James R. Jarrell v. Richard A. Kaul, M.D. (072363) , 223 N.J. 294 ( 2015 )

SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the
convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the
interest of brevity, portions of any opinion may not have been summarized.)
James R. Jarrell, et al. v. Richard A. Kaul, M.D., et al. (A-42-13) (072363)
Argued October 20, 2014 -- Decided September 29, 2015
CUFF, P.J.A.D. (temporarily assigned), writing for a majority of the Court.
In these appeals, the Court examines three issues related to the statutory requirement that physicians
licensed to practice medicine in New Jersey must obtain and maintain medical malpractice liability insurance
pursuant to N.J.S.A. 45:9-19.17. Specifically, the court considers whether: (1) an injured patient may bring a direct
action against a negligent, uninsured physician; (2) failure to comply with the statutory liability insurance mandate
gives rise to an informed consent claim; and (3) a health care facility that grants privileges to a physician to use its
facilities to treat patients has a continuing duty to ascertain a physician’s compliance with the insurance requirement.
In September 2005, plaintiff James Jarrell, who suffered from chronic back pain, was referred to defendant
Dr. Richard A. Kaul, a board certified anesthesiologist who practiced at defendant Market Street Surgical Center
(MSSC). In October 2005, Dr. Kaul performed a spinal fusion procedure on Jarrell. Following the surgery, Jarrell
experienced new pain in his left side that worsened over time and led to a “drop foot.” In January 2006, Jarrell was
examined by a board certified neurosurgeon, who concluded that the pain and drop foot were caused by Dr. Kaul’s
improper placement of some screws that pinched a nerve. At the time of the October 2005 procedure, Dr. Kaul had
a malpractice insurance policy that specifically excluded spinal surgery. Although he claimed to have $500,000 in
liquid assets, he did not have a letter of credit in that amount. The Board of Medical Examiners (BME) revoked Dr.
Kaul’s license to practice medicine in 2012.
Jarrell and his wife (collectively, plaintiffs) filed a complaint against Dr. Kaul and MSSC. On summary
judgment, the court found that there was no cause of action against Dr. Kaul for deceit, misrepresentation, lack of
informed consent, or battery based on his failure to maintain insurance. The trial court also dismissed plaintiffs’
claims against MSSC because they lacked an expert who would testify that MSSC deviated from accepted standards
of medical care by failing to properly ascertain Dr. Kaul’s credentials and by permitting an uninsured physician to
perform spinal procedures in its facility. Trial proceeded against Dr. Kaul limited to the issue of medical
negligence, and the jury found that Dr. Kaul negligently performed the spinal fusion, which proximately caused
Jarrell’s injury.
Dr. Kaul appealed and plaintiffs cross-appealed. The Appellate Division affirmed the summary judgment
orders, the jury verdict, and the damages award. The panel held that the trial court properly dismissed all claims
against Dr. Kaul based on his lack of insurance because N.J.S.A. 45:9-19.17 does not provide a private cause of
action for injured parties. For the same reasons, the panel concluded that N.J.S.A. 45:19-17(b), does not permit a
direct action by a patient against a surgical center that permits an uninsured or underinsured physician to use its
facilities. This Court denied Dr. Kaul’s petition for certification, but granted plaintiffs’ cross-petition. 216 N.J. 366
(2013).
HELD: Under N.J.S.A. 45:9-19.17, an injured patient does not have a direct cause of action against a physician
who does not possess medical malpractice liability insurance or a suitable letter of credit. Moreover, failure to
comply with the statutory liability insurance mandate does not give rise to an informed consent claim. Finally, a
cause of action for negligent hiring may be asserted against a health care facility that grants privileges to a physician
who has not complied with the statutorily required insurance provisions.
1. Beginning in 1998, the Legislature required physicians to maintain medical malpractice liability insurance. If a
physician could not obtain insurance, he or she could post a letter of credit. The statute, N.J.S.A. 45:9-19.17, was
later amended to require physicians to maintain insurance in the amount of at least $1 million per occurrence and $3
million per policy year, or to post a letter of credit for $500,000. The intent of these provisions is to ensure that
citizens will have some recourse for adequate compensation in the event of medical malpractice. (pp. 12-16)
2. While both the statute and its implementing regulations expressly provide that a physician who does not obtain
medical malpractice insurance or a suitable letter of credit is subject to disciplinary action by the BME and civil
penalties, neither expressly provides that an injured patient has a direct cause of action against a treating physician
who does not comply with the statutory requirements. However, although courts should hesitate to recognize any
unmentioned remedy, both the United States Supreme Court and this Court have held that a statute may implicitly
create a private cause of action. (pp. 16-18)
3. In order to determine whether an implicit private cause of action exists here, the Court considers the legislative
history and statutory language. The Court finds that the BME was expressly deemed the intended vehicle to ensure
compliance with the statutory requirements, a choice which reflects a legislative decision to encourage and force
compliance, rather than wait for a complaint by an injured patient. A post-injury direct claim is reactive and does
little to further the goal of creating a source of compensation for patients injured by negligent medical care. Thus,
the Court concludes that N.J.S.A. 45:9-19.17 neither expressly nor implicitly recognizes a direct cause of action by
an injured patient against a physician who fails to obtain the statutorily required medical malpractice liability
insurance or letter of credit. (pp. 18-21)
4. The Court next turns to the question of informed consent, which is a negligence concept predicated on a
physician’s duty to disclose material information that will allow a patient to intelligently assess the nature and risks
of a proposed treatment or procedure. A risk is material if a reasonable patient would likely attach significance to it
in deciding whether to forego the treatment. The validity of the consent obtained from a patient normally is
confined to disclosure of the associated risks, but consent may, in certain circumstances, be vitiated by a physician’s
significant misrepresentations of credentials or experience. In such circumstances, a plaintiff must show that the
physician’s more limited experience or credentials could have substantially increased the risk and that the increased
risk would cause a reasonably prudent patient not to consent. A physician’s failure to comply with N.J.S.A. 45:9-
19.17 is not a perfect fit with this jurisprudence since it does not necessarily mean that the physician is unskilled and
since lack of insurance bears no relation to the risks attendant to a proposed treatment or procedure. The Court
discerns no principled reason to depart from its prior jurisprudence and extend the relief that the informed consent
doctrine may provide to an injured patient in order to address the financial insecurity of a physician. (pp. 21-31)
5. Turning to plaintiffs’ claim that MSSC had a duty to limit the use of its facility only to those physicians who
satisfy the statutory insurance requirements, the Court notes that, generally, a person who engages an independent
contractor is not liable for the negligence of that contractor. An exception is made if the contractor is incompetent,
although liability is limited to the physical harm that is caused. In cases invoking this exception, lack of financial
responsibility, including the absence of insurance, was not considered as indicative of incompetence. However,
when a task requires specific permits or licenses, retention of a contractor without those necessary credentials
subjects the business to liability for hiring an incompetent contractor. Likewise, granting privileges to a physician
lacking the appropriate credentials also exposes a health care facility to liability. (pp. 31-41)
6. Here, the basic element of competency for any physician seeking surgical privileges at MSSC’s facility is
possession of a license to practice medicine in New Jersey, and an essential condition for such a license is
possession of a medical malpractice liability insurance policy or an acceptable letter of credit. MSSC had an initial
duty to ascertain that Dr. Kaul possessed the requisite license and a continuing duty to assure that his license was
maintained. The record reveals that MSSC knew that Dr. Kaul possessed an insurance policy that expressly
excluded the procedure performed on Jarrell. Although Dr. Kaul asserted that he had advised the BME and MSSC
that he possessed sufficient assets to satisfy the alternative letter of credit requirement, such a representation does
not satisfy the regulatory definition of a letter of credit. Moreover, the record is barren of any evidence that the
BME accepted this representation. Consequently, since discovery is required to clarify several issues integral to
plaintiffs’ negligent hiring claim, the trial court erred in granting summary judgment in favor of MSSC. (pp. 41-44)
The judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART, and the
matter is REMANDED for further proceedings consistent with the Court’s opinion.
JUSTICE ALBIN, DISSENTING IN PART and CONCURRING IN PART, joined by CHIEF
JUSTICE RABNER, expresses the view that the facts here present the quintessential case of lack of informed
consent, and that a logical extension of New Jersey’s informed consent jurisprudence would permit a cause of action
if a plaintiff established four elements: (1) the physician was uninsured to perform the medical procedure; (2) the
physician failed to inform the patient that he was uninsured; (3) the patient would not have undergone the procedure
if properly informed; and (4) the plaintiff can prove damages.
JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, and SOLOMON join in JUDGE
CUFF’s opinion. JUSTICE ALBIN filed a separate opinion dissenting in part and concurring in part, in
which CHIEF JUSTICE RABNER joins.
2
SUPREME COURT OF NEW JERSEY
A-42 September Term 2013
072363
JAMES R. JARRELL and SHEILA
G. JARRELL, his wife,
Plaintiffs-Appellants,
v.
RICHARD A. KAUL, M.D. and
MARKET STREET SURGICAL
CENTER,
Defendants-Respondents,
and
JOHN T. FORD, SUSSEX COUNTY
TOTAL HEALTH CENTER, INC.,
Defendants.
Argued October 20, 2014 – Decided September 29, 2015
On certification to the Superior Court,
Appellate Division.
Lewis Stein argued the cause for appellants
(Nusbaum, Stein, Goldstein, Bronstein &
Kron).
Jeffrey B. Randolph argued the cause for
respondent Richard A. Kaul, M.D.
Peter E. Rhatican argued the cause for
respondent Market Street Surgical Center.
Abbott S. Brown argued the cause for amicus
curiae New Jersey Association for Justice
(Lomurro, Davison, Eastman and Munoz,
attorneys; Mr. Brown and Christina Vassiliou
Harvey, on the brief).
1
JUDGE CUFF (temporarily assigned) delivered the opinion of
the Court.
In this appeal, we examine three issues related to the
statutory requirement that physicians licensed to practice
medicine in New Jersey and providing medical care in this State
must obtain and maintain medical malpractice liability
insurance. The first issue presented in this appeal is whether
an injured patient may bring a direct action against a
negligent, uninsured physician. The second issue is whether a
physician has a duty to advise a prospective patient that he is
in compliance with the statutory medical malpractice liability
insurance requirement and whether the failure to obtain such
insurance gives rise to a lack of informed consent claim. The
third issue is whether a health care facility that grants
privileges to a physician to use its facilities to treat
patients has a continuing duty to ascertain a physician’s
compliance with the insurance requirement.
Plaintiff James R. Jarrell sought treatment for persistent
pain in his back from defendant Dr. Richard A. Kaul, a board
certified anesthesiologist. The doctor performed a spinal
fusion procedure at a surgical center. At the time of the
operation, Dr. Kaul was required to have medical malpractice
liability insurance or to have posted a letter of credit. The
medical malpractice liability insurance issued to him expressly
2
excluded spinal surgical procedures. Dr. Kaul instead maintains
that he produced a suitable letter of credit.
The surgery performed by Dr. Kaul actually increased
Jarrell’s discomfort, so he sought treatment from another
physician. Another surgeon performed a surgical revision of the
procedure performed by Dr. Kaul.
Jarrell and his wife, Sheila, filed a complaint alleging
that Dr. Kaul negligently performed the initial spinal
procedure, and they sought compensatory damages for pain and
suffering and economic losses caused by the physician’s
negligence. They also asserted a direct claim against Dr. Kaul
based on his status as an uninsured physician at the time he
treated Jarrell. Based on Dr. Kaul’s lack of liability
insurance, plaintiffs also asserted claims seeking damages for
misrepresentation, fraud, deceit, and lack of informed consent.
They also asserted a negligent hiring claim against the facility
where Dr. Kaul performed the surgery. Jarrell’s wife asserted a
loss of consortium claim. Only the negligence claim proceeded
to trial. A jury awarded $500,000 to Jarrell and $250,000 to
his wife. All of the other claims were dismissed prior to
trial.
Although it is undisputed that Dr. Kaul was uninsured for
the procedure he performed on Jarrell, we affirm the dismissal
of Jarrell’s direct claim against the physician for his failure
3
to maintain insurance. The statute imposing the medical
malpractice liability insurance requirement does not expressly
authorize a direct action against a noncompliant physician and
neither the language nor the purpose of the statute supports
such a claim.
Although a reasonably prudent patient may consider a
physician’s compliance with the statutorily imposed liability
insurance requirement material information, lack of compliance
or failure to disclose compliance does not necessarily provide
the predicate for an informed consent claim. Indeed, using the
informed consent doctrine to address the financial insecurity of
a physician and the inability of a patient to satisfy a judgment
or to fund a settlement would represent a marked departure from
our prior informed consent jurisprudence. We decline to follow
that course.
Finally, we hold that a health care facility that grants
privileges to physicians has a continuing duty to ensure that
those physicians have and maintain the required medical
malpractice liability insurance or have posted a suitable letter
of credit that conforms with the statutory requirement.
I.
Jarrell suffered from chronic back pain for many years.
His chiropractor referred him to Dr. Kaul, a board certified
anesthesiologist, in September 2005. Dr. Kaul’s practice
4
focused on pain management and minimally invasive spinal
procedures. In 2005, Dr. Kaul saw patients and performed
procedures at Market Street Surgical Center (MSSC) in Saddle
Brook several times a week. Dr. Kaul also served as the Medical
Director of MSSC until 2007.
Dr. Kaul diagnosed Jarrell with a herniated lumbar disc,
lumbar radiculopathy, and discogenic back pain. On October 11,
2005, Dr. Kaul performed a spinal fusion procedure in which he
fused the L4, L5, and S1 vertebrae using two mesh cages attached
by rods and pedicle screws. Immediately following the surgery,
Jarrell experienced new pain in his left side that worsened over
time and eventually led to a “drop foot,”1 causing him to fall.
A friend referred Jarrell to Dr. Alfred Steinberger, a
board certified neurosurgeon, in January 2006. Following an
examination and diagnostic tests, Dr. Steinberger concluded that
Dr. Kaul improperly placed some screws that pinched a nerve
causing the pain and drop foot. On January 31, 2006, Dr.
Steinberger removed and replaced the fixation devices implanted
by Dr. Kaul in October 2005. Jarrell’s pain decreased
immediately following the second procedure; however, at the time
1 “Drop foot” is “a general term for difficulty lifting the front
part of the foot. If you have foot drop, you may drag the front
of your foot on the ground when you walk.” Mayo Clinic Staff,
Diseases and Conditions: Foot drop, MayoClinic.org (last
visited June 19, 2015), www.mayoclinic.org/disease-
conditions/foot-drop/basics/definition/con-20032918.
5
of his January 2012 trial, he still required pain medication,
including fentanyl patches, and his physical activity was
limited.
Dr. Kaul was educated in England, where he practiced as a
dental anesthesiologist. He relocated to New Jersey and
obtained a license to practice medicine in 1995. Thereafter, he
commenced a pain management practice and performed various
spinal procedures, including the spinal fusion procedure he
conducted on Jarrell.
At the time of the October 2005 spinal procedure, Dr. Kaul
had a malpractice insurance policy that specifically excluded
spinal surgery. He claimed to have $500,000 in liquid assets
but did not have a letter of credit from a bank or other
financial institution. Dr. Kaul did not discuss his insurance
coverage, or lack thereof, with Jarrell or his wife. Neither
Jarrell nor his wife inquired about Dr. Kaul’s insurance
coverage.
The Board of Medical Examiners (BME)2 revoked Dr. Kaul’s
license to practice medicine in 2012.
II.
Jarrell and his wife filed a nine-count complaint in the
Superior Court against Dr. Kaul and MSSC. Jarrell asserted a
2 The BME is the administrative body that regulates the practice
of medicine in this State.
6
claim against Dr. Kaul for medical negligence alleging that he
departed from accepted standards of medical care in his choice
of procedure and his selection of medical devices for use in the
surgery. (Count One). Jarrell further alleged that Dr. Kaul
misrepresented his qualifications and training, thereby
wrongfully obtaining his informed consent for the surgery.
(Count Two). Jarrell also claimed that MSSC negligently and
unreasonably facilitated performance of an unauthorized surgical
procedure by an unqualified physician. (Count Five). His wife
asserted a loss of consortium claim. (Count Seven).
Jarrell also alleged that Dr. Kaul performed the October
2005 surgical procedure without the statutorily required
malpractice insurance or letter of credit and withheld this
information from him. He alleged that Dr. Kaul’s noncompliance
formed the basis for a claim sounding in deceit, fraudulent
misrepresentation, and lack of informed consent (Count Eight),
as well as a battery claim (Count Nine). Plaintiffs also
asserted claims against John T. Ford and Sussex County Total
Health Center, Inc. (Counts Three and Four), which were
dismissed.
Plaintiffs’ motion for summary judgment based on Dr. Kaul’s
failure to carry medical malpractice insurance that covered the
spinal procedure performed on Jarrell was denied. The motion
judge reasoned that Dr. Kaul had informed the BME that he had
7
substantially complied with the statutory requirement, and the
BME had not placed any limits on his license to practice
medicine. Plaintiffs renewed this motion immediately prior to
trial and Dr. Kaul filed a cross-motion for summary judgment.
The trial court granted Dr. Kaul’s cross-motion. The court
reasoned that Basil v. Wolf, 193 N.J. 38 (2007), precluded any
form of direct action against Dr. Kaul for failing to maintain
insurance. The court held that there was no cause of action
against Dr. Kaul for deceit, misrepresentation, lack of informed
consent, and battery based on the failure to maintain insurance.
The trial court also dismissed plaintiffs’ claims against MSSC
because plaintiffs lacked an expert who would testify that MSSC
deviated from accepted standards of medical care by failing to
properly ascertain Dr. Kaul’s credentials and permitting an
uninsured and unqualified physician to perform spinal procedures
in its facility.
Trial proceeded solely against Dr. Kaul limited to the
issue of medical negligence. The jury found that Dr. Kaul
negligently performed the October 2005 spinal fusion and his
negligence proximately caused injury to Jarrell. The jury
awarded $500,000 in damages to Jarrell for his pain, suffering,
and disability, and $250,000 to his wife for loss of consortium.
All post-trial motions for a new trial or remittitur were
denied.
8
Dr. Kaul appealed, arguing that significant trial errors
required a reversal of the judgment and a new trial. Plaintiffs
filed a cross-appeal contending that the trial court erroneously
denied their motion for summary judgment and erroneously granted
partial summary judgment in favor of Dr. Kaul based on Dr.
Kaul’s lack of insurance. They also contended that the trial
court erred in granting summary judgment in favor of MSSC based
on Dr. Kaul’s credentials and lack of insurance.
In an unreported opinion, the Appellate Division affirmed
the summary judgment orders, the jury verdict, and the damages
award. The appellate panel held that the trial court properly
dismissed all claims against Dr. Kaul based on his lack of
insurance because N.J.S.A. 45:9-19.17 does not provide a private
cause of action for injured patients. The panel based this
decision largely on this Court’s opinion in Basil, supra, 193
N.J. at 72, in which the Court stated that the statutory medical
malpractice insurance requirement placed noncompliant physicians
on notice only that they may be subject to disciplinary action
by the BME. For the same reasons, the panel concluded that
N.J.S.A. 45:9-19.17(b) does not permit a direct action by a
patient against a surgical center that permits an uninsured or
underinsured physician to use its facilities.
This Court denied Dr. Kaul’s petition for certification but
granted plaintiffs’ cross-petition. Jarrell v. Kaul, 216 N.J.
9
366 (2013). The Court also admitted the New Jersey Association
for Justice (NJAJ) to appear as amicus curiae.
III.
Plaintiffs urge that the Appellate Division’s reliance on
Basil was misplaced. They contend that the discussion on which
it relied to foreclose a direct cause of action against Dr. Kaul
due to his lack of medical malpractice insurance is mere dicta.
They also urge this Court to draw a distinction between “mere
negligent failure to maintain malpractice insurance versus gross
negligence or intentional concealment, deceit, and lack of
informed consent (battery).” They request that the Court
reconsider its position in Basil because the Court did not
consider whether the statute requiring medical malpractice
insurance implicitly authorized a direct action by a patient
against an uninsured physician. Plaintiffs urge that
application of the three-prong analysis set forth in In re
Resolution of State Commission of Investigation, 108 N.J. 35
(1987), leads to the conclusion that the Legislature implicitly
created a private right of action. Therefore, plaintiffs argue
that all claims premised on Dr. Kaul’s lack of insurance must be
reinstated.
Finally, plaintiffs maintain that Howard v. University of
Medicine & Dentistry of New Jersey, 172 N.J. 537 (2002),
suggests that an informed consent claim against Dr. Kaul should
10
be permitted. They contend that the ability of a physician to
compensate a patient in the event of negligence is information
that would be material to the reasonably prudent patient
selecting a surgeon.
As to MSSC, plaintiffs urge that the Appellate Division
misunderstood their claim against the facility. Plaintiffs
contend that they did not assert a respondeat superior or any
theory of vicarious liability against MSSC. Rather, they
maintain that their claim against MSSC is premised on a duty of
the surgical center to ensure that surgeons who perform
procedures in its facility are qualified to perform those
procedures and those qualifications include proper insurance or
other suitable financial security.
Dr. Kaul responds that his lack of insurance does not
permit a private right of action by injured patients. He
further contends that there is no legal basis to support
plaintiffs’ theory that lack of insurance vitiates any consent
to perform a procedure. Furthermore, he claims that although
the policy of insurance excluded spinal surgery, he maintained
insurance at the time of the surgery performed on Jarrell and he
held sufficient financial assets at the time to comply with the
statute.
MSSC contends that plaintiffs are attempting to establish a
new duty for health care facilities that will expose them to
11
“financial ruin.” It argues that N.J.S.A. 45:9-19.17 does not
impose on health care facilities the duty to enforce the
insurance requirement, and the BME has not adopted regulations
requiring such action. It urges that the Appellate Division
judgment barring a direct negligence claim against it based on
the credentialing process should be affirmed.
Amicus NJAJ asserts that this appeal presents an
opportunity for this Court to hold as a matter of law and sound
public policy that patients’ right to informed consent includes
the right to know if their physician possesses insurance that
covers the procedure for which consent is sought. Furthermore,
every medical facility should be obliged to confirm on a regular
basis that the physicians who have been granted privileges to
perform procedures have the minimum amount of insurance coverage
required by statute and that the insurance covers all procedures
performed at the facility by the physician.
IV.
The Legislature first required physicians to maintain
medical malpractice liability insurance in 1998. L. 1997, c.
365. The obligation extended to those physicians who were
licensed in this State and who treated patients in this State.
Id. at § 1. The 1998 legislation also permitted a physician to
post a letter of credit if medical malpractice liability
insurance was not available. Ibid. In addition, the
12
Legislature delegated to the BME3 the authority to establish the
minimum amounts per occurrence and per policy year of the
required coverage. Ibid. The BME adopted a regulation that
required physicians to maintain “insurance in the sum of $1
million per occurrence and $3 million dollars per policy year.”
N.J.A.C. 13:35-6.18(a).
In 2004, the Legislature amended the statute. The
legislation established the minimum amount of medical
malpractice liability insurance that a physician must obtain and
maintain at $1,000,000 per occurrence and $3,000,000 per policy
year. L. 2004, c. 17, § 25. The Legislature also set the
minimum amount of the letter of credit at $500,000 and
authorized the BME to require higher amounts for both insurance
and the letter of credit. Ibid. It has not done so. See
N.J.A.C. 13:35-6.18 (establishing minimum amounts per occurrence
and per policy year at $1,000,000 and $3,000,000 respectively
and $500,000 for letter of credit).
Codified as N.J.S.A. 45:9-19.17, the statute provides as
follows:
a. A physician who maintains a
professional medical practice in this State
and has responsibility for patient care is
required to be covered by medical malpractice
liability insurance issued by a carrier
authorized to write medical malpractice
3The BME is the agency responsible for the licensure and discipline
of licensed physicians in this State. N.J.S.A. 45:9-1, -2.
13
liability insurance policies in this State, in
the sum of $1,000,000 per occurrence and
$3,000,000 per policy year and unless renewal
coverage includes the premium retroactive
date, the policy shall provide for extended
reporting endorsement coverage for claims made
policies, also known as “tail coverage,” or,
if such liability coverage is not available,
by a letter of credit for at least $500,000.
The physician shall notify the State
Board of Medical Examiners of the name and
address of the insurance carrier or the
institution issuing the letter of credit,
pursuant to section 7 of P.L. 1989, c. 300
([N.J.S.A.] 45:9-19.7).
b. A physician who is in violation of
this section is subject to disciplinary action
and civil penalties pursuant to sections 8, 9
and 12 of P.L. 1978, c. 73 ([N.J.S.A.] 45:1-
21 to 22 and 45:1-25).
c. The State Board of Medical Examiners
may, pursuant to the “Administrative Procedure
Act,” P.L. 1968, c. 410 ([N.J.S.A.] 52:14B-1
et seq.), establish by regulation, minimum
amounts for medical malpractice liability
insurance coverage and lines of credit in
excess of those amounts required pursuant to
subsection a. of this section.
d. The State Board of Medical Examiners
shall notify all physicians licensed by the
board of the requirements of this section
within 30 days of the date of enactment of
P.L. 2004, c. 17.
The statement of the Assembly Health Committee accompanying the
1998 bill provided that the intent of the bill was “to ensure
the citizens of the State that they will have some recourse for
adequate compensation in the event that a physician or
14
podiatrist is found responsible for acts of malpractice.”
Assembly Health Comm., Statement to S. 267 (Sept. 19, 1996).
The BME adopted implementing regulations on April 5, 1999,
which defined key phrases including “[m]aintaining a
professional practice with responsibility for patient care,”
“[l]etter of credit,” and “[n]ot available.” N.J.A.C. 13:35-
6.18(a). A “[l]etter of credit” is defined as “a non-
assignable, non-transferrable, unexpired, continuous irrevocable
obligation, liability bond or other instrument issued by a bank
or savings association authorized to do business in this State.”
Ibid. Coverage is “[n]ot available” when the physician is
unable to purchase insurance coverage from a carrier authorized
to write it; however, insurance coverage that is unaffordable is
still considered available. Ibid.
A physician who does not have medical malpractice insurance
must present to the BME a letter of credit in the amount of
$500,000, N.J.A.C. 13:35-6.18(b), and must promptly notify the
BME if a demand for payment on the letter has been made or the
continuing viability of the letter has been compromised,
N.J.A.C. 13:35-6.18(d)(1)-(2). The failure of a physician
obliged to obtain medical malpractice liability insurance or a
letter of credit as required by the regulation is considered
professional misconduct, N.J.A.C. 13:35-6.18(e), and he or she
is subject to discipline in accordance with N.J.S.A. 45:1-21(e).
15
Such discipline may include revocation or suspension of the
physician’s license to practice medicine in this State. See
N.J.S.A. 45:1-21.
It is against this statutory and regulatory backdrop that
we examine the three issues presented in this appeal.
V.
We commence our discussion of whether N.J.S.A. 45:9-19.17
bestows on an injured patient a private right of action against
a physician who does not obtain or maintain statutorily required
medical malpractice insurance4 with an examination of the express
language of the statute and the regulations adopted by the BME
implementing this requirement. As set forth above, the express
terms of N.J.S.A. 45:9-19.17 provide that a physician who
obtains neither a policy of medical malpractice insurance nor a
letter of credit is subject to disciplinary action by the BME
and civil penalties. The implementing regulations reflect this
legislative decision. See N.J.A.C. 13:35-6.18(e). Neither the
statute nor the implementing regulations expressly provide that
an injured patient has a direct cause of action against a
treating physician who does not comply with the statutory
financial responsibility provisions.
4 When we refer to the requirement to maintain medical
malpractice liability insurance, we include by implication the
letter of credit alternative. See N.J.S.A. 45:9-19.17(a).
16
Both the United States Supreme Court and this Court have
held that a statute that does not expressly create a private
cause of action may, nonetheless, implicitly create one. See
Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d
26, 36 (1975) (addressing whether statute imposing criminal
liability on corporation making political contributions created
private right of action); State Comm’n of Investigation, supra,
108 N.J. at 40-41 (addressing whether subjects of investigation
may seek enforcement of confidentiality obligations of
investigatory agency). This Court employs a three-prong test
that inquires
[1] whether the plaintiff is “one of the class
for whose especial benefit the statute was
enacted”; [2] whether there is any evidence
that the Legislature intended to create a
private cause of action under the statute; and
[3] whether implication of a private cause of
action in this case would be “consistent with
the underlying purposes of the legislative
scheme.”
[State Comm’n of Investigation, supra, 108
N.J. at 41 (citations omitted) (quoting Cort,
supra, 422 U.S. at 78, 95 S. Ct. at 2088, 45
L. Ed. 2d at 36).]
Through this inquiry the Court seeks to ascertain the
underlying legislative intent. Jalowiecki v. Leuc, 182 N.J.
Super. 22, 30 (App. Div. 1981). When the Legislature has
expressly created specific remedies, a court should always
hesitate to recognize another unmentioned remedy. See
17
Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 19,
100 S. Ct. 242, 247, 62 L. Ed. 2d 146, 154-55 (1979). Stated
differently, “[i]n the absence of strong indicia of a contrary
[legislative] intent, we are compelled to conclude that [the
Legislature] provided precisely the remedies it considered
appropriate.” Middlesex Cnty. Sewerage Auth. v. Nat’l Sea
Clammers Ass’n, 453 U.S. 1, 15, 101 S. Ct. 2615, 2623, 69 L. Ed.
2d 435, 447 (1981).
There is scant legislative history associated with N.J.S.A.
45:9-19.17. The committee statement accompanying this
legislation simply states that the insurance requirement is
designed to ensure a source of some compensation in the event of
medical negligence. Assembly Health Comm., Statement to S. 267,
supra. Notably, N.J.S.A. 45:9 generally regulates the practice
of medicine and further requires physicians to undertake certain
health-related tasks. For example, N.J.S.A. 45:9-19.11
immunizes members of the BME from liability for actions taken in
the course of their administrative obligations, and N.J.S.A.
45:9-22.3(b) immunizes a physician from liability for failing to
distribute a breast cancer information booklet to a patient.
These instances suggest that the Legislature was content to
entrust oversight of these responsibilities to the BME.
In Basil, supra, this Court noted that N.J.S.A. 45:9-19.17,
when originally adopted in 1998, did not authorize a direct
18
action against an uninsured physician. 193 N.J. at 71, 72. We
reached that conclusion in the context of the statutory and
regulatory scheme in place at the time the defendant physician
examined the plaintiff. Id. at 71-72, 73. Notably, until the
BME adopted regulations in 1999 to implement the 1998 statute,
including a definition of “maintaining a professional practice
with responsibility for patient care,”5 it was not abundantly
clear that physicians who simply performed independent medical
examinations, such as the defendant physican, were required to
maintain medical malpractice liability insurance. Id. at 71-72.
Following the adoption of the regulations, however, “all
practitioners . . . were on notice that . . . any physician who
does not satisfy the insurance requirement would be incompetent
to practice his profession.” Id. at 72. Here, at the time Dr.
Kaul treated plaintiff, there was no question that he was
required to maintain liability insurance.
Applying the three-part test adopted by this Court in State
Commission of Investigation, we determine that N.J.S.A. 45:9-
19.17 does not create, expressly or implicitly, a direct cause
of action by a patient against a noncompliant treating
physician. To be sure, a patient, such as Jarrell, may receive
a direct benefit by virtue of the availability of insurance to
5 N.J.A.C. 13:35-6.18.
19
provide a source of funds to recompense for negligent care. On
the other hand, there is no evidence that the Legislature
contemplated that enforcement of its determination -- that
physicians providing medical care in this State must be insured
-- would be advanced by bestowing a direct cause of action on an
injured patient. To the contrary, the Legislature expressly
concluded that the administrative agency charged with regulating
the licensure and discipline of physicians -- the BME -- would
be the most likely vehicle to ensure compliance with the
liability insurance requirement.
It is difficult to quarrel with this approach. A physician
is prohibited from providing medical care in New Jersey without
a license, and the BME will not issue a license unless a
physician establishes financial responsibility. Noncompliance
is considered professional misconduct and the BME has the
authority to suspend or revoke a license to practice medicine of
a noncompliant physician. Administrative oversight and
enforcement is the declared enforcement mechanism and that
choice reflects a legislative decision to encourage and force
compliance rather than wait for a complaint by an injured
patient that may never be filed.
The underlying purpose of the legislation is predominately
proactive. The legislative intent is to create a source of
compensation for a patient injured by negligent medical care. A
20
post-injury direct claim against a noncompliant and negligent
physician is reactive and does little to further the articulated
goal.
We therefore conclude that N.J.S.A. 45:9-19.17 does not
expressly, and cannot be read to implicitly, recognize a direct
cause of action by an injured patient against a physician who
fails to obtain the statutorily required medical malpractice
liability insurance or letter of credit. The Appellate Division
judgment that rejected such a cause of action is affirmed.
VI.
In Count Eight of the amended complaint, plaintiffs allege
that Dr. Kaul knew that he was uninsured at the time that he
obtained Jarrell’s consent to perform surgery. Jarrell alleged
that Dr. Kaul’s uninsured status “would have been significant in
[his] decision-making.” Plaintiffs asserted that the failure to
disclose this information constitutes “deceit, misrepresentation
and outrageous conduct.”
Before the trial court and on appeal, plaintiffs argued
that the claims asserted in the amended complaint, as they
pertained to Dr. Kaul’s lack of insurance, implicated the
doctrine of informed consent.6 All of the claims asserted by
plaintiffs against Dr. Kaul, other than the medical malpractice
6 In Count Two, plaintiffs alleged that Dr. Kaul misrepresented
his professional training and experience.
21
claim asserted in Count One, were construed as direct claims
under the statute cast in various guises against Dr. Kaul based
on his lack of financial responsibility. As a result, neither
the trial court nor the appellate panel considered whether the
absence of statutorily required medical malpractice liability
insurance may be information that a reasonably prudent patient
would consider material to his or her decision to proceed with a
course of medical treatment or surgical procedure.
Plaintiffs argue that the existence, or absence, of medical
malpractice insurance is as important a piece of information as
are the risks attendant to the medical treatment recommended by
a physician. They insist that a discussion of the nature and
risks of the treatment and the risks associated with failing to
pursue a particular course of treatment is incomplete and any
decision to pursue or reject a certain course of treatment
cannot be considered informed if the physician fails to advise
the patient that he does not possess the statutorily required
medical malpractice insurance. Dr. Kaul responds that a
physician’s duty to obtain informed consent from a patient prior
to undertaking medical treatment is limited to the risks
associated with the treatment, not whether a patient may have a
source to pay a monetary judgment in the event the physician
negligently discharges his professional duties.
22
In Largey v. Rothman, 110 N.J. 204 (1988), the Court
observed that the origins of the duty of a physician to obtain a
patient’s consent to a medical procedure can be traced to the
eighteenth century. Id. at 207 (citing Slater v. Baker &
Stapleton (1767), 95 Eng. Rep. 860 (K.B.)). In In re Conroy, 98
N.J. 321 (1985), this Court stated that “‘[e]very human being of
adult years and sound mind has a right to determine what shall
be done with his own body; and a surgeon who performs an
operation without his patient’s consent commits an assault for
which he is liable in damages.’” Id. at 346 (quoting
Schloendorff v. Soc’y of N.Y. Hosp., 105 N.E. 92, 93 (N.Y.
1914)).
Informed consent is
essentially a negligence concept, predicated
on the duty of a physician to disclose to a
patient such information as will enable the
patient to make an evaluation of the nature of
the treatment and of any attendant substantial
risks, as well as of available options in the
form of alternative therapies.
[Largey, supra, 110 N.J. at 208.]
If a physician withholds facts that are necessary to form the
basis of an intelligent consent to proposed treatment, the
physician has not discharged his duty to the patient. Ibid.;
see Salgo v. Leland Stanford, Jr. Univ. Bd. of Trs., 317 P.2d
170, 181 (Cal. Ct. App. 1957). The duty extends to the need to
provide information to a patient not only about risks attendant
23
to the proposed treatment but also to alternative treatments or
therapies and the risks of pursuing no treatment at all.
Matthies v. Mastromonaco, 160 N.J. 26, 38 (1999).
Largey, supra, adopted the “prudent patient” or
“materiality of risk” standard. 110 N.J. at 213. The Court
recognized that “[t]he foundation for the physician’s duty to
disclose in the first place is found in the idea that ‘it is the
prerogative of the patient, not the physician, to determine for
himself the direction in which his interests seem to lie.’” Id.
at 214 (quoting Canterbury v. Spence, 464 F.2d 772, 781 (D.C.
Cir.), cert. denied, 409 U.S. 1064, 93 S. Ct. 560, 34 L. Ed. 2d
518 (1972)). Thus, this Court acknowledged a physician’s duty
to “‘warn of the dangers lurking in the proposed treatment’ and
to ‘impart information [that] the patient has every right to
expect,’ as well as a duty of ‘reasonable disclosure of the
choices with respect to proposed therapy and the dangers
inherently and potentially involved.’” Id. at 211 (alteration
in original) (quoting Canterbury, supra, 464 F.2d at 782). The
Court stated that
the scope of the duty to disclose “must be
measured by the patient’s need, and that need
is the information material to the decision.
Thus the test for determining whether a
particular peril must be divulged is its
materiality to the patient’s decision: all
risks potentially affecting the decision must
be unmasked. And to safeguard the patient’s
interest in achieving his own determination on
24
treatment, the law must itself set the
standard for adequate disclosure.”
[Ibid. (quoting Canterbury, supra, 464 F.2d at
786-87).]
The breadth of the duty to disclose risks is measured by a
standard that is not personal to the physician or to the
patient. Rather, it is an objective standard “‘with due regard
for the patient’s informational needs and with suitable leeway
for the physician’s situation.’” Ibid. (quoting Canterbury,
supra, 464 F.2d at 787). A risk is “material” if the reasonable
patient “would be ‘likely to attach significance to the risk or
cluster of risks’ in deciding whether to forego the proposed
therapy or to submit to it.” Id. at 211-12 (quoting Canterbury,
supra, 464 F.2d at 787).
Thus, the Largey Court reversed the verdict in favor of a
physician, where the trial court instructed the jury to evaluate
the plaintiff’s informed consent claim in accordance with the
prevailing “reasonable physician” standard. Id. at 205, 216.
In the course of deciding that the plaintiff’s informed consent
claim should be evaluated in accordance with the prudent patient
standard, the Court stated that
“[t]he topics importantly demanding a
communication of information are the inherent
and potential hazards of the proposed
treatment, the alternatives to that treatment,
if any, and the results likely if the patient
remains untreated. The factors contributing
significance to the dangerousness of a medical
25
technique are, of course, the incidence of
injury and the degree of harm threatened.”
[Id. at 213 (alteration in original) (quoting
Canterbury, supra, 464 F.2d at 787-88).]
In Matthies, supra, the Court emphasized that a physician
is required to explain the risks associated with all medically
reasonable alternatives, including invasive and noninvasive
treatments. 160 N.J. at 34. In that case, an eighty-one-year-
old, partially paralyzed woman living independently fell and
fractured her hip. Id. at 29-30. Without consulting the
patient or her family, her physician unilaterally decided not to
surgically repair her fractured hip and placed her on bed rest.
Id. at 31. The Court emphasized that “the decisive factor [in
any informed consent analysis] is not whether a treatment
alternative is invasive or noninvasive, but whether the
physician adequately presents the material facts so that the
patient can make an informed decision.” Id. at 36. Dismissing
the contention that the plaintiff’s position would require a
physician to provide a detailed explanation of every treatment
option, the Court emphasized that “[t]he standard obligates the
physician to disclose only that information material to a
reasonable patient’s informed decision.” Ibid. (citing Largey,
supra, 110 N.J. at 211-12). Because the physician impermissibly
arrogated to himself the decision concerning which treatment
26
alternative would be pursued, the Court remanded the matter for
a new trial. Id. at 34, 41.
The validity of the consent obtained from a patient
normally is confined to a disclosure of the risks associated
with the recommended procedure and alternative procedures or
therapies. The Court has recognized, however, that in certain
circumstances consent may be vitiated if the physician made
significant misrepresentations of his credentials or experience.
In Howard, supra, a neurologist disclosed to the plaintiff the
significant risks, including paralysis, of the surgery proposed
to address a large cervical disc herniation. 172 N.J. at 543.
The plaintiff claimed that the defendant physician informed him
that he was a board certified physician and in each of the prior
eleven years had performed sixty procedures similar to the
procedure he proposed to perform on the plaintiff. Ibid.
Following the surgery, which left the plaintiff a quadriplegic,
the plaintiff learned that the defendant neurologist was not
board certified and had performed the procedure no more than
twenty-five times. Id. at 544.
The Court acknowledged in Howard that a misrepresentation
about a physician’s credentials or experience is “not a perfect
fit” with the prevailing doctrine of informed consent. Id. at
557. Nevertheless, the Court determined that “the possibility
of materiality is present” when the physician makes significant
27
misrepresentations about his credentials and experience when
discussing the risks associated with the proposed surgical
procedure, and those misrepresentations may undermine the
validity of the consent obtained from the patient. Id. at 558.
The Court stated that
[i]n certain circumstances, a serious
misrepresentation concerning the quality or
extent of a physician’s professional
experience, viewed from the perspective of the
reasonably prudent patient assessing the risks
attendant to a medical procedure, can be
material to the grant of intelligent and
informed consent to the procedure.
[Id. at 555 (citing 1 Dan B. Dobbs, The Law of
Torts, § 251 at 660-61 (2001)).]
Thus, to succeed on an informed consent claim based on
misrepresented credentials and experience, the plaintiff in
Howard also was required to show that the additional risk posed
by the physician’s actual credentials and experience increased
the plaintiff’s risk of paralysis from the procedure. Id. at
558. That demonstration is guided by two inquiries: first,
“whether the more limited experience or credentials possessed by
defendant [physician] could have substantially increased
plaintiff’s risk of paralysis,” ibid., and second, “whether that
substantially increased risk would cause a reasonably prudent
person not to consent to undergo the procedure,” ibid.
Requiring a physician to disclose whether he maintains
medical malpractice liability insurance, the amount of the
28
coverage, and any restrictions, reservations, or limitations of
the insurance coverage, or whether a physician has posted a
letter of credit with the BME is also “not a perfect fit” with
our informed consent jurisprudence.
We recognize that the existence or not of medical
malpractice liability insurance or the permissible letter of
credit may be material information for some patients. To
encourage compliance and to enforce the legislative mandate, the
BME has adopted regulations that declare that the failure to
obtain and maintain medical malpractice liability insurance
constitutes professional misconduct. N.J.A.C. 13:35-6.18(e).
In addition, a physician’s failure to have the required coverage
subjects him or her to discipline in accordance with N.J.S.A.
45:9-19.17(b), which may include revocation or suspension of the
physician’s license to practice medicine in this State. See
N.J.S.A. 45:1-21.
Declaring that failure to comply with the statutory
requirement to maintain liability insurance is an act of
professional misconduct, which subjects a physician to
substantial discipline by the BME, and recognizing that some
patients would consider the existence or not of such insurance
material information do not lead inexorably to the conclusion
that noncompliance with the statutory mandate should give rise
to an informed consent claim. As explained in Largey, supra,
29
informed consent is predicated on the duty of the physician to
disclose to the patient the information that will enable the
patient to make a reasoned evaluation of the nature of the
proposed treatment, any risks associated with it, and those
risks associated with any alternative treatments. 110 N.J. at
208. Yet, there may be many reasons that explain a physician’s
lack of liability insurance and some of those reasons do not
necessarily mean that the physician is unskilled to perform the
proposed procedure or to administer the proposed treatment.7 In
such circumstances, the absence of insurance bears no relation
to the nature of the proposed medical course or to the risks
attendant to a proposed procedure or treatment.
To be sure, a patient who has been injured due to negligent
care by an uninsured physician has sustained a financial loss,
but such a loss is not the injury that the informed consent
doctrine ever contemplated. Applying the informed consent
jurisprudence to the financial consequences of negligent care by
an uninsured physician untethers the remedy from its theoretical
underpinnings and is a stark departure from our prior
7 We readily acknowledge in Howard, supra, that even exaggerating
one’s credentials was “not a perfect fit” with our informed consent
jurisprudence. 172 N.J. at 557. Nevertheless, we permitted a
plaintiff to proceed with such a claim if he could establish that
the actual experience of the physician “could have substantially
increased plaintiff’s risk of paralysis” and that a patient facing
that increased risk would not consent to the procedure. Id. at
558.
30
jurisprudence. We discern no principled reason to extend the
additional and questionable relief that the informed consent
doctrine may provide to an injured patient to address the
financial insecurity of a physician.
VII.
Plaintiffs also asserted a negligence claim against MSSC
based on its action permitting Dr. Kaul to perform a medical
procedure for which he was uninsured at its facility.
Plaintiffs do not seek to hold MSSC vicariously liable for Dr.
Kaul’s negligent treatment. Rather, they contend that MSSC owed
a duty to them and others to limit use of its facility only to
those who satisfy the statutory mandate to obtain and maintain
the minimum level of medical malpractice liability insurance.
In essence, plaintiffs asserted a claim of negligent hiring
against MSSC.
Generally, a person who engages an independent contractor
is not liable for the negligence of that contractor. Majestic
Realty Assocs. v. Toti Contracting Co., 30 N.J. 425, 430-31
(1959). An individual will be held liable if he or she: (1)
retains control of the manner and means by which the work will
be performed; (2) retains an incompetent contractor; or (3)
retains an independent contractor to perform work that
constitutes a nuisance per se. Ibid. Plaintiffs urge that a
surgical center that grants privileges to a physician to perform
31
a procedure for which he is uninsured invokes the second
exception because it permitted an incompetent physician to use
its facility.
The incompetent contractor exception is founded on the
premise that
[a]n employer is subject to liability for
physical harm to third persons caused by his
failure to exercise reasonable care to employ
a competent and careful contractor
(a) to do work which will involve the
risk of physical harm unless it is skillfully
and carefully done, or
(b) to perform any duty which the
employer owes to third persons.
[Restatement (Second) of Torts § 411 (1965).]
A competent and careful contractor is “a contractor who
possesses the knowledge, skill, experience, and available
equipment which a reasonable [person] would realize that a
contractor must have in order to do the work which he is
employed to do without creating unreasonable risk of injury to
others.” Id. at cmt. (a). Any liability for failing to engage
a competent contractor is limited “to the physical harm as is so
caused.” Id. at cmt. (b). In order for the employer to be
liable, “that harm shall result from some quality in the
contractor which made it negligent for the employer to entrust
the work to him.” Ibid.
32
Efforts to invoke the second Majestic exception to the
ordinary rule that a principal is not liable for the negligent
acts of an independent contractor have often arisen in the
context of a tradesman, such as a paver, a tree surgeon, or a
carpenter, who was employed to perform a certain task and is
later determined to be insolvent. See Mavrikidis v. Petullo,
153 N.J. 117, 137-38 (1998) (rejecting contention that efforts
to minimize cost and use of uninspected truck constitutes
incompetence); Cassano v. Aschoff, 226 N.J. Super. 110, 112, 116
(App. Div.) (rejecting contention that insolvency of tree
surgeon constitutes indicia of incompetence), certif. denied,
113 N.J. 371 (1988); Miltz v. Borroughs-Shelving, 203 N.J.
Super. 451, 466 (App. Div. 1985) (confirming that financial
responsibility is not reliable indicia of incompetence of
carpenter). In those cases, lack of financial responsibility,
including the absence of insurance, was not considered as
indicia of a lack of skill or incompetence. Such dispositions
are consistent with comment (g) to § 411 of the Restatement,
which provides that § 411 “has no application where the
contractor, although competent and careful, is financially
irresponsible.”
Mavrikidis illustrates this rule and comment. In
Mavrikidis, a trucking firm retained by a gasoline station
operator to pave the surface of the station used a grossly
33
overloaded truck with faulty brakes to haul hot asphalt to the
gas station. 153 N.J. at 124-25, 128. Unable to stop due to
the faulty brakes, the truck drove through a red light, struck
the plaintiff’s car, hit a telephone pole and overturned,
spilling hot asphalt onto the plaintiff’s car. Id. at 125. The
Court refused to recognize a cause of action for negligent
hiring of the asphalt hauler because the evidence presented at
trial demonstrated that the retained contractor was a skilled
and experienced paving contractor and there was no evidence that
the gas station operator knew or had reason to know that the
vehicle used to carry the asphalt was unsafe. Id. at 141-42.
In a dissenting opinion, Justice Stein asserted that the
majority viewed the Majestic incompetent contractor exception
too narrowly. Id. at 152 (Stein, J., dissenting). The dissent
also found substantial evidence to support the jury’s finding
that the gas station operator negligently hired a contractor to
pave and transport hot asphalt because it could set off the
paving cost against a debt owed to it by the contractor, and it
knew that the contractor operated uninspected trucks in a state
of disrepair. Id. at 154-58.
In Puckrein v. ATI Transport, Inc., 186 N.J. 563, 579-80
(2006), the Court addressed the Majestic negligent hiring
exception in the context of retaining independent contractors to
perform tasks in a highly regulated industry. We recognized a
34
cause of action against a principal engaged in the collection
and disposal of solid waste and recyclable materials, who
retained a trucking company to haul the waste to various out-of-
state waste disposal facilities. The principal demonstrated
little or no regard for the qualifications of the drivers or the
conditions of the vehicles used to transport the materials. The
contract between the business and the trucking firm retained by
it required the trucking firm to comply with all applicable
city, state, and federal requirements, and the trucking firm
agreed to maintain required insurance and to indemnify the
business that retained its services. Id. at 569-70.
Discovery revealed that equipment bearing markings other
than the retained trucking firm occasionally appeared at the
facility to collect solid waste and recyclable materials. Id.
at 571. The transportation manager for the principal believed
“they were the same company.” Ibid. Moreover, the
transportation manager conceded that he never checked to
determine if the trucks that appeared at his facility had passed
inspection or held the requisite registration, insurance,
licenses, or permits. Ibid.
The incident that formed the basis for the plaintiff’s
complaint in Puckrein occurred when the driver of a tractor-
trailer drove through a red light and struck an automobile with
three occupants. Id. at 568. Two of the occupants died; a
35
third occupant was seriously injured. Ibid. At the time of the
accident, the tractor-trailer contained tons of glass residue.
Ibid. The vehicle also had faulty brakes and the liability
insurance had lapsed. Id. at 568, 570.
Relying on basic negligence principles and § 411 of the
Restatement, the Court recognized a duty of an employer “to
exercise reasonable care to employ a competent and careful
contractor” to perform work that involves a risk of physical
harm unless it is done with skill. Id. at 575. The Court
concluded that
to prevail against the principal for hiring an
incompetent contractor, a plaintiff must show
that the contractor was, in fact, incompetent
or unskilled to perform the job for which
he/she was hired, that the harm that resulted
arose out of that incompetence, and that the
principal knew or should have known of the
incompetence.
[Id. at 576 (citing Mavrikidis, supra, 153
N.J. at 136-37).]
In so holding, the Court addressed the contrary result reached
in Mavrikidis.
The Puckrein Court did not view its earlier opinion in
Mavrikidis as the final word on the Majestic incompetent
contractor exception; instead, the Court viewed the disposition
in Mavrikidis as
a difference of opinion over whether to
consider that contract narrowly as a paving
contract, or more broadly as including pre-
36
and post-paving activities. Although that
issue may be debatable, what is not debatable
is that the tipping point between the majority
and the dissent in Mavrikidis was not a
disagreement over the basic legal principles
to which we have adverted. That is the
backdrop for our inquiry.
[Id. at 577.]
Ultimately, the Puckrein Court determined that summary
judgment had been improperly granted in favor of the business
that had retained the wastehauler. Id. at 580. The Court noted
that the tractor-trailer operator hauling the glass had been
retained to perform the very task that was the subject of the
contract between the business and the wastehauler. Id. at 578.
Any driver performing those tasks had to have a valid driver’s
license, the vehicle had to be registered and inspected, and the
owner/operator of the vehicle had to maintain liability
insurance. Ibid. As such, the Court concluded that
the core question here is not whether [the
retained trucker] was competent to transport
[the business’s] loads upon the public
highways -- it was not. The question is
whether [the business] violated its duty to
use reasonable care in selecting a trucker and
whether it knew or should have known of [the
retained trucker’s] incompetence.
[Id. at 579.]
A later case rephrased the essential question as whether the
principal that engaged an independent contractor inquired “into
37
an independent contractor’s essential competency.” Fox v.
Millman, 210 N.J. 401, 427 (2012).
A year following this Court’s decision in Puckrein, the
Court restated the circumstances that would permit a person to
prevail on a claim against a principal who retained an
incompetent or unskilled contractor. Basil, supra, 193 N.J. at
68. In Basil, this Court addressed a negligent hiring claim
brought against a workers’ compensation carrier that retained an
uninsured physician to examine and treat persons who sustained
workplace injuries. Id. at 43-45. The physician was not
obliged to have medical malpractice liability insurance as a
condition of his license to practice medicine in this State at
the time the insurance carrier retained the defendant physician
or at the time he performed the medical examinations of the
plaintiff. Id. at 72. Accordingly, the Court concluded that
the physician could not be considered an incompetent contractor.
Id. at 72-73.
The Court proceeded, however, to emphasize that the current
state of the law requiring medical malpractice liability
insurance as a condition of licensure imposed a continuing
responsibility on an insurer that retains physicians to treat or
examine injured workers to ensure that the retained physician is
qualified to practice. Id. at 73. The Court stated:
38
State regulations now clearly require
practicing physicians maintaining a
professional office . . . to obtain a minimum
amount of medical malpractice insurance as a
condition for licensure. An IME contract
physician who lacked malpractice insurance
after . . . (the effective date of [N.J.A.C.
13:35-6.18(a)]), is unqualified to practice
medicine. Consistent with our 2006 holding in
Puckrein, supra, an insurance company that
engages an IME physician for evaluative
purposes now must be aware that it is under a
continuing duty of inquiry in respect of
malpractice insurance requirements in order to
ensure that the physicians it engages are
qualified to practice.
[Ibid. (internal citation omitted).]
In sum, Puckrein establishes that, when a business retains
a contractor to perform a task that requires special skill and
specific permits or licenses, its retention of a contractor
without those necessary credentials subjects the business to
liability for hiring an incompetent contractor. Similarly,
Basil counsels that granting privileges to a physician without
the appropriate credentials also exposes the health care
facility to liability for hiring an incompetent contractor.
The provision of medical care is highly regulated in this
State. Hospitals and the wide variety of alternative providers
of health care services, including ambulatory care centers and
surgical centers, are highly regulated. See, e.g., N.J.A.C.
8:43G-1.1 to -7A.10 (establishing hospital licensing standards);
N.J.A.C. 8:43A-1.1 to -33.4 (promulgating manual of standards
39
for licensing ambulatory care centers). No health care facility
may provide medical care unless it obtains a license, N.J.S.A.
26:21-1 to -12(a), and that license is subject to renewal on an
annual basis, N.J.A.C. 8:43E-5.3(c). Each set of regulations
governing each type of health care facility recognizes that the
health care administered in a facility is provided by employees,
such as nurses and technicians, and independent contractors,
such as physicians. Health care facilities are given broad
responsibility to select the professionals who will provide
medical care; however, regulations address the manner in which
the medical staff shall be organized, the staff policies and
procedures that should be addressed, and medical staff
qualifications. N.J.A.C. 8:43G-16.1 to -17.1. The governing
authority of each facility is required to establish criteria for
delineating the privileges that will be granted, granting
privileges to provide medical care in its facility in accordance
with the adopted standards and procedures, and reviewing the
granted privileges on a periodic basis. N.J.A.C. 8:43A-4.1, -7.2
to -7.4. Physicians must submit an application to obtain
privileges and must demonstrate that they are currently licensed
to practice medicine in this State. See N.J.A.C.
8:43A-1.21, -3.5, and -12.3(a) (requiring provision of surgical
privileges at ambulatory health centers to currently licensed
physicians); N.J.A.C. 8:43G-16.3(a) (requiring all physicians
40
with clinical privileges at hospitals to be licensed to practice
medicine by BME). Obtaining and maintaining medical malpractice
liability insurance in the amounts prescribed by law is a
requirement to obtain and maintain a license to practice
medicine in New Jersey. N.J.S.A. 45:9-19.17; N.J.A.C. 13:35-
6.18(b).
In the context of plaintiffs’ negligent hiring claim
against MSSC, the basic element of competency for any physician
seeking surgical privileges at MSSC’s facility is possession of
a license to practice medicine in the State of New Jersey. An
essential condition for such a license is possession of a policy
of medical malpractice liability insurance or an acceptable
letter of credit as required by statute and the regulations
adopted by the BME. Moreover, the statutory financial
responsibility requirements impose a continuing obligation on
the physician to maintain the appropriate type and amount of
insurance.
As recognized in Puckrein and Basil, when the task that a
principal retains an independent contractor to perform requires
specific qualifications, such as possession of certain permits
and licenses, the principal has an initial duty to ascertain
that the contractor possesses the requisite license and a
continuing duty to assure that the requisite license is
maintained. Here, MSSC had a duty to withhold privileges to any
41
physician who did not meet the financial responsibility
requirements for a license to practice medicine in this State.
To be sure, the Legislature delegated the authority to enforce
the liability insurance requirement to the BME. The record
before the trial court, however, demonstrates that MSSC knew
that Dr. Kaul possessed an insurance policy that expressly
excluded the procedure performed on plaintiff. The record also
reveals that Dr. Kaul asserted that he advised the BME and MSSC
that he possessed sufficient assets to satisfy the alternative
letter of credit requirement. Yet, a simple representation that
a physician possesses sufficient assets does not satisfy the
regulatory definition of a letter of credit. See N.J.A.C.
13:35-6.18(a). More importantly, the record is barren of any
evidence that the BME accepted this bare representation of
financial responsibility or that MSSC conducted any inquiry to
confirm that the BME deemed such a representation as compliance
with the statutory insurance requirement. In short, based on
this record, the trial court erred in granting summary judgment
in favor of MSSC.
A negligent hiring cause of action is not a strict
liability claim. To the contrary, it is founded on basic
negligence principles. Thus, a plaintiff who asserts such a
claim against a health care facility must do more than prove
that the facility granted privileges to a physician without the
42
statutorily required medical malpractice liability insurance or
letter of credit.
Here, having misconstrued the nature of plaintiffs’ claim
against MSSC, the trial court dismissed the negligent hiring
claim. As noted in this opinion, there are several open
questions about whether Dr. Kaul complied with the alternative
letter of credit requirement. As described by Dr. Kaul, his
bare assertion of adequate financial assets to respond to a
negligence claim does not comply with the BME definition of a
letter of credit. N.J.A.C. 13:35-6.18(a). Moreover, Dr. Kaul
asserts either he or MSSC personnel discussed the sufficiency of
his purported letter of credit with BME personnel. Discovery is
required to clarify this and other issues integral to this
claim. We therefore reverse the summary judgment entered in
favor of MSSC in the negligent hiring claim asserted by
plaintiffs.
VIII.
In summary, we conclude that N.J.S.A. 45:9-19.17 does not
create a direct action by an injured patient against a physician
who does not possess medical malpractice liability insurance or
a suitable letter of credit. Moreover, failure to comply with
the statutory liability insurance mandate does not give rise to
an informed consent claim. The inability to recover a judgment
is not the injury contemplated by the informed consent doctrine.
43
Finally, we hold that a cause of action for negligent
hiring may be asserted against a health care facility that
grants privileges to a physician who has not complied with the
statutorily required insurance. A health care facility that
grants privileges to physicians to use its facility has a
continuing duty to ensure that any physician granted privileges
maintains the required insurance, which is a condition of
obtaining and maintaining a license to practice medicine in this
State.
IX.
The judgment of the Appellate Division is affirmed in part
and reversed in part and remanded for further proceedings
consistent with this opinion.
JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, and SOLOMON
join in JUDGE CUFF’s opinion. JUSTICE ALBIN filed a separate
opinion dissenting in part and concurring in part, in which
CHIEF JUSTICE RABNER joins.
44
SUPREME COURT OF NEW JERSEY
A-42 September Term 2013
072363
JAMES R. JARRELL and SHEILA
G. JARRELL, his wife,
Plaintiffs-Appellants,
v.
RICHARD A. KAUL, M.D. and
MARKET STREET SURGICAL
CENTER,
Defendants-Respondents,
and
JOHN T. FORD, SUSSEX COUNTY
TOTAL HEALTH CENTER, INC.,
Defendants.
JUSTICE ALBIN, dissenting and concurring.
The facts here present the quintessential case of lack of
informed consent. Dr. Kaul did not have the medical malpractice
insurance required by law to perform the invasive surgical
procedure on his patient, plaintiff James Jarrell. Performing
the procedure without the requisite insurance constituted
professional misconduct. Yet, Dr. Kaul never explained any of
this to his patient, presumably because plaintiff never would
have agreed to the procedure had he been fully informed.
Dr. Kaul failed to disclose material facts to his patient.
He denied plaintiff the right to decide whether a financially
1
incompetent -- or worse yet, a professionally incompetent --
physician should perform invasive surgery on him. Dr. Kaul was
credentialed only as an anesthesiologist; he was not insured to
perform spinal surgery.
A logical extension of our informed-consent jurisprudence
would permit a cause of action if a plaintiff can establish four
elements: (1) the physician was uninsured to perform the
medical procedure, (2) the physician failed to inform the
patient that he was uninsured, (3) the patient would not have
undergone the procedure if properly informed, and (4) the
plaintiff can prove damages. The majority, however, is not
willing to take this natural step in the development of our
common law.
A cause of action for lack of informed consent would
recognize that a physician cannot hide material facts and that
the patient has a right to make critical choices concerning his
health. No reasonable patient would consent to spinal surgery
knowing that his physician lacks malpractice insurance to
perform that procedure. Because the majority is unwilling to
find that Dr. Kaul breached a common-law duty by failing to
disclose to the patient his lack of insurance to perform spinal
surgery, I respectfully dissent. I concur in the remainder of
the Court’s opinion.
I.
2
A physician is statutorily required to maintain medical
malpractice liability insurance. N.J.S.A. 45:9-19.17. The
purpose of the law is “to ensure the citizens of the State that
they will have some recourse for adequate compensation in the
event that a physician or podiatrist is found responsible for
acts of malpractice.” Assembly Health Comm., Statement to S.
267 (Sept. 19, 1996). A physician who does not maintain medical
malpractice liability insurance for a procedure he performs is
subject to discipline for professional misconduct -- discipline
that includes possible revocation or suspension of his license
to practice medicine. See N.J.S.A. 45:1-21; N.J.A.C. 13:35-
6.18(e). The public therefore presumes that a physician is
insured to perform a surgical procedure.
Physicians are obligated to provide information that is
material to a reasonable patient’s ability to make an informed
decision about whether to proceed with a course of treatment or
procedure. Matthies v. Mastromonaco, 160 N.J. 26, 36 (1999).
The doctrine of informed consent finds its source in the concept
of negligence. Largey v. Rothman, 110 N.J. 204, 208 (1988). In
an informed-consent analysis, the dominant issue is “whether the
physician adequately presents the material facts so that the
patient can make an informed decision.” Matthies, supra, 160
N.J. at 36. A “‘physician violates his duty to his patient and
subjects himself to liability if he withholds any facts which
3
are necessary to form the basis of an intelligent consent by the
patient to the proposed treatment.’” Largey, supra, 110 N.J. at
208 (quoting Salgo v. Leland Stanford, Jr. Univ. Bd. of
Trustees, 317 P.2d 170, 181 (Cal. Dist. Ct. App. 1957)); see
also In re Conroy, 98 N.J. 321, 346 (1985) (explaining that
under informed-consent doctrine, “no medical procedure may be
performed without a patient’s consent, obtained after
explanation of the nature of the treatment, substantial risks,
and alternative therapies” (internal quotation marks omitted)).
The informed-consent doctrine is about patient autonomy -- the
right of the patient to make decisions that intimately and
materially concern his health and life. Rothman, supra, 110
N.J. at 209; see also Howard v. Univ. of Med. & Dentistry of
N.J., 172 N.J. 537, 557 (2002) (recognizing informed-consent
claim when objectively reasonable patient would not consent to
procedure if physician’s inexperience had been known to
patient). The physician cannot arrogate to himself decisions
that vitally concern the patient’s health.
A patient has a right to know whether a physician
performing a procedure is in a financially responsible position
in the event that the patient suffers injuries due to medical
malpractice. A reasonable patient would consider a physician’s
lack of insurance a material factor in making a decision whether
to have spinal surgery. That is so because an uninsured
4
physician provides no financial safety net for a patient who is
harmed by the physician. Lack of insurance also may suggest
that the carrier considered the physician incompetent to perform
the procedure.
If the physician does not tell the patient that he is not
lawfully permitted to perform the uninsured medical procedure,
then the patient should be able to file a cause of action for
lack of informed consent, provided he would not have undergone
the procedure had he been properly informed and he can prove
damages.
II.
The goals of tort law are to deter persons from engaging in
unreasonable conduct and to compensate victims for the damage
done to them by tortfeasors. The application of the common law
to this claim of lack of informed consent would have been an
unremarkable extension of our jurisprudence. It is remarkable
that a patient has no cause of action against a physician who
performs a surgical procedure under the false pretense that he
is insured.
For those reasons, I respectfully dissent in part and
concur in part.
5
SUPREME COURT OF NEW JERSEY
NO. A-42 SEPTEMBER TERM 2013
ON CERTIFICATION TO Appellate Division, Superior Court
JAMES R. JARRELL and SHEILA
G. JARRELL, his wife,
Plaintiffs-Appellants,
v.
RICHARD A. KAUL, M.D. and
MARKET STREET SURGICAL
CENTER,
Defendants-Respondents,
and
JOHN T. FORD, SUSSEX COUNTY
TOTAL HEALTH CENTER, INC.,
Defendants.
DECIDED September 29, 2015
Chief Justice Rabner PRESIDING
OPINION BY Judge Cuff (temporarily assigned)
CONCURRING/DISSENTING OPINIONS BY Justice Albin
DISSENTING OPINION BY
AFFIRM IN
CONCUR IN
PART/
PART/
CHECKLIST REVERSE IN
DISSENT IN
PART/
PART
REMAND
CHIEF JUSTICE RABNER X
JUSTICE LaVECCHIA X
JUSTICE ALBIN X
JUSTICE PATTERSON X
JUSTICE FERNANDEZ-VINA X
JUSTICE SOLOMON X
JUDGE CUFF (t/a) X
TOTALS 5 2