Risk Management

Entities at Risk for Professional Liability Claims, Too

By Betsy Kelley OMIC Vice President of Product Management

Digest, Spring 2011

To view the table referred to in this article, go to http://www.omic.com/new/digest/Digest_2011Spring.pdf

Throughout OMIC’s history, the number of insured professional entities has steadily increased. Many new group practices have joined OMIC, and physicians who previously practiced alone have merged their practices with others. Groups now represent 55% of OMIC’s overall market share. Even physicians who remain in solo practice more often form limited liability corporations or similar professional entities in an effort to protect their personal assets, attain tax advantages, and achieve other benefits. With more physicians shifting from hospital-based surgery to outpatient procedures, outpatient surgical centers have flourished. As the number of insured entities has increased, so too has the number of reported claims. Between the company’s inception in 1987 and year-end 2000, 96 claims and suits were filed against medical entities (multi-shareholder corporations and partnerships), sole shareholder corporations, and surgery centers (outpatient surgical facilities or OSFs). During the next five years, an additional 208 entity-related claims were reported. Claim frequency increased even further between 2005 and 2010. By the end of 2010, a total of 449 entity claims had been reported during the decade. Cases against medical entities represented nearly 60% of all entity claims and 12% of all claims reported to OMIC between 2001 and 2010. For this same period, solo corporations accounted for 29% of all entity claims and 6% of claims altogether, and surgical centers accounted for 11% and 2%, respectively. (See graphs on page 4.) The increase in the number of insured entities, however, does not alone account for the large increase in entity claims. Simply put, entities are more frequently being named in claims. This article will explore the different causes of actions that expose entities to claims.

Let the Superior Reply

Under the doctrine of respondeat superior, a professional entity may be held vicariously liable for the acts and omissions of those who provide services on its behalf. As the “master,” the entity is ultimately responsible for the actions of its agents (“servants”), including the entity’s owners, employees, and, in some cases, independent contractors. This is a common cause of action against insured entities. Increasingly, claims against physicians alleging medical negligence include their entity as a co-defendant, and on rare occasions, the case may be filed solely against the entity. A savvy plaintiff attorney may include the entity in an effort to find a deeper pocket or an additional limit of liability. Rather than serving as protection from liability, the entity may instead become an additional source of indemnity. While OMIC has often been successful in having the entity dropped or dismissed in court in the absence of negligence on the entity’s part, these cases may be costly to defend and indemnity payments are sometimes necessary.

Naming All Potential Plaintiffs

Plaintiff attorneys may start with a primary target but do not initially know all the facts at the beginning of a lawsuit. In the case of alleged negligent surgery, it is common to name the surgery center. An OMICinsured ophthalmologist performed Descemet’s stripping endothelial keratoplasty, without complication, on a patient with Fuchs’ dystrophy. When the DSEK failed, the patient underwent penetrating keratoplasty. Claiming complete loss of vision due to alleged negligent corneal transplant, he sued both the surgeon and the outpatient surgical facility. No contention that any OSF employee was negligent or otherwise contributed to the patient’s outcome surfaced during discovery. After nearly $15,000 in legal expenses, the OSF was dismissed from the suit. The case proceeded against only the surgeon.

Negligent Acts of Employed Optometrists and Physicians

Optometrists and ophthalmologists have an independent scope of practice regulated by state law and are directly liable for their own care. If they are employees of an entity, however, the entity is not only vicariously liable but also is expected to direct and supervise the care provided. In one practice, a patient with a 25-year history of diabetes was seen by a non- OMIC insured optometrist employed by an OMIC-insured entity. The patient complained of glare at night, problems driving, and a decrease in distance and near visual acuity over the previous several months. The optometrist diagnosed moderate to severe proliferative diabetic retinopathy, narrow angle glaucoma risk OU/neovascular glaucoma OU, and cataracts OU (no surgery indicated). The patient was instructed to return in two months for a visual field exam with an ophthalmologist. When she did not show for her scheduled appointment ten weeks later, staff consulted the ophthalmologist, who advised offering her the next open appointment, one month later. The patient returned as scheduled, complaining of constant pain and light sensitivity of one week’s duration. Her vision was HM OD and LP OS with IOPs of 19 and 76, respectively. The ophthalmologist diagnosed narrow angle glaucoma secondary to neovascular glaucoma, initiated treatment, and arranged for her to be seen emergently by a glaucoma specialist. The patient filed suit for delay in treatment and named the optometrist (direct liability) and his employer, the ophthalmologist’s sole shareholder corporation (vicarious liability for its employed OD and MD). Defense experts were critical of the OD for not arranging an immediate consultation with an ophthalmologist. They also criticized the ophthalmologist for not having the patient return immediately when she missed the appointment, but he was not named as a defendant. The entity was ultimately dismissed from the suit, and the optometrist reached a settlement of $250,000 with the patient. OMIC paid more than $23,000 defending the corporation.

Former Employed Physician with No Tail Coverage

Entities face increased exposure when health care providers have no direct coverage for their own liability, either because they have chosen to practice without insurance or because, when leaving the practice, they did not purchase “tail” or prior acts coverage for their previous activities. In these situations, the entity may be found legally liable for damages. (See Policy Issues for coverage limitations relating to uninsured providers.) Dr. A (not insured by OMIC), one of several ophthalmologists employed by an OMIC-insured group, saw a patient for complaints of a silver arc of three days’ duration. The dilated exam showed a posterior vitreous detachment (PVD). Dr. A advised the patient to return in three months. When she returned two months later, her dilated exam again showed PVD, and she was instructed to return in six months. Instead, she returned in two months. At this exam, Dr. A noted possible Sjogren’s. Although Dr. A later testified that he performed a dilated fundus exam at this visit, no fundus exam was documented. Optos images were ordered, which revealed a retinal detachment that Dr. A allegedly missed. When the patient returned a few weeks later complaining of hazy vision, there was questionable optic pallor and the cup-to-disc ratio was 0.1. There is no documentation of a retinal detachment or dilated exam at this visit. Dr. A recommended visual field testing, which was completed the following week and indicated a “possible visual field defect.” Plans for carotid Doppler and sedimentation rate were recommended. A few weeks later, the patient was seen at another facility, where the retinal detachment was diagnosed. Because Dr. A did not carry professional liability insurance, the patient also filed suit against the entity for vicarious liability, even though no criticisms of the entity were voiced. The case settled at mediation for $300,000 on behalf of the entity. The uninsured physician also contributed $50,000 towards settlement.

Role of Staff in Lawsuits

The previous cases relate to alleged errors committed by physicians and extended health providers, such as optometrists. Ancillary personnel, such as employed nurses and technicians, are another source of vicarious liability. Although OMIC’s policy extends coverage directly to non-physician personnel, such employees are rarely named in medical malpractice complaints. Instead, allegations of employee negligence are generally filed against the employing entity. A medical entity was sued after a patient suffered a chemical corneal burn caused by an enzyme cleaner. When the patient removed her contact lenses during a pre-surgery check-up, the technician placed them in cleaning solution rather than wetting solution. Upon placing the lens back in her eye, the patient experienced severe burning, swelling, and pain. This case settled for $40,000 against the entity. In another practice, an insured ophthalmologist discovered, while dictating the operative report for a cataract surgery in which cortex was retained, that the wrong IOL had been implanted. The ophthalmic assistant had incorrectly transcribed A-scan data from another patient’s record. The surgeon called the patient the next day and informed him of the error. The patient self-referred to another ophthalmologist, who treated him for complications relating to the retained cortical material. The patient filed a claim against the surgeon and his solo corporation alleging pain, light sensitivity, chronic redness, and the need for additional surgeries. Although these complaints resulted from complications of the initial surgery and were unrelated to the wrong-power IOL, the technical error compromised the case’s defensibility. Accordingly, a settlement of $42,500 was made on behalf of the entity.

Slips, Trips, and Other Mishaps

Another area of potential liability is the insured premises. While it may seem that slips, falls, and other office mishaps should be covered under the practice’s commercial general liability (CGL) or business owner’s policy (BOP), such cases often fall instead under professional liability. Many of these cases center on patient supervision or are related to medical care provided rather than premise defects. An elderly patient with multiple medical issues was escorted to an uncarpeted exam room and placed on a stool with rollers and no back. While alone in the exam room, she fell off the stool and hit her tailbone. As a precaution, she was sent to a local hospital for examination. X-rays showed no visible damage, but a bone scan taken three months later noted subtle findings of a possible hairline fracture. The patient filed a claim against the ophthalmic entity, which reported the claim to its CGL carrier. That carrier denied coverage, classifying the case as professional liability due to negligent supervision. OMIC settled the case on the entity’s behalf for $60,000.

Protocols and Pitfalls

In some instances, the practice’s policies and procedures themselves— or the failure of staff to follow them—contribute to liability claims. Breakdown in the phone message system resulted in a $140,000 settlement on behalf of an insured medical entity. A patient with a history of ECCE, laser iridotomy, and pars plana vitrectomy underwent a corneal transplant by Dr. X. The bandage contact lens was removed two months later, and the epithelium was healing. Two weeks later, the patient called the medical exchange on a Saturday morning, complaining of pain and redness in the operated eye. When the call was not returned, he called again that evening and three more times on Sunday. He was finally seen by the on-call physician, who diagnosed endophthalmitis, prescribed Quixin and Cosopt, and advised the patient to return to his corneal specialist the next day. The patient returned as instructed and was referred by Dr. X to the hospital, where the eye was eviscerated. The patient filed suit against the entity only; no physicians were named. Failure to follow protocols to prevent wrong-eye/wrong-site surgery resulted in a $75,000 payment on behalf of an OSF and $240,000 on behalf of a non-OMIC surgeon. A patient was scheduled for strabismus surgery OD. Preoperatively, the nurse and patient identified the right eye, and all documentation indicated the right eye. In spite of this, the left eye was draped, no “time out” was called, and surgery proceeded on the left eye. As these cases demonstrate, professional entities face a number of professional liability exposures. This issue’s Risk Management Hotline discusses ways to reduce some of them.

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