Mitigating Vicarious Liability and Staying in Your Own Lane

TRACEY ANGELO, BSN, CPHRM, FASHRM
AVP, Risk Management Group
AWAC Services Company, a member company of Allied World

Psychiatrists are experiencing increased challenges when managing their practices. Whether it’s the need for additional clinical or administrative support, the desire to lease unused office space, or a plan for the practice to offer complementary services, psychiatrists will want to consider how these relationships might create vicarious liability and to what extent.  If you are thinking about employing an advanced practice nurse, contracting with a billing specialist, or leasing out space in your office to a therapist, you will want to learn about your potential risk exposures.

in therapy with patientWill you be employing the clinician directly or contracting with them independently? Does your current lease allow you to sublease office space or will you need a rental agreement? Will there be signage to show the shared space is not a partnership? Is the Billing Specialist willing to sign a Business Associate Agreement as part of their contract to limit privacy risks and transfer liability? Vicarious liability and other theories that associate the risk of practicing with others can be assumed quickly if you don’t stop to consider how to best prepare for this risk.

What are some definitions and examples that clarify where vicarious liability may arise?

To help answer this question, let’s begin by defining vicarious liability. Black’s Law Dictionary defines vicarious liability as “the imposition of liability on one person for the actionable conduct of another, based solely on the relationship between the two persons.”1 Vicarious liability arises in a variety of legally recognized relationships, including those between employer and employee and partners in a partnership.2  Vicarious liability imposes the responsibility for the negligence caused by someone else. The most common example of this in healthcare is the risk that is taken on when a physician hires, trains, supervises and even independently contracts with a nurse, therapist, provider or another party.

Vicarious liability is often found when an error/injury occurs with a patient (such as with medication errors, delayed diagnosis, failure to treat, etc.), even if you were not directly involved in the incident. Another example may be if you contract with a revenue cycle management company to handle your billing and they lose a file with patient information in it. Should you assume responsibility for the disclosure of protected health information or is it solely the responsibility of your contracted vendor?

Another important legal term is respondeat superior, Latin for “that the master must answer.” This concept embodies the general rule that an employer is responsible for the negligent acts or omissions of its employees.2 This theory is used to hold a physician liable for their employees’ negligent acts or omissions and can apply even when the physician did not personally treat the patient. This is one reason why collaborative practice agreements such as delegatory or supervisory agreements are so important when physicians are working with nurse practitioners or physician assistants. Collaborative practice agreements provide a mechanism for legal protection and set out the rights and responsibilities of each party involved.3

If you are in a practice situation where you might be considered to be vicariously liable, you might want to consider the following questions.  How often are you meeting with your staff to know if there are risks or concerns with the population of people they are treating as an extension of your practice? Are you auditing their plan of treatment and documentation as needed?  Are there policies and procedures in place to ensure the chain of command is utilized for certain decision making?

Similarly, how the patients perceive your relationships with the healthcare entities you are affiliated with may expose you to ostensible agency liability.  IRMI (International Risk Management Institute) defines ostensible agency liability as liability resulting from certain powers granted to an agent that the public has come to expect the agent to possess even if a principal has not actually granted such powers.4 If the court determines that an ostensible agency exists, the principal may be vicariously liable for the wrongful acts of the ostensible agent. Managing ostensible agency vicarious liability risk in healthcare is directed at ensuring patients understand their healthcare providers’ relationships with the hospitals, groups, clinics and offices where these providers are seeing and treating patients.5

This claim of liability can be seen in malpractice litigation when the patient/public assumes and perceives that the physician/provider has other relationships with a hospital, independent contractor or another provider. An example of this could be that a negligence claim is alleged against a psychiatrist who refers a patient upon completion of treatment to a psychologist that shares an office in the same building. The patient could claim that a formal relationship exists between the psychiatrist and psychologist based upon a referral made by the psychiatrist and the fact that the psychologist is practicing in the same office building. A plaintiff who makes these claims can be attempting to find a “deep pocket” or extensive insurance coverage and is implying that there’s an affiliation between the two providers.

Risk Management Recommendations for Mitigating Vicarious Liability

When hiring additional staff, adding supervisory responsibility, or contracting with a third-party vendor, consider the following:

  • Perform due diligence on your candidates to ensure they are trustworthy and qualified. Perform primary source verification of licensing and education, check references and conduct criminal background checks prior to hiring or contracting.
  • Implement policies and procedures that highlight the expectations, or the duties and responsibilities for their role and within the practice. Offer and document training and education upon hire and consider annual training as needed.
  • Plan to meet regularly with staff (employed or independently contracted) and vendors to certify compliance with policies and procedures and evidence of competency.
  • When signing off on documentation, be sure to read and address any concerns before signing.
  • Establish an understanding as to when the “chain of command” should be utilized to ensure that timely reporting of matters is handled and there’s an ability to remedy situations sooner rather than later.
  • Ensure collaborative agreements are in place when physicians are working with advanced practice providers.
  • Consult with a healthcare practice attorney on the risks and benefits of independent contractor arrangements versus direct employment. Independent contractor relationships do not always prevent vicarious liability. Also, have an attorney review third party vendor contracts to assist with mitigating liability where appropriate such as with indemnification and hold harmless language.
  • Contact your medical malpractice carrier or broker with questions about covering additional staff and affording appropriate limits of coverage. Be sure to request a certificate of insurance from any independent contractor/vendor doing business for your practice.

When referring patients to others you have an informal relationship with, such as a provider/company that you share office space with or complementary service providers, consider the following:

  • Clarify with your patients that there is no formal relationship with these individuals (this can be in writing if necessary).  If you share space, provide clear signage on the entrance door and inside the office.
  • Use separate reception areas if possible, do not share staff and do not jointly share telephone numbers or other means of electronic communication (social media, websites or email).
  • Consult with a healthcare practice attorney on any lease/rental agreement or questions about cobranding and sharing resources with other service providers.
  • Contact your insurance broker/insurance company related to coverage questions with your situation.

Although you may not be able to stay in your “own lane” to prevent vicarious liability claims from occurring, improving your position to defend potential claims is the best that you can do.  Take the time to plan for collaborations and partnerships, consider the risk management recommendations above, and consult with legal counsel on questions related to these matters.

Tracey Angelo

About the Author

Tracey Angelo, BSN, CPHRM, FASHRM provides risk management consulting services to Allied World’s medical professional liability policyholders and insured psychiatrists, psychologists and psychiatric nurse practitioners and physician assistants. She works directly with policyholders to develop individualized action plans to mitigate potential loss based on their unique exposures and risk management needs. Additionally, Tracey assists these clients with ongoing medical educational programs as well as policy and procedure review and development

1 Black’s Law Dictionary. 5th Edition. West Publishing. 1979.
2 Thornton RG.  Responsibility for the acts of others. Proceedings (Baylor University Medical Center). 2010 July; v.23 (3). www.ncbi.nlm.nih.gov/pmc/articles/PMC2900989/
3 J Herman, S Ziel. Collaborative practice agreements for advanced practice nurses: what you should know.  AACN Clinical Issues. 1999 August.  https://pubmed.ncbi.nlm.nih.gov/10745704/
4 IRMI https://www.irmi.com/
5 Thornton RG.  Responsibility for the acts of others. Proceedings (see end note 2).

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