Allina Health must face vicarious-liability claim

In a reversal of long-standing precedent, the state Supreme Court has ruled that a vicarious-liability claim against Allina Health System over the actions of two subcontracting emergency room doctors can proceed.

The July 29 ruling in Popovich v. Allina, et. al., reverses case law that, since 1989, had held that hospitals are liable only for the negligence of their own employees.

The 4-2 decision overrules both a Hennepin County trial court and a split Court of Appeals panel. Both dismissed claims against Allina Health System as foreclosed by precedent.

The Supreme Court’s majority ruled otherwise, holding that Popovich’s claim against Allina should proceed.

Applying the theory of “apparent authority,” the majority found that Allina publicly held itself out in the competitive marketplace as an emergency medical care provider, using advertising, signage and other communications. The patient in the case consequently relied on Allina to select physicians to care for him.

That makes for a valid vicarious-liability claim, the majority ruled.

Brandon Thompson is the partner at Ciresi Conlin L.L.P., who successfully represented plaintiff Alla K. Popovich in the case. He said the ruling unmasks a fiction that Allina hid behind for years when it listed emergency room doctors on its website as “our providers.”

Allina did that even while using the doctors’ subcontractor status to shield itself from legal liability. And Allina is hardly the only hospital company to do so, he said.

“If you hold yourself out to the public as providing certain services,” he said, “and if you take steps that would lead a reasonable member of the public to think that somebody is your agent, then you’re on the hook for their conduct. It doesn’t matter what sort of secret deal you have with them that nobody knows about.”

Justice Natalie Hudson wrote the majority opinion; Justice G. Barry Anderson dissented. The ruling sends the lawsuit back to the courtroom of Hennepin County District Court Judge Joseph R. Klein.

“We’re basically starting from the ground up on discovery,” Thompson said. “We’ve got to have our initial Rule 26 conference and now, basically, the case begins.”

Chuck Webber, a partner at Faegre Drinker Biddle & Reath who represented Allina in the appeal, said the ruling is both disappointing and a cause for serious concern. He said he hopes one day it will be overturned.

“I don’t think there can be any doubt that this is a decision that’s going to increase the cost of care across the system,” Webber said. “This just increases the liability in a way that I think doesn’t redound to patients’ benefit at all.”

Severe injury

Alla Popovich, acting as the wife and guardian ad litem for the patient, Aleksandr M. Popovich, filed suit in July 2018. Thompson described the patient as a 38-year-old former champion wrestler and swimmer who suffered a severe brain injury, leaving him barely able to walk and permanently unable to care for himself.

He was stricken early on Feb. 9, 2016, when he complained of dizziness, loss of balance, blurry vision and trouble breathing. He first sought care in Unity Hospital’s Fridley emergency room, where he underwent a brain scan that was reviewed by a radiologist. He was sent home after two hours.

Later that day, Popovich’s breathing again became labored and he became unresponsive. An ambulance took him to a second Allina-owned emergency room, this one at Mercy Hospital in Coon Rapids. There, another scan showed abnormalities and swelling on the brain. A doctor transferred him to Abbott Northwestern Hospital, where he was admitted with a severe stroke.

His wife sued the doctors’ employers, Emergency Physicians Professional Association and Suburban Radiologic Consultants, Ltd., and the treating physicians, Dr. Aileen Haung and Dr. Taj Melson. The plaintiff contended the doctors provided negligent care, missing critical signs that might have prevented her husband’s life-altering injury.

She also sued Allina, claiming the company was vicariously liable through the doctrine of “apparent authority.”

That theory holds that a business can be civilly liable if it holds out its third-party agents as having authority, or if it knowingly permits an agent to act on its behalf and the agent acts negligently. The standard has not before been applied to hospitals in Minnesota.

In District Court, Allina moved to dismiss, citing the state Court of Appeals’ 1989 McElwain v. Van Beek decision. That ruling says “a hospital can only be held vicariously liable for a physician’s acts if the physician is an employee of the hospital.” It has guided Minnesota courts for 30 years; the District Court relied on it to dismiss the claim.

Popovich filed an interlocutory appeal with the Court of Appeals. It ruled the same way, with Judge Kevin G. Ross dissenting. He found that the precedent upon which McElwain rested—the state Supreme Court’s 1952 Moeller v. Hauser decision—didn’t say what the McElwain court thought it said.

“In other words,” Ross wrote, “when we implied in McElwain that a rule of law exists in Minnesota categorically immunizing hospitals from vicarious liability in every malpractice case in which the allegedly negligent physician has any other arrangement than an employment relationship with the hospital, we were plainly incorrect.”

Popovich ported Ross’ argument into the Supreme Court on appeal. Allina countered that the Court of Appeals in both McElwain and Popovich reached the correct understanding of Minnesota law.

For the apparent authority argument to succeed in a vicarious liability claim against the hospital, Allina argued, Popovich would have to demonstrate “actual reliance.” In other words, the claim fails unless plaintiff demonstrates that her husband would have refused treatment had he known his ER physicians weren’t Allina employees.

While, the Minnesota Supreme Court had never applied the “apparent authority” standard in the way Popovich requested, other courts have. Notably, the Ohio State Supreme Court, in its 1994 Clark v. Southview Hospital & Family Health Center decision, rejected the “actual reliance” standard—effectively, a “but-for” rule—which Allina sought to apply.

The but-for standard imposes too great burden on patients to “ascertain and understand the contractual arrangement between the hospital and treating physician,” the Ohio court ruled. They deemed that a “virtually impossible” burden.

Hudson agreed and adopted Popovich’s preferred standard. She ruled that the plaintiff demonstrated Allina had held itself out as an emergency care provider through its advertising, signage and other messaging and that her husband, as a result, relied on Allina to provide care.

“This reliance standard reflects the reality that most people who go to the emergency room do not know which medical professionals will treat them once they arrive,” Hudson wrote.

“Instead,” she added, “they rely on the hospital to select the professionals for them. That is precisely what happened here.” She then remanded the case back to District Court.

In his dissent, Anderson said the majority violates longstanding authority and “creates an unworkable reliance requirement.” He agreed with Allina that the “apparent authority” standard should apply only if the patient, knowing an emergency room was staffed by contractors, would have moved on.

Without naming it as such, he argued, the majority effectively imposes a strict liability standard for “all potential patient-plaintiffs who enter an emergency room.”

He disagreed with the plaintiff that hospitals, like other business, should be held responsible for the conduct of “their apparent agents.” Unlike most businesses, Anderson argued, hospitals are subject to intensive state and federal regulations. And unlike other businesses, they can’t turn customers away based on inability to pay.

“In light of these extensive regulations and given that the legislature has not chosen to prohibit the use of independent-contractor physicians in hospital emergency rooms,” Anderson writes, “it is hardly self-evident why we should extend the common law here to further expand hospital liability.”

Ultimately, Anderson concludes, the majority ruling means “the cost of malpractice is shifted away from the providers at fault and shifts toward the medical facilities.”

Supreme Court Chief Justice Lorie Gildea joined in Anderson’s dissent. Justice Margaret Chutich did not take part in the case.