§47.2 Agency/Apparent Authority

The Case: Boren v. Weeks, 251 S.W.3d 426 (Tenn. 2008)

The Basic Facts: "In this medical malpractice appeal, the trial court denied the hospital's motion for summary judgment finding that a factual dispute exists as to whether the hospital may be held vicariously liable for the alleged negligence of an independent contractor emergency room physician based on a theory of apparent agency." 251 S.W.3d at 428.

The Bottom Line:

• "'Apparent agency is essentially agency by estoppel; its creation and existence depend upon such conduct by the apparent principal as will preclude him from denying another's agency.' White v. Methodist Hosp. S., 844 S.W.2d 642, 646 (Tenn. Ct. App.1992) (hereinafter ' Methodist Hosp.') (citing Kelly v. Cliff Pettit Motors, [234 S.W.2d 822 (Tenn. 1950)]).

  Generally, to prove apparent agency one must establish (1) the principal actually or negligently acquiesced in another party's exercise of authority; (2) the third person had knowledge of the facts and a good faith belief that the apparent agent possessed such authority; and (3) the third person relied on this apparent authority to his or her detriment.

  Mechs. Laundry Serv. v. Auto Glass Co. of Memphis, [98 S.W.3d 151, 157 (Tenn. Ct. App. 2002) (quoting Methodist Hosp., 844 S.W.2d at 646) (internal citations omitted)]." Id. at 433.
• "Apparent authority is established through the acts of the principal rather than those of the agent or through the perception of a third party. See Bells Banking Co. v. Jackson Ctr., [938 S.W.2d 421, 424 (Tenn. Ct. App. 1996)]. Southern Ry. Co. v. Pickle, [197 S.W. 675 (Tenn. 1917)], this Court explained:

  The apparent power of an agent is to be determined by the acts of the principal and not by the acts of the agent; a principal is responsible for the acts of an agent within his apparent authority only where the principal himself by his acts or conduct has clothed the agent with the appearance of authority, and not where the agent's own conduct has created the apparent authority. The liability of the principal is determined in any particular case, however, not merely by what was the apparent authority of the agent, but by what authority the third person, exercising reasonable care and prudence, was justified in believing that the principal had by his acts under the circumstances conferred upon his agent.

  Id. at 677 (quoting 2 Corpus Juris 574, 575)." Id.
• "Whether and under what circumstances an apparent agency relationship may arise from a hospital's use of independent contractor physicians in its emergency room is an issue of first impression for this Court. However, several other jurisdictions have recently addressed either this precise issue, or similar issues, in depth. Sword v. NKC Hosps., Inc., 714 N.E.2d 142 (Ind. 1999), the Indiana Supreme Court conducted a thorough analysis of apparent agency as it applies to a hospital's liability for negligence in the provision of services, such as anesthesia or emergency room care, by independent contractors. The Court noted that other jurisdictions have held hospitals liable for the negligence of independent contractors in both situations, describing the rationale for these decisions as follows:

  While the language employed by these courts sometimes varies, generally they have employed tests which focus primarily on two basic factors. The first factor focuses on the hospital's manifestations and is sometimes described as an inquiry whether the hospital acted in a manner which would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital. Courts considering this factor often ask whether the hospital held itself out to the public as a provider of hospital care, for example, by mounting extensive advertising campaigns. In this regard, the hospital need not make express representations to the patient that the treating physician is an employee of the hospital; rather a representation also may be general and implied.
  
  The second factor focuses on the patient's reliance. It is sometimes characterized as an inquiry as to whether the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.

  Id. at 151 (internal quotation marks and citations omitted). With regard to reliance, the Court explained that some jurisdictions look at whether the plaintiff reasonably believed that the hospital was providing the pertinent medical care, while other jurisdictions presume reliance. Id. The Court concluded that: '[c]entral to both of these factors - that is, the hospital's manifestations and the patient's reliance - is the question of whether the hospital provided notice to the patient that the treating physician was an independent contractor and not an employee of the hospital.' Id." Id. at 433-34.
• "The Indiana Supreme Court ultimately adopted the formulation of apparent agency set forth in the [RESTATEMENT (SECOND) OF TORTS § 429 (1965)]. Id. at 152. That section of the [Restatement] provides:

  One who employs an independent contractor to perform services for another which are accepted in the reasonable belief that the services are being rendered by the employer or by his servants, is subject to liability for physical harm caused by the negligence of the contractor in supplying such services, to the same extent as though the employer were supplying them himself or by his servants.

  [RESTATEMENT (SECOND) OF TORTS] § 429. The Court construed this provision to require that the 'trier of fact must focus on the reasonableness of the patient's belief that the hospital or its employees were rendering health care.' Sword, 714 N.E.2d at 152. According to Sword,

  This ultimate determination is made by considering the totality of the circumstances, including the actions or inactions of the hospital, as well as any special knowledge the patient may have about the hospital's arrangements with its physicians. We conclude that a hospital will be deemed to have held itself out as the provider of care unless it gives notice to the patient that it is not the provider of care and that the care is provided by a physician who is an independent contractor and not subject to the control and supervision of the hospital. A hospital generally will be able to avoid liability by providing meaningful written notice to the patient, acknowledged at the time of admission.

  Id. (emphasis added). The Court noted, however, that written notice might not suffice where a patient does not have an adequate opportunity to make an informed choice, such as in the case of a medical emergency. Id." Id. at 434.
• "Similarly, the South Carolina Supreme Court adopted the approach set out in the [RESTATEMENT (SECOND) OF TORTS § 429]. Simmons v. Tuomey Reg'l Med. Ctr., 341 S.C. 32, 533 S.E.2d 312, 322 (2000). The Court stated:

  Under section 429, the plaintiff must show that (1) the hospital held itself out to the public by offering to provide services; (2) the plaintiff looked to the hospital, rather than the individual physician, for care; and (3) a person in similar circumstances reasonably would have believed that the physician who treated him or her was a hospital employee. When the plaintiff does so, the hospital will be held vicariously liable for any negligent or wrongful acts committed by the treating physician.

  Id. at 322. The Court limited this test's application 'to those situations in which a patient seeks services at the hospital as an institution, and is treated by a physician who reasonably appears to be a hospital employee.' Id. at 323." Id.
• "Comparable tests have been adopted in several other jurisdictions, specifically with respect to the rendering of emergency services or anesthesia services. See, e.g., Gilbert v. Sycamore Mun. Hosp., [622 N.E.2d 788, 796 (Ill. 1993)] (concluding that the element of 'holding out' is 'satisfied if the hospital holds itself out as a provider of emergency room care without informing the patient that the care is provided by independent contractors,' and that 't]he element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to provide complete emergency room care, rather than upon a specific physician"); Gatlin v. Methodist Med. Ctr., Inc., [772 So.2d 1023, 1027 (Miss. 2000)] (with respect to a hospital's liability for the acts of an independent contractor anesthesiologist, holding that the controlling 'analysis seeks to determine whether the patient was seeking treatment from the hospital, without regard for the identity of the particular physicians working at the hospital, or whether the patient instead sought the services of a particular physician who merely happened to be on staff at a particular hospital'); Diggs v. Novant Health, Inc., [628 S.E.2d 851, 862 (N.C. Ct. App. 2006)] (adopting [Restatement (Second) of Torts § 429] to hold that 'a plaintiff must prove that (1) the hospital has held itself out as providing medical services, (2) the plaintiff looked to the hospital rather than the individual medical provider to perform those services, and (3) the patient accepted those services in the reasonable belief that the services were being rendered by the hospital or by its employees. A hospital may avoid liability by providing meaningful notice to a patient that care is being provided by an independent contractor'); Pamperin v. Trinity Mem'l Hosp., [423 N.W.2d 848, 857 (Wis. 1988)] (concluding that if the plaintiff proves that the hospital 'held itself out as a provider of emergency room care without informing [plaintiff] that the care was provided by independent contractors, [plaintiff] has satisfied the first requirement for proving liability under the doctrine of apparent authority.... In determining that a plaintiff acted in reliance upon the conduct of the hospital or its agent ... [c]ourts have uniformly recognized that, except when the patient enters a hospital intending to receive care from a specific physician while in the hospital, it is the reputation of the hospital itself upon which a patient relies.')." Id. at 434-35.
• "Our intermediate appellate courts have followed a similar analysis when faced with the issue. In Edmonds v. Chamberlain Mem'l Hosp., [629 S.W.2d 28, 29 (Tenn. Ct. App. 1981)], the plaintiff's husband was taken to the emergency room of the defendant's hospital where he was treated by an emergency room physician and then sent home. After the plaintiff's husband died, litigation ensued, and the issue became whether the hospital was liable for the alleged negligence of the emergency room physician. Id. The hospital denied liability, pointing out that the physician was an independent contractor, not an employee or agent. Id. The trial court granted summary judgment for the hospital. The court of appeals reversed, however, finding 'a disputed issue of material fact as to whether or not Dr. Loftis was the hospital's agent.' Id. at 32.
• The Court of Appeals cited the following facts in support of its holding: the emergency room operated in conjunction with the rest of the hospital; the hospital required all of the physicians with staff privileges to work in the emergency room on a rotating basis, treating members of the public who came to the hospital for emergency medical care; and all emergency treatment took place on the hospital's premises and utilized the hospital's supporting personnel and equipment. Id. The court also relied on the fact that '[t]he patient does not know or select the physician but relies upon the hospital for providing the physician.' Id." Id. at 435.
• "This issue next arose in Methodist Hosp., where the plaintiff sued after suffering a cardiac arrest during a laproscopic sterilization procedure, resulting in severe and permanent brain damage. Overruling the trial court, the Court of Appeals reversed the grant of summary judgment, finding disputed factual issues as to whether the hospital was liable based on an apparent agency theory. 844 S.W.2d at 648. The Court of Appeals so held, despite the absence of direct evidence of the patient's reliance on the alleged apparent agency relationship.

  The Methodist Hosp. Court discussed Edmonds, then went on to explain the development of this area of law in other jurisdictions:
  
  An increasing number of jurisdictions have held that in situations where a hospital offers a service, such as the care of an anesthesiologist, and the patient has no part in choosing the individual who will perform the service, a court may infer that the patient reasonably relied on the health care provider's apparent authority to act for the hospital.
  
  Cases from other jurisdictions have concluded that unless there is some reason for a patient to believe that the treating physician in a hospital is an independent contractor, it is natural for the patient to assume reliance on the reputation of the hospital as opposed to any specific doctor. This reliance is often the reason the patient selects the hospital in the first place and these cases recognize his prerogative to make that assumption.
  
  [A] hospital should be vicariously liable for doctors in emergency or operating room settings notwithstanding the existence of a private contract with secret limitations between hospital and doctor or by virtue of some other business relationship unknown to the patient and contrary to the hospital's apparent representation. Patients often seek care and treatment from hospitals rather than from particular physicians. The patient entering the emergency room or operating theater seldom knows the name of the emergency medicine physician or anesthesiologist who will treat him.

  Id. at 647 (internal quotations and citations omitted)." Id. at 435 - 36.
• "We agree with and adopt the analysis derived from the [RESTATEMENT (SECOND) OF TORTS § 429] that has been adopted by many of our sister states. To hold a hospital vicariously liable for the negligent or wrongful acts of an independent contractor physician, a plaintiff must show that (1) the hospital held itself out to the public as providing medical services; (2) the plaintiff looked to the hospital rather than to the individual physician to perform those services; and (3) the patient accepted those services in the reasonable belief that the services were provided by the hospital or a hospital employee. See, e.g., Sword, 714 N.E.2d at 152; Diggs, 628 S.E.2d at 862; Simmons, 533 S.E.2d at 322." Id. at 436.
• "As discussed in Methodist Hosp. and Sword, '[a] hospital generally will be able to avoid liability by providing meaningful written notice to the patient, acknowledged at the time of admission.' Sword, 714 N.E.2d at 152; see Methodist Hosp., 844 S.W.2d at 647. Thus the issue often becomes, as it does here, what constitutes 'meaningful' notice. The court in Sword recognized that '[u]nder some circumstances, such as in the case of a medical emergency, ... written notice may not suffice if the patient had an inadequate opportunity to make an informed choice.' 714 N.E.2d at 152." Id.
• "In Cooper v. Binion, [598 S.E.2d 6 (Ga. Ct. App. 2004)], the Georgia Court of Appeals analyzed what it meant to provide adequate notice to a patient. The plaintiff and his wife testified that they understood from the circumstances that the emergency room physician who treated the plaintiff was a hospital employee, particularly because the doctor did not see patients outside of the hospital's emergency room and told them that he could not be their private doctor. Id. at 11. The wife further testified that they relied on the hospital's good reputation in accepting medical care from the emergency room physician. Id. The hospital countered that it explicitly informed the plaintiff and his wife that the physician was not an employee by posting a sign in the admissions area to that effect and by including a paragraph in the admitting documents (which were signed by the wife). Id. The court held:

  Generally, posting a conspicuous sign in the admissions area that the emergency room physicians are not hospital employees and having the patient sign an acknowledgment to this effect would preclude a claim of apparent authority. However, since there was testimony that a witness present that day did not recall seeing any such signs in the admissions area, and there was no testimony that either [plaintiff] or his wife saw such, some evidence would indicate that no such sign was posted or if so, it was not conspicuous. The acknowledgment in the admitting form was one of thirteen paragraphs in a two-page document signed by [plaintiff's] wife, and nothing indicates that the hospital called attention to the acknowledgment. Under these circumstances and evidence, we cannot hold that the hospital as a matter of law sufficiently notified [plaintiff] that Dr. Binion was not its employee.

  Id. at 11-12 (internal citations omitted) (emphasis added)." Id. at 436-37.
• "Just as with the court in Cooper, we are unable to hold in this case that the hospital, as a matter of law, sufficiently notified Mr. and Mrs. Boren that Dr. Weeks was not its employee. The acknowledgment in the consent form was found in the second half of one paragraph of a three-page form initialed and signed by Mr. Boren. There is nothing in the record that indicates that the hospital called attention to that acknowledgment. In fact, several registration and admission hospital staff members testified that the form was completed in an electronic format, that patients and their representatives were simply asked if they consented to treatment, and hospital staff did not as a matter of practice explain that the physicians were independent contractors rather than employees or agents.
  
  River Park offers emergency services to the public. The Borens relied on the hospital to provide emergency care instead of relying on any particular physician. They accepted the services of the emergency room physicians with the belief that those physicians were employees of the hospital. While the hospital included a disclaimer in the consent form, we cannot say as a matter of law that the disclaimer provided the Borens with adequate notice under the circumstances." Id. at 437.

Other Sources of Note: Dewald v. HCA Health Services of Tennessee , 251 S.W.3d 423 (Tenn. 2008) (reversing court of appeals' grant of summary judgment and remanding to trial court for consideration of hospital's summary judgment motion consistent with standard adopted in Boren); Thomas ex rel. Thomas v. Oldfield, No. M2007-01693-COA-R3-CV, 2008 WL 2278512 (Tenn. Ct. App. June 2, 2008) (finding material facts in dispute concerning: whether hospital held itself out to the public as providing medical services; whether plaintiff looked to hospital rather than individual physician to perform services; whether patient accepted services in the reasonable belief that services were provided by the hospital or hospital employee; and, if so, whether hospital provided meaningful notice to plaintiff at time of admission that the ER physician was not its agent, and remanding on the issue of apparent agency).