showed that he reasonably believed that his doctor works for the MCO. The patient evidently failed to make the requisite showing.