ABA Health eSource
 March 2008 Volume 4 Number 7

Pitfalls Of Hospitals Seeking Indemnity Or Contribution From Hospital Based Physicians As A Result Of "Vicarious Liability Claims" Against The Hospital
by Richard Jones, 1 Akerman Senterfitt, Tampa, FL

Richard JonesWith so many hospitals facing financial challenges due to increased costs, seasonal census, reimbursement rate declines, and increased tax and regulation scrutiny of arrangements/relationships with hospital-based physicians, rights to recover damages from hospital-based physicians through indemnity or contribution are becoming increasingly important.

Indemnity to recover from the active tortfeasor exists in most states. This right allows a passive tortfeasor responsible to an injured party only through some vicarious, constructive, derivative or technical liability to recover all amounts paid. 2 A right of contribution among tortfeasors exists by statute or case law in some states, including Florida. For contribution to exist, there must be a common liability among two or more tortfeasors to an injured person, 3 and one of the persons responsible must have paid to the injured person an amount greater than that person's share of the loss to discharge the common liability. 4 Contribution in Florida is governed by the Uniform Contribution Among Tortfeasors Act, which is codified as Florida Statute ยง 768.31. The principal distinction between contribution and indemnity is that a person seeking indemnity must not have been actively negligent, 5 while a person seeking contribution may be actively negligent but has paid more than that person's percentage of fault. 6 Physicians and risk managers may not understand the distinction between indemnity and contribution because vicarious liability often travels under the rubric of "nondelegable duty" -- which somehow contemplates "negligence" on the part of a hospital where no actual negligence exists. Indemnity allows full recovery for the payment made by the person who discharges another's liability to a third person, 7 and contribution allows recovery only for the difference between the amount paid by the person seeking contribution as compared to what that person should have paid. 8

Indemnity may be created by a contract. 9 A contract of indemnity must have sufficient consideration and be sufficiently clear to be enforceable. 10 If there is no contract provision providing indemnity, there still may be a claim for what is called "common law indemnity." 11 For that to exist, the party to be indemnified must be without fault, and any liability of that party to pay third persons must be solely vicarious for the wrongdoing of another. 12 Indemnity between more than one tortfeasor is allowed only where the whole of the fault was that of the person from whom indemnity is requested. 13

A well drafted contract between a hospital and hospital-based physician groups will avoid the pitfalls of trying to understand the differences between indemnity and contribution and determining whether fault exists or not on the part of a hospital. The solution is to emphasize performance standards, the conduct of the physician group and its employees and contractors, and maintaining adequate liability insurance. "Adequate" means an amount of coverage that, in most situations will protect not only the physician but also the hospital -- which should be an additional insured under the physician's coverage.

Negotiators for the physician group may resist both the indemnity and the insurance requirement, especially if the insurance requirement exceeds what the hospital requires as a minimum for credentialing. Negotiators for the hospital should point out that the indemnity clause and the insurance requirements will help avoid it and the physicians from becoming adversaries in medical malpractice litigation. In states where joint and several liability has been abolished, as in Florida, the effort for actual parties to minimize their percent of responsibility to the plaintiff requires pleading that all non-named parties are negligent and then proving the negligence. Thus, in Florida, if the hospital is the only named defendant, it must plead that one or more physicians were negligent and prove the negligence of the physicians so that an ultimate jury verdict will apportion only a percentage of fault to the hospital even though the physicians are not named as parties. Once a hospital pleads the negligence of physicians, it is an invitation to the plaintiff to join the physicians as defendants and a huge wedge is driven between the hospital and the physicians who continue performing services as hospital-based physicians. By drawing the distinctions between what happens without good coverage and good indemnification, the negotiations may well achieve both when drafting the contract between the hospital and the physicians.

Even when settling cases, hospitals must be mindful of indemnity clauses within contracts with hospital based physicians. If hospital liability is settled, any release or settlement documents should preserve the hospital's right to seek recovery from the physicians if the hospital pays more than its fair share or pays when it was not actively negligent. The hospital should seek to include within the contract a requirement that before the physician settles with a patient the hospital have the right to review the release so that a release either includes the hospital or includes language which allows the hospital to recover indemnity notwithstanding the physician obtaining a release from the patient.

1 The Author acknowledges the research assistance of Liben Amedie, a litigation Associate lawyer at Akerman Senterfitt, Tampa Office
2 Houdaille Industries, Inc. v. Edwards, 374 So.2d 490, 493 (Fla. 1979).
3 Dade County School Bd. v. Radio Station WQBA, 731 So.2d 638, 641 n.2 (Fla. 1999).
4 Desrosiers v. Russell, 660 So.2d 396, 398 (Fla. 2 nd DCA 1995); Schrank v. Pearlman, 683 So.2d 559 (Fla. 3 rd DCA 1996).
5 Houdaille Industries, Inc., 374 So.2d at 493.
6 Desrosiers v. Russell, 660 So.2d 396 (Fla. 2 nd DCA 1995).
7 Cleary Bros. Const. v. Upper Keys Marine Const., Inc., 526 So.2d 116, 117 (Fla. 3 rd DCA 1988).
8 Schrank v. Pearlman, 683 So.2d 559, 561 (Fla. 3 rd DCA 1996).
9 Dade County School Bd. v. Radio Station WQBA, 731 So.2d 638, 643 (Fla. 1999)./span>
10 Id.
11 Id. at 642.
12 Stuart v. Heartz Corp., 351 So.2d 703, 705 (Fla. 1977).
13 Id.