McLaughlin v. Nahata, M.D. Apl of: Dialysis Clinic ( 2023 )

[J-68-2022] [MO: Brobson, J.]
IN THE SUPREME COURT OF PENNSYLVANIA
WESTERN DISTRICT
ALYSSA MCLAUGHLIN AND WILLIAM : No. 7 WAP 2022
MCLAUGHLIN :
: Appeal from the Order of the
: Superior Court entered July 28,
v. : 2021 at No. 1115 WDA 2020,
: affirming the Order of the Court of
: Common Pleas of Washington
AMIT NAHATA, M.D.; KATHRYN SIMONS, : County entered February 5, 2020 at
M.D.; ANNE F. JOSIAH, M.D.; THOMAS : No. 2015-3223 and remanding.
PIROSKO, D.O.; JESSIE GANJOO, M.D.; :
ASHLEY BERKLEY, D.O.; THE : ARGUED: October 26, 2022
WASHINGTON HOSPITAL; AND :
WASHINGTON HEALTH SYSTEM :
WASHINGTON HOSPITAL :
:
:
v. :
:
:
DIALYSIS CLINIC, INC. :
:
:
APPEAL OF: DIALYSIS CLINIC, INC. :
CONCURRING OPINION AND OPINION IN SUPPORT OF AFFIRMANCE
JUSTICE WECHT DECIDED: July 28, 2023
Dialysis Clinic, Inc. (“DCI”) is a healthcare organization that employs nephrologists
who provide dialysis and kidney care to patients. DCI requires the physicians that it
employs to hold medical staff privileges at various facilities, including the Washington
Hospital (“Hospital”). DCI employees Jessie Ganjoo, M.D., and Amit Nahata, M.D., held
staff privileges at the Hospital. In 2013, Alyssa McLaughlin was admitted to the Hospital,
where she received substandard care from Dr. Ganjoo and Dr. Nahata. According to the
Hospital, Dr. Ganjoo and Dr. Nahata treated Ms. McLaughlin in the course and scope of
their employment with DCI.
Ms. McLaughlin and her husband William McLaughlin sued the Hospital under
Section 516 of the Medical Care Availability and Reduction of Error (“MCARE Act”), which
permits patients to sue hospitals directly under a theory of ostensible agency.1 The
McLaughlins obtained a verdict for which the Hospital is liable by operation of Section
516, and the Hospital obtained a verdict against Dr. Ganjoo and Dr. Nahata through
indemnification for this judgment. Having established that the negligent physicians were
obligated to indemnify the Hospital, the Hospital filed an action against DCI. The Hospital
now seeks to shift its liability through indemnification to DCI as the corporate employer of
the negligent physicians or, in the alternative, to apportion liability between DCI and the
Hospital under a theory of contribution.
The Court holds that the law permits the Hospital to pursue its claim of contribution
against DCI.2 The OISPA would hold that the Hospital is not entitled to pursue its claim
1 Section 516 provides:
(a) Vicarious liability.--A hospital may be held vicariously liable for the acts of another
health care provider through principles of ostensible agency only if the evidence shows
that:
(1) a reasonably prudent person in the patient’s position would be justified in the belief
that the care in question was being rendered by the hospital or its agents; or
(2) the care in question was advertised or otherwise represented to the patient as care
being rendered by the hospital or its agents.
(b) Staff privileges.--Evidence that a physician holds staff privileges at a hospital shall be
insufficient to establish vicarious liability through principles of ostensible agency unless
the claimant meets the requirements of subsection (a)(1) or (2).
40 P.S. § 1303.516.
2 I join Sections I, II, III.A, and III.C of the Opinion of the Court. I do not join Sections
III.B and IV. For ease of discussion, I refer to of the Opinion in support of a partial
affirmance and a remand with instructions as the OISPA.
[J-68-2022] [MO: Brobson, J.] - 2
of indemnification. I agree that contribution is available to the Hospital because two
parties that are vicariously liable for a common agent are joint tortfeasors within the
meaning of Section 8322 of the Uniform Contribution Among Joint Tort-feasors Act
(“UCATA”).3 There is no legal support for DCI’s argument that contribution is unavailable
between parties who are vicariously liable for a plaintiff’s injuries.4
As this case proceeds on remand, the factual question of the parties’ actual control
over the negligent physicians as their common agent will be relevant to determining DCI’s
vicarious liability. The factual question of control will likewise be relevant to apportioning
liability between DCI and the Hospital under the Hospital’s claim for contribution. Under
principles of agency law, an agency relationship “results from (1) the manifestation of
consent of one person to another [that] (2) the other shall act on his behalf and subject to
his control, and (3) consent by the other so to act.”5 Within this relationship, the principal
is vicariously liable for the negligence of the agent if such negligence was committed
within the scope of employment.6 The reason that the law imposes this kind of vicarious
liability is because the principal “has the right to exercise control over the physical
activities” of the agent “within the time of service.”7 If the employee or agent is negligent,
3 42 Pa.C.S. §§ 8321-27.
4 See Appellant’s Br. at 45.
5 Smalich v. Westfall, 269 A.2d 476, 480 (Pa. 1970) (citing Chalupiak v. Stahlman,
81 A.2d 577, 580 (Pa. 1951); Restatement (Second) of Agency § 1(1) (1958)).
6 Tayar v. Camelback Ski Corp., Inc., 47 A.3d 1190, 1196 (Pa. 2012) (recognizing
that a corporation, which acts through its officers, employees, and other agents, generally
is vicariously liable for acts committed by its employees in the course of employment);
Travelers Cas. & Sur. Co. v. Castegnaro, 772 A.2d 456, 460 (Pa. 2001) (concluding that
a principal is liable for the negligent acts and torts of its agents that are committed in the
agent’s scope of employment); Smalich, 269 A.2d at 481; Builders Supply Co. v. McCabe,
77 A.2d 368, 370 (Pa. 1951).
7 Smalich, 269 A.2d at 481.
[J-68-2022] [MO: Brobson, J.] - 3
the injured party may recover against the employer or principal on the theory of
respondeat superior.8
For a principal to be held liable for an agent’s negligence, the law requires (i) that
the principal maintain the right of control over the manner in which the work is performed
and (ii) that the negligent conduct was within the agent’s “scope of employment.”9 The
hallmark of the principal-agent relationship is the right of the principal to control not only
the objective to be achieved by performance of the work, but also the manner in which
that work is performed. As this Court has described:
A master is one who stands to another in such a relation that he not only
controls the results of the work of that other, but also may direct the manner
in which such work shall be done. A servant is one who is employed to
render personal services to his employer otherwise than in the pursuit of an
independent calling, and who in such service remains entirely under the
control and direction of the latter.10
Of all the pertinent factors, the right to control is the most important in determining the
existence of a master-servant relationship.11
8 Builders Supply, 77 A.2d at 370.
9 Orr v. William J. Burns Int’l Detective Agency, 12 A.2d 25, 27 (Pa. 1940) (“It is, in
general, sufficient to make the master responsible that he gave to the servant an authority,
or made it his duty to act in respect to the business in which he was engaged when the
wrong was committed, and that the act complained of was done in the course of his
employment.”) (citing Brennan v. Merchant & Co., Inc., 54 A. 891, 892 (Pa. 1903));
Schroeder v. Gulf Refining Co., 150 A. 663, 664 (Pa. 1930) (holding that if a tortious act
occurs while the servant is employed in the “usual course” of the master’s business, and
the servant is acting for the benefit of the master, there is a presumption that the act was
within the scope of employment).
10 Joseph v. United Workers Assoc., 23 A.2d 470, 472 (Pa. 1942).
11 See, e.g., Smalich, 269 A.2d at 481 (discussing the central role of control in
determining an agency relationship).
[J-68-2022] [MO: Brobson, J.] - 4
More than one party may be vicariously liable for the negligent acts of a
physician.12 As we explained in Yorston:
Physicians and surgeons, like other persons, are subject to the law of
agency and a physician may be at the same time the agent both of another
physician and of a hospital even though the employment is not joint.
McConnell v. Williams, [65 A.2d 243 (Pa. 1949)]. In determining whether a
person is the servant of another it is necessary that he not only be subject
to the latter’s control or right of control with regard to the work to be done
and the manner of performing it but that this work is to be performed on the
business of the master or for his benefit. McGrath v. Edward G. Budd
Manufacturing Co., [36 A.2d 303, 305 (Pa. 1944)]. Actual control, of course,
is not essential. It is right to control which is determinative. On the other
hand, the right to supervise, even as to the work and the manner of
performance, is not sufficient; otherwise a supervisory employee would be
liable for the negligent act of another employee though he would not be the
superior or master of that employee in the sense the law means it.
Restatement (Second), Agency, § 220(1) (1958); Commonwealth to the
Use of Orris v. Roberts, [141 A.2d 393 (Pa. 1958)].13
Whether the power of control was sole or joint in a particular scenario is a question of fact
for the jury.14
In the case at bar, the two physicians were employed by DCI while simultaneously
working and maintaining staff privileges at the Hospital. The trial court correctly observed
that the factual background of this case includes unrebutted evidence that Dr. Ganjoo
and Dr. Nahata were DCI’s employees when they provided negligent care to Ms.
12 Tonsic v. Wagner, 329 A.2d 497, 500-01 (Pa. 1974); Yorston v. Pennell, 153 A.2d
255, 259-60 (Pa. 1959); Kissell v. Motor Age Transit Lines, 53 A.2d 593, 596 (Pa. 1947).
13 Yorston, 153 A.2d at 259–60.
14 Tonsic, 329 A.2d at 500; Kissell, 53 A.2d at 595-96; Dunmire v. Fitzgerald, 37 A.2d
596, 599 (Pa. 1944) (holding that, if it is not entirely clear who is the controlling master,
and the evidence supports different inferences, it is for the jury to determine the question
of agency).
[J-68-2022] [MO: Brobson, J.] - 5
McLaughlin.15 DCI has offered no evidence to the contrary.16 As the corporate employer
of the physicians, DCI would be vicariously liable for acts committed by them as
employees acting in the course of their employment.17 As the hospital in which the injuries
occurred, the Hospital is vicariously liable for the physicians’ conduct through principles
of ostensible agency pursuant to Section 516 of the MCARE Act. Consequently, there
are two entities that are vicariously liable for the physicians’ negligence: DCI as the
corporate employer and the Hospital as the ostensible principal.
The parties and the trial court agree that control is central to establishing DCI’s
vicarious liability and to guiding the court’s apportionment of liability between the two
vicariously liable entities. In particular, there are contested facts as to whether and to
what extent DCI exercised control over Drs. Ganjoo and Nahata.18 On the issue of
contribution, the trial court denied DCI’s motion for summary judgment in order to permit
the case to proceed to trial to apportion liability, citing Sleasman v. Brooks, 32 Pa. D. &
C.3d 187, 190 (Pa.Com.Pl. 1984). In Sleasman, apportionment between two co-
employers was based upon joint control over their common co-employee. Relying upon
the persuasive authority of Sleasman, the trial court here intends to apportion liability
between DCI and the Hospital based upon their respective control of Drs. Ganjoo and
Nahata. The trial court explained:
From this trial judge’s view, the equities of this dispute drive the decision to
put [the Hospital’s] contribution claim to a jury. Neither [the Hospital], an
ostensible employer, nor DCI, the actual employer, should be permitted to
escape liability without a full and fair hearing. The facts and circumstances
surrounding who controlled Drs. Ganjoo and Nahata in their treatment of
15 Tr. Ct. Op., 7/15/2020, at 9.
16 Id. at 10.
17 See Tayar, 47 A.3d at 1196.
18 Tr. Ct. Op., 2/5/2020, at 6-11.
[J-68-2022] [MO: Brobson, J.] - 6
Mrs. McLaughlin should be determined. Then the financial burden should
be apportioned accordingly.19
DCI has taken the position that, if contribution is available as a matter of law, then
apportionment based upon respective control is necessary in order to allocate vicarious
liability.20 And the Hospital, of course, agrees with the trial court’s decision to proceed to
a trial to apportion liability under its claim for contribution. The factual question of control
remains to be resolved in this case and would appear to be determinative of the issue of
contribution.
Turning to indemnification, I disagree with the OISPA’s preclusion of this claim.
The OISPA predicates this limitation upon its belief that one vicariously liable party cannot
shift its liability to another vicariously liable party.21 The OISPA contends that, by
establishing the Hospital as the ostensible principal, Section 516 forecloses the Hospital’s
claim for indemnification against DCI.22 I cannot agree. As a matter of law, Section 516
bears no relevance to the question of whether the Hospital is able to establish a factual
predicate to support its claim for indemnification by the corporate employer of the
negligent physicians.
Indemnity is a common law equitable remedy that is aimed at preventing an unjust
result.23 Indemnification generally is available where a party was held liable on the basis
of “fault that is imputed or constructive only, being based on some legal relation between
19 Tr. Ct. Op., 7/15/2020, at 22.
20 Appellant’s Br. at 15; 53 (providing that if the Court is inclined to allow contribution
here, then the trial court’s decision to have a trial to apportion vicarious liability based
upon respective control should not be disturbed).
21 OISPA. at 29.
22 OISPA. at 30.
23 City of Wilkes-Barre v. Kaminski Bros., 804 A.2d 89, 92 (Pa. Cmwlth. 2002).
[J-68-2022] [MO: Brobson, J.] - 7
the parties.”24 To this end, indemnification shifts the entire responsibility for damages
from a party who “without active fault on his own part, has been compelled, by reason of
some legal obligation, to pay damages occasioned by the initial negligence of another,
and for which he himself is only secondarily liable.”25 In this way, indemnity seeks to shift
the burden of the loss to the “defendant who was actually responsible for the accident
which occasioned the loss.”26 Only a party that is free from fault is entitled to
indemnification.27
The availability of indemnification therefore depends both upon a legal obligation
and a lack of fault in the party seeking indemnification. In Builders Supply, the Court
rejected the third party plaintiff’s claim for indemnity because there was a binding
judgment that the third party plaintiff’s own negligence was a contributing factor in the
accident.28 In Sirianni, the Court rejected the City of Philadelphia’s claim for indemnity
because the City’s own negligence contributed to the accident.29 These cases confirm
24 Builders Supply, 77 A.2d at 371.
25 Id. at 370; Sirianni v. Nugent Bros., Inc., 506 A.2d 868, 871 (Pa. 1986) (providing
that common law indemnity is available “only when a defendant who has been held liable
to a plaintiff solely by operation of law seeks to recover his loss from a defendant who
was actually responsible for the accident which occasioned the loss”).
26 Sirianni, 506 A.2d 871.
27 Id. (holding that the proper inquiry concerning a claim for indemnity is “whether the
party seeking indemnity had any part in causing the injury”); Builders Supply, 77 A.2d at
370.
28 Builders Supply, 77 A.2d at 374.
29 Sirianni, 506 A.2d at 871-72.
[J-68-2022] [MO: Brobson, J.] - 8
that a party’s right to indemnity depends upon that party being free of any fault in causing
the injury.30
If the Hospital is free of fault, then Builders Supply will support its claim for
indemnity. Giving several examples of cases in which a right to indemnity was found to
exist, the Builders Supply Court highlighted Philadelphia Co. v. Cent. Traction Co., 30 A.
934, 936 (Pa. 1895):
Many other illustrations might, of course, be given, as, for example, where
a person injured by the leakage of gas from a defective pipe recovered
damages from the gas company which maintained the pipe, [and] the gas
company was held entitled to recover indemnity from a street railway
company whose negligent excavation in the street had caused the pipe to
break.31
Our precedents support permitting one corporation to seek indemnification from another
corporation whose employees committed negligence as a matter of law.
As a factual matter, indemnification depends upon fault. In this respect, the
Hospital maintains that indemnification is available to it because it acted without fault.
DCI maintains that the Hospital’s corporate negligence contributed to the injuries and
therefore forecloses the Hospital’s indemnification claim.32 The record contains some
evidence of corporate negligence that, if accepted as true, would establish the Hospital’s
direct liability for the McLaughlins’ harm.33 In particular, DCI identified two experts who
30 Id. at 871 (“Whether an owner of property may be primarily, or ultimately,
responsible for injuries occurring on that property is not the proper inquiry. Rather a court
must look to whether the party seeking indemnity had any part in causing the injury.”).
31 Builders Supply, 77 A.2d at 370-71 (citing Philadelphia Co., 30 A.3d at 936).
32 “Corporate negligence is a doctrine under which the hospital is liable if it fails to
uphold the proper standard of care owed the patient, which is to ensure the patient’s
safety and well-being while at the hospital. This theory of liability creates a nondelegable
duty which the hospital owes directly to a patient.” Thompson v. Nason Hosp., 591 A.2d
703, 707 (Pa. 1991).
33 Tr. Ct. Op., 2/5/2020, at 10.
[J-68-2022] [MO: Brobson, J.] - 9
have offered opinions critical of the failure of the Hospital’s staff to monitor changes in
Ms. McLaughlin’s condition, contributing to her injuries.34 DCI’s evidence could show the
Hospital’s own fault and defeat the Hospital’s indemnity claim.35 That remains to be seen.
Unless something precludes it, I see no reason why the Hospital would not have the right
to seek indemnification from DCI.36
According to the OISPA, Section 516 precludes the Hospital’s right to seek
indemnification. The OISPA acknowledges that one corporate entity can obtain
indemnification from another corporate entity whose negligent employees were at fault.
Yet the OISPA declines to apply this rule of law to the Hospital’s benefit because the
Hospital is the ostensible principal of the negligent physicians under Section 516.37 Even
if it were equitable to allow the Hospital the opportunity to establish the facts necessary
34 See Thompson, 591 A.2d at 709 (“When there is a failure to report changes in a
patient’s condition and/or to question a physician’s order which is not in accord with
standard medical practice and the patient is injured as a result, the hospital will be liable
for such negligence.”).
35 See Builders Supply, 77 A.2d at 374 (rejecting a plaintiff’s claim for indemnity
because of proof of the plaintiff’s fault in causing the injury); Sirianni, 506 A.2d at 871-72
(rejecting a city’s claim for indemnity based upon the city’s own negligence).
36 The OISPA posits that, where two principals are vicariously liable for a common
agent, there is no difference in the legal obligation owed to the plaintiff that would permit
indemnification by either principal. OISPA. at 29. I cannot agree. As explained above,
indemnification depends upon fault, thus differentiating the obligations owed to the
plaintiff as between two vicariously liable principals.
Builders Supply does not support precluding the Hospital’s claim for
indemnification. See OISPA. at 30, n.24. Builders Supply discussed not only how
indemnification operates between a principal and agent, 77 A.2d at 370, but also how it
operates in other scenarios. One such scenario was Philadelphia Company, 30 A. 934at 936, which, as described above, contemplated indemnification from one corporate
entity to another. 77 A.2d at 370-71. Consistent with Philadelphia Company, the Hospital
is entitled to the opportunity to establish its claim for indemnification against DCI as the
employer of the physicians whose negligence caused the loss.
37 OISPA. at 30.
[J-68-2022] [MO: Brobson, J.] - 10
to support a right of indemnification, the OISPA believes that Section 516 precludes this
outcome. The OISPA reasons that, because the MCARE Act designates the Hospital as
the ostensible principal, the Hospital cannot shift its responsibility for damages to the
actual employer.38
I cannot agree. Although Section 516 designates the Hospital the ostensible
principal for purposes of the McLaughlins’ negligence action, it says nothing about
allocating or shifting vicarious responsibility for the judgment.
Section 516 codifies the common law of ostensible agency as applied to hospitals.
After this Court recognized respondeat superior as a basis for hospital liability in Tonsic,
the Superior Court adopted a theory of ostensible agency for a hospital’s vicarious liability
for the negligence of a physician who was an independent contractor rather than an
employee.39 The ostensible agency theory adopted therein was premised upon Section
429 of the Restatement (Second) of Torts. Under this theory, “a hospital could be held
liable for the negligence of an independent contractor physician where (1) the patient
looked to the institution, rather than the individual physician, for care, or (2) the hospital
‘held out’ the physician as its employee.”40
With Section 516 of the MCARE Act, the General Assembly codified the vicarious
liability of hospitals under principles of ostensible agency, rendering hospitals vicariously
liable (under certain circumstances) for the negligence of health care providers practicing
in the hospital. The effect of Section 516 is to allow an injured patient to sue the hospital
in which negligence occurred without proving that the hospital employed the provider or
that the provider was acting as the hospital’s agent. This ensures that the plaintiff
38 Id.
39 Capan v. Divine Providence Hosp., 430 A.2d 647 (Pa. Super. 1980).
40 Green v. Pennsylvania Hosp., 123 A.3d 310, 317 (Pa. 2015).
[J-68-2022] [MO: Brobson, J.] - 11
recovers directly from the hospital and avoids the independent contractor doctrine that
would otherwise shield the hospital from liability.41
The ostensible agency doctrine codified in Section 516 does nothing to limit a
hospital’s ability to seek indemnification from a corporate employer of negligent
physicians. Section 516 simply serves as the law that operates to hold the Hospital liable.
The permissive language of Section 516—that a hospital “may” be held vicariously
liable—does not provide that ostensible agency is the exclusive means for establishing
vicarious liability for a physician’s negligence. In short, Section 516 establishes the legal
obligation necessary for indemnification; the factual predicate remains to be established.
The Hospital’s claim for indemnification depends upon the Hospital’s fault or lack
thereof. This is a factual question for the jury to decide. The claim does not depend upon
Section 516, which serves only as the legal obligation that compelled the Hospital to pay
damages to the plaintiffs in the first instance. If the Hospital can establish that it is “without
active fault” of its own, as it alleges, it may be entitled to shift the entire responsibility for
damages to DCI as the employer of the negligent physicians.
Contrary to the OISPA, I do not view Section 516 as offering anything relevant to
the equities. As the trial court held, neither the McLaughlins’ choice of defendants nor
Section 516 should compel the Hospital to pay for liabilities created by DCI’s employees
while acting within the course and scope of their employment.42 Denying the Hospital the
opportunity to seek indemnification for harm allegedly caused by DCI’s employees, when
41 See Kinney-Lindstrom v. Med. Care Availability and Reduction of Error Fund, 73
A.3d 543, 555 (Pa. 2013) (recognizing that the MCARE Act was enacted to ensure “fair
compensation to the injured victim of malpractice” and to enable health care providers to
obtain affordable professional liability insurance).
42 Tr. Ct. Op., 7/15/2020, at 16; see also Burch v. Sears, Roebuck & Co., 467 A.2d
615, 622 (Pa. Super. 1983) (observing that indemnification, like contribution, is available
even against defendants that the plaintiff does not sue).
[J-68-2022] [MO: Brobson, J.] - 12
the Hospital may yet establish that it acted without fault, is inequitable and unjust. There
is no authority for the proposition that a hospital’s vicarious liability under principles of
ostensible agency insulates the corporate employers of negligent physicians from liability.
The OISPA reliance upon Section 516 as a limitation on the Hospital’s ability to establish
indemnity is contrary to MCARE’s goal of keeping medical malpractice insurance
premiums affordable, as it would preclude indemnification where the requirements are
otherwise satisfied. Section 516 simply is not relevant to the availability of indemnification
to the Hospital.
A fair allocation of liability among vicariously liable principals in this case depends
upon further factual development. Whether the Hospital is entitled to indemnification,
contribution, or neither will depend upon what level of relative control it exercised over the
negligent physicians and whether the Hospital was at fault for the McLaughlins’ injuries.
If, on remand, the Hospital is able to establish that DCI exclusively controlled Dr. Ganjoo
and Dr. Nahata and that the Hospital was not at fault because it did not engage in
corporate negligence, then it would establish a claim for indemnification. Otherwise,
having failed to establish its entitlement to indemnification, the Hospital would be entitled
to contribution based upon the respective control of the Hospital and DCI.
Permitting the Hospital to seek indemnification and contribution from the corporate
employers of negligent physicians allows for factual development on the issue of which
entity exercised the control necessary to deter negligence, and therefore maintains the
ability to implement policies to reduce negligence. Allocating or shifting responsibility
based upon the degree of control that vicariously liable defendants exercised over the
negligent physicians will effectuate the aim of Section 516 to compensate injured plaintiffs
while also placing the financial burden of negligent physicians on the party best situated
[J-68-2022] [MO: Brobson, J.] - 13
to prevent similar occurrences of negligence. I would afford the Hospital the opportunity
to prove the factual basis of its claim for indemnification as well as contribution.
Chief Justice Todd and Justice Donohue join this Concurring Opinion and Opinion in
Support of Affirmance.
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