Vicarious Liability for Professional Negligence of Independent Contractors: Popovich v. Allina Health Systems

08/10/2020 / Matthew Bergeron

On July 29, 2020, the Minnesota Supreme Court held that a hospital can be found vicariously liable for the negligence of its independent contractors. The ruling in Popovich v. Allina Health fundamentally changes the landscape of medical malpractice liability in Minnesota as, previously, the Court had held that a hospital could only be held vicariously liable for the negligence of its employees. The majority in Popovich relied on a theory of apparent authority to determine that a physician, practicing at a hospital under an independent contractor agreement, was acting as the agent of the hospital such that the hospital could be held vicariously liable for the physician’s negligence.

In Popovich¸ the plaintiff alleged that her husband received negligent medical care from an emergency physician and a radiologist that had been engaged by Allina Health System to provide services at two of their Twin Cities hospitals. She alleged that the negligent care had led to her husband suffering a debilitating stroke and subsequently brought suit against Allina. The district court dismissed the case and the Minnesota Court of Appeals affirmed that decision, citing a 30-year precedent that a hospital could only be vicariously liable for the actions of a non-employee. McElwain v. Van Beek, 447 N.W.2d 442 (Minn. Ct. App. 1989), rev. denied (Minn. Dec. 20, 1989).

However, in Popovich, the Court reversed the Minnesota Court of Appeals, finding grounds for vicarious liability under a theory of apparent authority. The Court distinguished Popovich’s argument for apparent authority from the theory of respondeat superior which was central to the Court’s reasoning in McElwain v. Van Beek. In doing so, the Court found that a principal (a hospital) could be vicariously liable under a theory of apparent authority if it had previously taken steps that might reasonably cause third parties (in this case, emergency room patients) to believe that the agent (the independently contracted physician) was acting on its behalf. This was contrasted with a theory of respondeat superior which necessitates an element of control by the principal over the agent.

Having found that a hospital can be held vicariously liable under a theory of apparent authority, the Court also sought to establish the proper legal standard for determining whether such apparent authority exists. To that end, the Court held that a hospital can be found to be vicariously liable when: 1) the hospital held itself out as the provider of services to the patient in question; and 2) that the patient looked to the hospital for care and relied on the hospital to select qualified health care professionals to provide the care.

The Court’s decision in Popovich will undoubtedly have a wide-ranging impact on professional services agreements between hospitals and independent physician groups. Most notably, hospitals and physician groups will likely need to revisit contract provisions related to liability insurance and indemnification. Further, the way certain services are marketed to the public (particularly emergency room services, radiological and anesthesia services, and specialty surgery services) may be re-examined in order to more clearly delineate for the public who is actually providing what care to the prospective patient. Lastly, Popovich may serve to further accelerate the trend of hospitals directly employing physicians as administrators look to limit exposure to negligence claims stemming from the care provided by individuals over whom they have little to no control.