Nursing Homes, Long-Term and Advanced Care Facilities

Corporate Negligence In Medicine

While legal practitioners, and even most laypeople, are familiar with the term “negligence,” that understanding plummets when it is affixed to the word “corporate.” Any confusion is understandable: By its very nature, as a formless entity, a corporation cannot act on its own and must act through its employees and agents. When these individuals are liable for negligence for acting within the scope of their employment, the law provides for relief under the doctrine of respondeat superior, or vicarious liability. When they are liable for negligence outside of their own actions, suit is properly brought against them individually, and not against the corporation. How, then, can corporate negligence exist, especially in the context of medical care?

Well, in the beginning it did not. In the 19th century, the doctrine of charitable immunity protected hospitals and other care organizations from liability, even under what we would today recognize as vicarious liability theories. See McDonald v. Massachusetts General Hos., 120 Mass. 432 (1876). Over time, this doctrine was assailed in repeated cases, which led to many revisions and workarounds of its context, until it was largely useless by the mid 20th century. See, e.g., Bing v. Thunig, 143 N.E. 2d 3 (N.Y. 1957); Flagiello v. Pennsylvania, 208 A.2d 193 (Pa. 1965).

With the charitable immunity doctrine largely discredited, traditional theories of vicarious liability gained prominence among legal practitioners. See, e.g., Parker v. Port Huron Hosp., 361 Mich. 1 (1960); Adkins v. St. Francis Hos. Of Charleston, 143 S.E.2d 154 (W. Va. 1965). Predictably, as these theories of liability became common, litigants began to push the envelope by bringing suit against hospitals directly. These were the very first cases of corporate negligence in the medical field. See Darling v. Charleston Cmty. Memorial Hosp., 211 N.E.2d 253 (Ill. 1965); Thompson v. Nason Hosp, 591 A.2d 703 (Pa. 1991).

In Darling , a college athlete broke his leg, which the treating physician put into a cast so that it might heal. Due to an error, however, the young man's toes began to grow dark in color, become cold and loose feeling while his foot remained in the cast. Despite later efforts to remedy the situation, the damage was done, and the boy's leg had to be amputated from the knee down. Successful suit was brought by the young man's parents against the hospital directly, as opposed to on a theory of vicarious liability. The hospital appealed to the Supreme Court of Illinois, which issued a landmark opinion on the subject.

Upholding the jury's award against the hospital, the state high court explained there were two grounds for its decision. The first was an administrative error on the part of the hospital: that it did not employ enough nurses to monitor and report on the patient's condition. Id. at 258. The second was that the hospital failed to review the treatment or require a consultation. Id. Both of these were framed by the court as “institutional liability.” At the time, Illinois was an outlier for this decision, and other states felt no compulsion to join it. Even when they did, they did not necessarily adhere to the same terms used by the Illinois Supreme Court ' “institutional liability” or “corporate negligence.”

As even a quick glance at the cases cited above reveals, these actions were primarily concerned with hospitals and the care provided there to patients, by doctors. But it was not long before these theories of liability were also brought to bear against other entities, such as nursing homes, long term and advanced care facilities (hereinafter “NLAs”). This began at approximately the same time Congress passed the Health Maintenance Organization Act of 1973, which greatly spurred the development of non-hospital NLAs. See 42 U.S.C. ” 300e-300e-17.

In cases of first impression, however, many courts refused to allow these theories of liability to be used against NLAs. See, e.g., Wickline v. California, 192 Cal. App. 3d 1630 (1986); Williams v. Good Health Plus, 743 S.W.2d 373 (Tex. App. 1987). The reasons offered by the courts for this distinction varied, but stemmed in part from a view that a treating physician was the most appropriate party to bear a burden for any mistake.

This protection of NLAs, however, immediately ran into the same resistance that had, slowly but surely, stripped the hospitals of their own immunity. See, e.g., Williams v. Healthamerica, 535 N.E.2d 717 (Ohio Ct. App. 1987) (concerning an HMO); Montgomery Health Care Facility v. Ballard, 565 Sdo.2d 221 (Al. 1990) (concerning a nursing home). Perhaps the most public and exhaustive evolution on this issue came from the courts of Pennsylvania, in the case of Scampone v. Highland Park Care Ctr., LLC, 57 A.3d 582 (Pa. 2012).

In Scampone, Pennsylvania's Supreme Court was confronted with a jury award against an NLA on a stated theory of corporate negligence. The issue on appeal was squarely whether a skilled nursing facility, such as Highland, could be directly liable, like hospitals had become in recent case law, as opposed to just vicariously liable. “Here, the determination hinges on the narrow legal question of whether a patient may hold a nursing home and/or affiliated entities liable under the 'corporate negligence' theory.” Id. at 386.

Initially, this inqiry required the court to address the grant of immunity toward NLAs that had been so prevalent throughout the nation originally. As Highland phrased its defense: “nursing homes and affiliated entities are categorically exempt from liability on a direct negligence theory ' [C]orporations act through their officers, employees and agents and, therefore, are not susceptible to direct negligence claims.” Id. As could be guessed, the court dismissed this line of reasoning with the exact same logic used to strip hospitals of the very same protection years earlier: “As the Flagiello Court noted in 1965, 'Non-liability is an anachronism of the law of today. It is a plodding ox on a highway built for high speed vehicles. It is out of tune with the life about us, at variance with modern-day needs and with concepts of justice and fair dealing.'” Id. at 387 (quoting Flagiello, supra, at 201) (noting, also, that neither hospitals nor NLAs enjoyed a statutory grant of non-liability from the legislature).

Having thus stripped NLAs of their immunity with a pen stroke, Pennsylvania's high court proceeded to establish direct liability for NLAs while admitting that the exact grounds for doing so were unclear. “Where a corporation is concerned, the ready distinction between direct and vicarious liability is somewhat obscured because we accept the general premise that the corporation acts through its officers, employees and other agents.” Id. at 389. The only guidance the court could offer to clarify this point was that “a corporation may also owe duties of care directly to a plaintiff, separate from those of its individual agents, such as duties to maintain safe facilities and to hire and oversee competent staff.” Id. Thus, who owed the duty that had been breached was the only guidepost provided. Despite this, the court did not believe it was unduly confusing the issue as it would be “incumbent upon the parties, through their attorneys, to aid courts in narrowing issues and formulating appropriate instructions to guide juries in their factual determinations and to avoid the possibility of double recoveries.” Id. at 390. With the decision in Scampone , Pennsylvania joined a growing cadre allowing direct suits against NLA's. However, the majority of these states offer no further guidance on such claims other than a nebulous reference to “duty,” regardless of whether a plaintiff is suing a hospital or some other NLA. Compare id.; Morrow v. Fundamental Long-Term Care Holdings, 412 S.C. 534 (S.C. 2015); Bailey v. Rose Care Center, 307 Ark. 14 (1991).

Next month, we will discuss the ways that corporate negligence is found today, and how it impacts liability in the medical malpractice setting.

Nathan C. Volpi is an attorney in the York, PA, office of Goldfein and Joseph, P.C.