Petrovich v. Share Health Plan of Illinois

Annotate this Case
SIXTH DIVISION
May 22, 1998


No. 1-95-3959

INGA PETROVICH and VUKASIN PETROVICH,

Plaintiffs-Appellants,

v.

SHARE HEALTH PLAN OF ILLINOIS, INC.,

Defendant-Appellee. )
)
)
)
)
)
)
)
) Appeal from the
Circuit Court of
Cook County,
Law Division

93 L 6622

The Honorable
Julia M. Nowicki,
Judge Presiding.

Modified Opinion Upon Denial of Reharing

JUSTICE QUINN delivered the opinion of the court:
This case is brought on appeal from the trial court's grant of
defendant's motion for summary judgment. The issue on appeal is
whether there is a genuine issue of material fact regarding whether
plaintiff-appellant's treating doctors were Share Health Plan's
(Share) apparent agents. For the reasons which follow, we reverse
the grant of summary judgment.

Statement of Facts
In 1989, plaintiff's employer, the Chicago Federation of
Musicians (CFM), enrolled in the Share health insurance plan. In
August, 1989, plaintiff, a retired member of the CFM, began seeing
Dr. Marie Kowalski (Dr. Kowalski) at the Illinois Masonic Medical
Center (Illinois Masonic) as her primary care physician. Plaintiff
selected Dr. Kowalski from Share's list of participating
physicians. To be covered under the plan, plaintiff was required
to receive primary medical care from Share's list of participating
physicians.
In September, 1990, plaintiff went to Dr. Kowalski because she
was experiencing persistent pain in the right side of her mouth,
tongue, throat and face. Dr. Kowalski was employed at a satellite
facility of Illinois Masonic. Illinois Masonic was under contract
with Share.
In October, 1990, Dr. Kowalski referred plaintiff to two other
Share physicians, Dr. Slavick, a neurologist, and Dr. Friedman, an
independent ear, nose and throat specialist. Both Dr. Slavick and
Dr. Friedman had contracts with Share.
Dr. Friedman recommended that plaintiff have a magnetic
resonance imaging test (MRI) or computed tomography (CT) scan done
on the base of her skull. Plaintiff testified that Dr. Kowalski
said that Share would not allow new scans. Plaintiff did not call
Share, as she did not know at that time that Share had a grievance
procedure. Dr. Kowalski gave Dr. Friedman a copy of an old MRI
test result. Apparently, sometime later, Dr. Kowalski ordered an
updated MRI. The MRI was performed on October 31, 1990. On
November 19, 1990, plaintiff had a follow-up visit with Dr.
Kowalski during which they discussed the results of the MRI.
Plaintiff testified that Dr. Kowalski told her nothing was there.
In May, 1991, Dr. Kowalski again referred plaintiff to Dr.
Friedman. This was plaintiff's third visit to Dr. Friedman. On
this visit, Dr. Friedman examined plaintiff and observed that
plaintiff's tongue was tender, and plaintiff informed him that
there was pus in her mouth. On June 7, 1991, Dr. Friedman
performed multiple biopsies on the right side of the base of
plaintiff's tongue. The biopsy results showed squamous cell
carcinoma in the base of plaintiff's tongue, and in the surrounding
tissues of the pharynx. Dr. Kowalski had never told plaintiff that
she suspected cancer.
On June 25, 1991, Dr. Friedman operated on plaintiff and
removed a six-centimeter portion of the base of plaintiff's tongue,
part of her palate, and a portion of her pharynx and jaw bone.
After the surgery, plaintiff underwent radiation treatments and
rehabilitation.
Plaintiff alleges that Share's physicians, Dr. Kowalski and
Dr. Friedman, negligently failed to diagnose the cancer sooner, and
that Share is vicariously liable under an apparent agency theory.
On appeal, the arguments of both defendant and plaintiff rely
on Share's organization and structure, and certain representations
made in the materials Share allegedly provided to plaintiff. These
facts are briefly summarized here.
The Illinois Health Maintenance Organization Act (HMO Act)
provides for two types of health maintenance organizations (HMOs):
(1) staff model HMOs, which are physician-sponsored and provide
care directly through salaried physicians in medical centers run by
the HMO; and (2) independent practice association (IPA) model HMOs,
which arrange for health care by contracting with independent
medical groups and paying them. 215 ILCS 125/1-2(7) (West 1994).
Share is an IPA model HMO, meaning that Share contracts with
independent medical groups, rather than directly employing them.
Share provides a list of participating physicians to its
members. Each member then selects a primary care physician, who is
responsible for the overall care of each patient, and makes
referrals when necessary. Each primary care physician must go
through an application procedure to join Share.
The Share member handbook specifically states to its members
that the primary care physician is "your health care manager" who
"makes the decisions" about the member's care. The member handbook
also stated that Share would provide "all your healthcare needs"
and "comprehensive quality services."
The subscriber certificate, or "benefits contract," section
8.5, states that Share's physicians are independent contractors and
that "SHARE Plan Providers and Enrolling Groups are not agents or
employees of SHARE nor is SHARE or any employee of SHARE an agent
or employee of SHARE Plan Providers or Enrolling Groups." The
subscriber certificate further provided the following:
"The relationship between a SHARE Plan
Provider and any Member is that of provider and
patient. The SHARE Plan Physician is solely
responsible for the medical servies provided to any
member. The SHARE Plan Hospital is solely
responsible for the Hospital services provided to
any Member."

Plaintiff testified at her evidence deposition that she
received and read portions of the member handbook but did not
remember receiving the subscriber certificate.
Both the contract between Illinois Masonic and Share and the
contract between Dr. Friedman and Share contained a disclaimer that
Illinois Masonic's physicians were not agents of Share. The
contracts stated the following: "It is understood and agreed that
[Illinois Masonic] and primary care physicians are independent
contractors and not employees or agents of Share." However,
plaintiff testified in her evidence deposition that she did not
know what Dr. Kowalski's or Dr. Slavick's relationship was with
Share.
Share employed a method of payment referred to as a
"capitation" system, meaning that Share paid its participating
physicians a fixed amount of money per month for each patient
assigned to that physician. The cost of any services the primary
care physician would provide was charged against that physician's
capitation account, except for hospitalizations and other services,
which were charged against a separate account. The costs of
medical procedures and tests were deducted from the physician's
capitation account. All consulting physician's fees were deducted
from the primary care physician's capitation account. The primary
care physician would then retain the surplus left at the end of the
month in the capitation account.
Share's primary care physicians were required under their
contract with Share to approve each of the patient's medical
requests and referals to specialists. The primary care physicians
were required to use Share's standard referral forms. However, Dr.
Kowalski testified at a discovery deposition that she did not need
to consult with representatives from Share in order to make
referrals, and did not feel constrained in making any decisions
regarding her patients.
Share's agreement with its members provided that, if the
member sought care outside of the Share network of participating
physicians, Share would not cover the cost. Share would also not
pay the cost if a member sought the care of a specialist without a
referral from the Share primary care physician, or bought any
medical services or supplies without the approval of the Share
primary care physician.
Also, at the time plaintiff filed her complaint, Share had a
quality assurance program in place to ensure that the primary care
physicians complied with the standard of care. Share complied with
the Illinois Department of Public Health Guidelines by conducting
a retrospective review once every two years by checking the
patients' charts for notation of allergy status, problem medication
listing, and children's physicals and current immunization.
However, Share conducted more intense reviews as well. Dr.
Kowalski testified at her discovery deposition that a Share
representative would come to the office and look at the patients'
charts at least once a year. A condition to being a Share primary
care physician was that one had to allow Share representatives
access to Share members' records to assure the patients were cared
for in an appropriate manner. Susan Kirkwood (Kirkwood), the
quality assurance manager at Share, testified at her discovery
deposition that Share monitored for substandard care, and that
there were penalties for doctors that ranged from being terminated
from the Share network to sending a letter with educational
information. In addition to this review, every patient complaint,
whether it was a telephone call or letter, would be reviewed.
However, the Share quality review task force never conducted a
review of plaintiff's case, because, according to Kirkwood, Dr.
Kowalski refused to release plaintiff's medical records.
After hearing arguments, the trial court granted defendant's
motion for summary judgment.

Discussion
The sole issue presented on appeal is whether the trial court
erred in granting defendant's motion for summary judgment. The
purpose of summary judgment is not to try a question of fact, but
to determine whether one exists. Gilbert v. Sycamore Municipal
Hospital, 156 Ill. 2d 511, 517, 622 N.E.2d 788 (1993). A motion
for summary judgment should be granted only where the pleadings,
depositions, admissions and affidavits show that there is no
genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c)
(West 1994). In determing whether there is a genuine issue as to
any material fact, courts must construe the pleadings, depositions,
admissions, and affidavits strictly in favor of the movant and
liberally in favor of the non-movant. Gilbert, 156 Ill. 2d at 518.
A triable issue exists where there is a dispute as to material
facts or where, although the facts are not in dispute, reasonable
minds might differ in drawing inferences from those facts. Raglin
v. HMO Illinois, Inc., 230 Ill. App. 3d 642, 645, 595 N.E.2d 153
(1992). Summary judgment is recognized to be a drastic remedy that
is properly granted only where the movant's right to it is clear
and free from doubt. Gilbert, 156 Ill. 2d at 518. Review in the
appellate court of a grant of summary judgment is de novo.
The trial court granted defendant's motion for summary
judgment after finding that there was no genuine issue of material
fact as to the issue of whether the doctors who treated plaintiff
were agents of Share under the theory of apparent authority. The
issue underlying this case is whether a health maintenance
organization can be vicariously liable for the negligence of its
participating physicians in a nonemergency standard referral
situation. There have been no published opinions on the vicarious
liability of an HMO since Gilbert, 156 Ill. 2d 511, 622 N.E.2d 778.
It has been recognized that HMOs are not immune from
liability. Raglin, 230 Ill. App. 3d at 646. "However, a lack of
immunity from prosecution for malpractice does not mean a fortiori
that HMOs may be held strictly liable for any injury that might
occur to one of their medical care plan subscribers during the
course of medical treatment." Raglin, 230 Ill. App. 3d at 646.
Rather, there must be some recognized legal theory under which an
HMO can be held liable.
In Illinois, HMOs can be held liable for medical malpractice
based on the following theories: (1) vicarious liability through
respondeat superior or ostensible or apparent agency; (2) corporate
negligence as a result of negligent selection and control of the
physician who rendered care; or (3) corporate negligence as a
result of the corporation's independent acts of negligence.
Raglin, 230 Ill. App. 3d at 646. HMOs could also be liable for
malpractice under a breach of contract or breach of warranty
theory. Raglin, 230 Ill. App. 3d at 646.
Plaintiff's case is based only on the theory of vicarious
liability through apparent agency. The doctrine of apparent
authority is more commonly applied in contracts cases, but it is
applicable in torts cases where "the injury would not have occurred
but for the injured party's justifiable reliance on the apparent
agency." Gilbert, 156 Ill. 2d at 524. The doctrine of apparent
authority has been used in the context of hospitals and hospital
emergency rooms. See Gilbert, 156 Ill. 2d 511, 622 N.E.2d 788.
However, nothing in the case law suggests that the doctrine of
apparent authority cannot be applied in the context of an HMO case.
The apparent agency of an HMO can be established by a showing
that the HMO, "by its actions or statements, led a third party, who
may have been unaware of the independent contractor relationship,
to believe that the physicians were controlled by" the HMO.
Raglin, 230 Ill. App. 3d at 647. The elements of apparent
authority thus are: (1) a "holding out" of the party who was
alleged to be negligent as an agent; and (2) reasonable reliance by
a third party on the principal's conduct. See Raglin, 230 Ill.
App. 3d at 647-650; Gilbert, 156 Ill. 2d at 523. See also
Restatement (Second) of Agency,  265, 267 (1957).
The apparent authority theory focuses on "holding out" someone
as an agent and reasonable reliance by a third party on such
representations. See Raglin, 230 Ill. App. 3d at 647-650; Gilbert,
156 Ill. 2d at 525-526. As the court in Gilbert put it:
"Apparent authority in an agent is the authority
which the principal knowingly permits the agent to
assume, or the authority which the principal holds
the agent out as possessing. It is the authority
which a reasonably prudent person, exercising
diligence and discretion, in view of the
principal's conduct, would naturally suppose the
agent to possess." Gilbert, 156 Ill. 2d at 523.
Whether a person has notice of an agent's lack of authority is a
question of fact. Gilbert, 156 Ill. 2d at 524.
As this court recognized in Raglin, vicarious liability
through the doctrine of apparent authority had already been
utilized to hold a hospital liable for the actions of its doctors,
despite the fact that an independent contractor relationship may
have existed between the hospital and the doctor. Raglin, 230 Ill.
App. 3d at 648. The doctrine of apparent authority in the context
of an HMO had not been utilized in Illinois, but had been employed
in other jurisdictions. Raglin, 230 Ill. App. 3d at 648.
The leading case on the issue of the apparent authority of a
physician participating in an HMO in Illinois is Raglin, 230 Ill.
App. 3d 642, 592 N.E.2d 15, where this court affirmed a grant of
summary judgment in an action based on apparent authority theory
against an HMO.
In Illinois, an HMO has not yet been held liable under the
theory of apparent authority. However, HMOs have been held liable
under a vicarious liability theory in other jurisdictions. For
example, the Pennsylvania superior court, under substantially the
same facts as the present case, reversed a grant of summary
judgment in favor of an HMO on the issue of apparent agency. Boyd
v. Albert Einstein Medical Center, 377 Pa. Super. 609, 547 A.2d 1229 (1988). In Boyd, the HMO contract stated that the HMO would
provide "`health care services and benefits to Members in order to
protect and promote their health.'" Boyd, 377 Pa. Super. at 621,
547 A.2d at 1235. Members of the HMO paid their physicians' fees
to the HMO, and not directly to the doctors. Boyd, 377 Pa. Super.
at 621, 547 A.2d at 1235. The primary care physicians were
screened by the HMO and had to comply with its rules. Boyd, 377
Pa. Super. at 621, 547 A.2d at 1235. The members were provided a
limited list of primary care physicians from which they were
required to choose. Boyd, 377 Pa. Super. at 621, 547 A.2d at 1235.
Also, the members could not see specialists without their primary
care physicians' referrals, and had no choice of specialists.
Boyd, 377 Pa. Super. at 621, 547 A.2d at 1235. The Boyd court held
that, because the plaintiff-appellant's decedent could not directly
see a specialist, but, rather, was required to go through the HMO,
there existed an "inference that appellant looked to the
institution for care and not solely to the physicians." Boyd, 377
Pa. Super. at 621, 547 A.2d at 1235.
This case is similar to Boyd, in that there is evidence that
plaintiff looked to Share to provide her medical care. Here, there
is a genuine issue of material fact as to whether Share held its
physicians out to be its apparent agents through its
representations, and whether plaintiff reasonably relied on these
representations.
Plaintiff presented evidence which showed that Share's
compensation arrangements with its doctors and its referral system
may have constrained its physicians' medical decisions and that
Share maintained some control over its physicians through its
quality assurance program.
Share's use of the capitation system could lead to the
reasonable inference that Share's method of compensation to its
participating physicians created a disincentive to order tests or
make referrals and thus exerted control over its physicians'
medical decisions. Here, plaintiff testified at her deposition
that Dr. Kowalski told her that Share would not pay for more tests.
This evidence was relevant to whether plaintiff was led to believe
that Dr. Kowalski was controlled by Share. See Raglin, 230 Ill.
App. 3d at 647. A third party could have reasonably relied on such
a statement to believe that was Dr. Kowalski was an agent of Share
because Share made decisions as to what medical care would be
provided. While Dr. Kowalski denied making this statement, there
is a question of fact as to whether the representations made by
Share reasonably lead plaintiff to believe that Dr. Kowalski was
Share's employee and was under Share's control.
There is also evidence that Share held its physicians out as
its agents through the quality assurance program. Defendant cites
Raglin, 230 Ill. App. 3d 642, 595 N.E.2d 153, in arguing that a
quality assurance program cannot provide a basis to establish
apparent agency. However, Share's quality assurance program is
different than that in Raglin.
Raglin held that the quality assessment program and review
guidelines established by the HMO in that case to comply with the
HMO Act (215 ILCS 125/1-1 et seq (West 1994)), are "not the type of
control from which agency arises." Raglin, 230 Ill. App. 3d at
649. In Raglin, the quality assessment program consisted merely of
administratively tracking the independent medical groups in its
network to determine whether they were complying with the rules of
the HMO. Raglin, 230 Ill. App. 3d at 649. The HMO only required
the physicians to provide documentation that they were following
certain procedures, and it did not review the contents of the
documentation to assess the accuracy of diagnoses. Raglin, 230
Ill. App. 3d at 649-50.
Here, unlike Raglin, the quality assessment program was not
simply a way of "tracking" the independent medical groups to ensure
that they were following the HMO's rules and certain minimum health
care standards. Rather, there is evidence that Share monitored
specifically for substandard care, periodically reviewing the
contents of patients' charts to ensure that they were current and
that certain conditions were noted. Also, Share's quality
assurance manager testified in her discovery deposition that Share
conducted an investigation for every patient complaint. There were
penalties for doctors that ranged from being terminated from the
Share network, to receiving a warning letter with educational
information for the physician. Thus, the scope of Share's quality
assurance program in this case goes beyond that in Raglin. The
evidence presented by plaintiff supports her claim on this issue
and creates a genuine issue of material fact.
There is further evidence that Share held its physicians out
as its apparent agents in Share's documents.
Defendants maintain that the legal relationship of Illinois
Masonic, and Illinois Masonic's physicians, to Share was that of
independent contractors. The subscriber certificate stated the
following:
"Relationship Between Parties. The relationships between
Share and Share Plan Providers, and between Share and
Enrolling Groups are contractual relationships between
independent contractors. Share Plan Providers and
Enrolling Groups are not agents or employees of Share nor
is Share or any employee of Share an agent or employee of
Share Plan Providers or Enrolling Groups.

The relationship between a Share Plan Provider and any
Member is that of provider and patient. The Share Plan
Physician is solely responsible for the medical services
provided to any Member. The Share Plan Hospital is
solely responsible for the Hospital services provided to
any Member."
However, plaintiff disputes that she ever received the
subscriber certificate. Moreover, an agency relationship can be
inferred despite a physician's legal relationship to an HMO. See
Raglin, 230 Ill. App. 3d at 647. Whether an agency relationship
can be inferred is a factual issue. Raglin, 230 Ill. App. 3d at
647.
Based on Share's representations holding its physicians out to
be its agents, it is possible to infer an agency relationship
between the physicians and Share. Share's subscriber certificate
stated that the Share primary care physician "is solely responsible
for the medical services provided to any member." However, despite
this statement, Share's member handbook stated to its members that
Share would provide "all your healthcare needs," and that each
member's primary care physician is "your health care manager." The
primary care physicians were required to use Share's standard
referral forms when making referrals for patients to see
specialists. Plaintiff paid her fee to Share, and not directly to
either Dr. Kowalski or Dr. Friedman. Also, plaintiff alleges that
she was led to believe that Dr. Kowalski was Share's agent because
Dr. Kowalski told her that Share would not pay for more tests.
Thus, it is possible to infer from this evidence that Share was
holding out its physicians to be its agents.
Defendant analogizes Share's statement in its subscriber
certificate that the physicians are responsible for each member's
medical care to the subsriber certificate in Raglin, which stated
that the HMO "did not directly furnish medical care and could not
make medical judgments." Raglin, 230 Ill. App. 3d at 650.
However, here, unlike Raglin, there were further representations in
Share's member handbook which could be interpreted as holding out
the physicians in Share's network as Share's agents.
Here, the member handbook is similar to the one in Boyd, 377
Pa. Super. 609, 547 A.2d 1229. Share's member handbook referred to
the members' selected physicians as the "Share Plan Primary Care
Physician." Like Share's member handbook, the HMO group contract
in Boyd stated that it would "[provide] health care services and
benefits to Members in order to protect and promote their health
***." Boyd, 377 Pa. Super. at 621, 547 A.2d at 1235. As in Boyd,
Share's statements in its member handbook creates an issue of
material fact as to whether the physicians were Share's apparent
agents.
Finally, there is also a genuine issue of material fact as to
the reasonable reliance element of apparent agency.
The trial court erred in its ruling that plaintiff could not
show reasonable reliance as a matter of law because the legal
relationship of Share to its participating physicians was set out
in the subscriber certificate and member handbook. The trial court
focused on the fact that plaintiff admitted that she read some of
the documents given to her by Share, but not all of them, and ruled
that this did not consitute reasonable reliance as a matter of law.
The trial court stated the following in its ruling:
"If I were to allow that kind of reliance to
stand as reasonable, then anyone could pick and
choose a few words out of a contract in any
situation and argue that their reliance on those
selections were reasonable; and I think that *** we
therefore have a situation where any particular
plaintiff could make self-imposed limitations on
information and argue reliance.
But over and above that, if I look at
everything that we have here from the Share
contract, benefit contract here, I think that they
have done what they are required to do. This
information was not hidden anyway. It is set out
as to what the relationship of the parties is.
If this particular plaintiff does not
understand the legal significance of that, I don't
think it is up to this court to provide that bridge
for her ***."
The court erred in its ruling because the legal relationship
between Share and its physicians set out in Share's documents does
not preclude the inference that Share's participating physicians
were its apparent agents. An agency relationship can be inferred
despite a physician's legal relationship to an HMO. Raglin, 230
Ill. App. 3d at 647. Thus, the fact that plaintiff may not have
read all of the documents given to her by Share is not dispositive
where there is other evidence of "holding out" on which plaintiff
could have reasonably relied. There were conflicting
representations within the documents the trial court relied on in
granting summary judgment. While the subscriber certificate
contained an independent contractor disclaimer clause, the member
handbook stated that it would provide Share's members with "all
your healthcare needs."
In addition, plaintiff was denied the opportunity to make a
further showing on the element of reasonable reliance because she
was foreclosed from obtaining further discovery of defendant's
advertising materials by the grant of summary judgment. These
advertising materials would go to the elements of "holding out" and
justifiable reliance. Here, the grant of summary judgment was
premature, and effectively foreclosed plaintiff from an opportunity
to make a further showing on the "holding out" element of the
apparent agency doctrine.
Plaintiff's argument as to the modern reality regarding the
aggressive advertisement of HMOs is compelling. Although Raglin,
230 Ill. App. 3d 642, 595 N.E.2d 153, represents the most recent
case law on the vicarious liability of HMOs, Gilbert, 156 Ill. 2d 511, 622 N.E.2d 788, decided after Raglin, looked to the "realities
of modern hospital care" in reversing a grant of summary judgment
in the defendant hospital's favor on the issue of vicarious
liability. Gilbert, 156 Ill. 2d at 520-522. One reality the
supreme court discussed was the business aspect of modern
hospitals, and the other reality was the reasonable expectations of
the public. Gilbert, 156 Ill. 2d 520-521. Our supreme court
quoted the Wisconsin Supreme Court in stating the following:
"[H]ospitals increasingly hold themselves out to the
public in expensive advertising campaigns as offering and
rendering quality health services. One need only pick up
a daily newspaper to see full and half page
advertisements extolling the medical virtues of an
individual hospital and the quality health care that the
hospital is prepared to deliver in any number of medical
areas. Modern hopitals have spent billions of dollars
marketing themselves, nurturing the image with the
consuming public that they are full-care modern health
facilicites. All of these expenditures have but one
purpose: to persuade those in need of medical services
to obtain those services at a specific hospital. In
essense, hospitals have become big business, competing
with each other for health care dollars." Gilbert, 156 Ill. 2d at 520, quoting Kashishian v. Port, 167 Wis. 2d
24, 38, 481 N.W.2d 277, 282 (1992).
The supreme court further stated:
"The realities of modern hospital care raise a
serious question regarding the responsibility of a
hospital when a physician who is an independent
contractor renders negligent health care. Can a hospital
always escape liability for the rendering of negligent
health care because the person rendering the care was an
independent contractor, regardless of how the hospital
holds itself out to the public, and regardless of the
perception created in the mind of the public?" Gilbert,
156 Ill. 2d at 522.
Likewise, the same public policy argument applies to HMOs,
whose aggressive advertising campaigns arguably create an
expectation in the public that they are providers of health care.
As plaintiff argues, HMOs should not be allowed to hold themselves
out as total providers of health care and then seek to avoid
liability based on a disclaimer buried in a contract. Defendant's
reliance on Raglin, 230 Ill. App. 3d 642, 595 N.E.2d 153, is
unpersuasive, as the facts of the present case go well beyond the
facts in Raglin. Not every HMO holds itself out in the same
manner, and thus a grant of summary judgment is not always
appropriate.
Lastly, defendant raises a statute of limitations defense as
to Dr. Friedman, contending that plaintiff's amended complaint,
which added allegations of Dr. Friedman's negligence for the first
time, was filed after the statute of limitations expired. This
argument is without merit. Plaintiff had no obligation to name Dr.
Friedman in the complaint, because plaintiff's cause of action is
against Share under a theory of vicarious liability, and not
directly against Dr. Friedman for his individual negligence. Thus,
Dr. Friedman is not a party who ought to have been named in the
original complaint. See 735 ILCS 5/2-616(a) (West 1994).
For the reasons stated above, we hold that the instant case
presents a genuine issue of material fact as to whether plaintiff's
treating physicians were apparent agents of Share. Thus, we
reverse the trial court's grant of summary judgment in defendant's
favor.
Reversed.
Campbell, P.J., and Zwick, J., concur.

Primary Holding

Independent contractors are subject to the doctrine of vicarious liability if apparent authority or implied authority creates an agency relationship.

Facts

After a late diagnosis of tongue cancer, Petrovich brought a professional negligence claim against her doctor and Share Health Plan of Illinois, her HMO. Share provided and paid for health care through contracts with independent medical groups and doctors, which were based on a compensation system known as capitation. In its handbook, Share stated that it would account for all of a member's health care needs and provide comprehensive high-quality services, and it also maintained a quality assurance program. Despite the contract and compensation system, the handbook identified the doctors as Share physicians, rather than as independent contractors.

Petrovich read the relevant parts of the handbook, although she did not read all of it. She argued that the handbook led her to believe that the doctors were employees of Share, which would mean that it was vicariously liable for the doctors' negligence.

Opinions

Majority

  • Quinn (Author)

If there is an appearance of authority granted by a principal to an agent, even if there is no actual authority, the principal cannot later deny agency to someone who has been injured through reliance on it. The same factors are appropriate for determining the vicarious liability of an HMO as for a hospital, which may be held liable through the theory of apparent agency when it holds out doctors as employees and the patient justifiably relies on those statements. In this situation, the patient never was informed that the health care providers were independent contractors, which satisfies the holding out prong. The justifiable reliance prong was satisfied because the patient relied on the HMO rather than a particular doctor to provide health care services. This was true because the patient had no choice in selecting the HMO.

Regarding whether implied authority existed, a court should consider whether the doctor controlled the means of performing the work, which would be necessary to maintain the independent contractor relationship and avoid liability for the HMO under the theory of respondeat superior. While the HMO cannot control the medical judgment of the doctors, the Illinois State Medical Society has stated that implied authority is an appropriate way to establish vicarious liability for HMOs when their doctors engage in medical malpractice. The HMO's system of control over its doctors is sufficient to nullify the independent contractor relationship and establish implied authority as well as apparent authority.

Case Commentary

Simply labeling an individual as an independent contractor will not shield an entity from vicarious liability if there is reason for parties dealing with the entity to think that the individual is an employee. The court will examine the specific relationship rather than relying on the label.


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