Policyholder Services

Equipment Leasing Liability

Kimberly Wynkoop, OMIC Legal Counsel

Digest, Spring 2012

For various reasons, insureds may lease their medical equipment to other practitioners in the community. The tool may be the only one of its kind in the community and the insured may want to make it accessible to other practitioners trained in its use or accommodate an itinerant ophthalmologist. In addition, leasing the equipment could help the insured recoup some of its cost. Insureds should examine their liability for others’ use of their equipment and know what their professional liability insurance does and does not cover. This issue was previously addressed in the Winter 2007 Digest; it is being discussed again in response to insureds’ inquiries about leasing the femtosecond laser.

In general, when an OMIC insured (the lessor) enters into a formal lease agreement to provide space and equipment to another ophthalmologist (the lessee) and the lessor is not providing other health care-related services under the agreement, its liability should, at least theoretically, be limited to that of a landlord or lessor. This is most clear when the lessor leases its office space and equipment for use when the lessor’s physicians are not themselves occupying the space or using the equipment.

General Negligence

Nonetheless, there are liabilities associated with this landlord/tenant or lessor/lessee relationship. First, there is general negligence, which occurs when the lessor has breached its duty to act reasonably. For example, injured parties have argued that a lessor was liable for failing to inspect equipment and discover defects likely to cause injury; failing to deliver operating manuals to the lessee; and failing to warn a lessee of equipment defects of which the lessor knew or should have known.[1]

OMIC’s policy does not cover any liability of the lessor arising out of the lessee’s use of the leased equipment or space, as this is a general liability, not a medical professional liability, exposure.

Products Liability

Lessors must also be aware of their exposure for products liability. This theory of liability provides that people who sell products in a defective condition that makes them unreasonably dangerous are subject to liability for harm caused to the end user or consumer. This liability is applied “strictly.” This means that no showing of negligence or wrongdoing on the part of the seller is required for it to be found liable. Courts in many jurisdictions have applied strict liability to lessors in addition to product manufacturers and retailers. The general reasoning of the court is that these people place the goods on the market knowing that they will be used without inspection for defects.[2]

OMIC’s policy excludes coverage for products liability. Lessors will want to ensure that they carry general liability insurance that covers not only negligence but strict products liability.

Professional Liability

The lessor may be exposed to additional liability risks if the lessee’s physicians use the space and/or equipment concurrently with the lessor’s physicians or if the lease agreement provides for the lessor to extend services beyond that of a typical landlord/lessor. For instance, the lessor may credential utilizers or maintain, calibrate, or operate the equipment on behalf of the lessee. The lessor’s liability exposure will depend upon the services the lessor provides and how the situation is perceived by patients.

This liability may fall under the professional liability umbrella as direct patient treatment or vicarious liability for others’ direct patient treatment. If there is no formal lease agreement and the outside utilizers are given open access to the owner’s space and equipment, or when a lease agreement calls for the lessor to perform tasks outside of the traditional landlord/ lessor realm, OMIC would treat the arrangement as an “outpatient surgical facility” (OSF).

Subject to underwriting review, compliance with OMIC’s OSF requirements, and payment of any applicable premium, coverage may be extended to the OSF for its direct liability and its vicarious liability arising from the professional services rendered at the facility.

Leased Employees

Ideally, when lessees use equipment leased from an OMIC-insured group, they should provide their own qualified staff to assist them. However, if the lessees do not have anyone qualified to assist and they need the lessor to provide staff trained and skilled in performing procedures on the equipment, then the lessor should formally lease the employee as well as the equipment to the lessee in order for the lessee’s policy to respond (assuming the lessee is OMIC insured or has similar policy coverage). In this case, the lessee’s policy would extend coverage to the leased employee while that person was rendering services on behalf of the lessee. The lessor’s policy would not cover the leased employee for the work he or she did for the outside utilizer. The policy covers non-physician employees only while they are acting within the scope of their employment by and for the direct benefit of the Insured.

If the employee is not formally leased to the other ophthalmologist, but is simply “loaned,” the work by the employee again is not for the direct benefit of the employer and therefore is not covered under the employer’s policy.

And, under OMIC’s policy, since the borrower has not formally leased the employee, the employee might not have coverage under the borrower’s policy. Employees, therefore, should ensure that they are covered under a lessee’s or borrowing ophthalmologist’s policy before agreeing to work for them. If not, the employee should obtain his or her own policy with an appropriate carrier.

1. Weinberg KP. “Florida Court Buries Graves Amendment Regarding Lessor Liability Claims and Financial Responsibility.” Monitor Daily. October 2008. http://www.monitordaily.com/.

2. “Finance Lessors Not Subject to Strict Products Liability.” Herr & Zapala, LLP. www.mylawfirm.com, accessed June 25, 2012.

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