How physicians can mitigate their liability

June 14, 2018

Physicians need to understand agency, the six types of authority, and their relationship to emergency departments.

A recent ruling by the Appellate Court of Illinois underscores the importance of agency and the relationship between physicians and emergency departments.

As I read the recent opinion in Davis v. Ingalls Health Sys., No. 1-17-1696 (Ill. App. Ct. May 11, 2018), I was reminded of something my agency law professor relayed during class: During the practice of law, most cases either have an element of agency law to consider or the entire case hinges on the outcome of establishing a relationship, authority, or the perception of a third-party. He was right. Whether in tort law through vicarious liability, in contracts through establishing if a valid contract exists, or in criminal law through conspiracy, agency law can-and does-determine the outcome of a case.

In Davis, the plaintiff was the parent of a now-deceased child who sued both Ingalls Memorial Hospital (Ingalls) and Atul Joshi, DO, (the treating emergency room physician) for negligence. Specifically, the physician allegedly failed to diagnose and treat the child’s streptococcus infection. The plaintiff argued that the concept of apparent agency could apply and both Ingalls and Joshi could be held liable. Here, the Appellate Court found that a genuine issue of material fact existed as to whether or not a reasonable person would have considered the physician a hospital employee based on his ID badge that said “Ingalls” and whether or not Ingalls knew that the badge displayed “Ingalls” instead of “MEA,” the physician’s employer.

Physicians need to understand what agency is and the six types of authority because many physicians are now employed by health systems. Furthermore, even if signs are posted, it may be inadequate, especially during stressful medical treatment scenarios.

According to the Restatementof the Law, Agency, Second (1958), the “general principle of interpretation” states that “[a]n agent is authorized to do, and to do only, what it is reasonable for him to infer that the principal desires him to do in the light of the principal’s manifestations and the facts as he knows or should know them at the time he acts.”

In a contract scenario, the six types of authority that may bind a principal to an agent are as follows:

  • actual express authority- explicit agreement, often in writing
  • actual implied authority- employment agreement exists but the authority to bind in a particular situation has not
  • apparent authority- “[a]pparent authority is the power to affect the legal relations of another person by transactions with third persons, professedly as agent for the other, arising from and in accordance with the other’s manifestations to such third persons”
  • estoppel- confusion could have been prevented if the principal interjected and asserted that the agent was not authorized
  • ratification- if a principal agrees to a contract after the fact, this ratification becomes binding
  • inherent agency power- exists for the protection of third parties.

The Davis case focused on apparent authority. Physicians should appreciate that it is the perception of a third-party that is the focus, not where on a form or on a wall the term “independent contractor” may appear.