Uninsured Practice of Medicine as Actionable Tort

By Alex Stein

A week ago, the Supreme Court of New Jersey has delivered an important decision on whether uninsured practice of medicine is actionable in torts. Jarrell v. Kaul, — A.3d —- 2015 WL 5683722 (N.J. 2015). This decision involved an uninsured anesthesiologist who allegedly provided negligent pain management treatment to a patient. Under New Jersey statute, N.J.S.A. 45:9–19.17; N.J.A.C. 13:35–6.18(b), a physician’s license to practice medicine is only valid when she holds medical-malpractice liability insurance in the requisite amounts.

The Court held that this statute does not give patients a private cause of action against uninsured or underinsured physicians. Based on the traditional common-law analysis (see In re Resolution of State Commission of Investigation, 527 A.2d 851 (N.J. 1987), and a more familiar decision, Uhr v. E. Greenbush Cent. Sch. Dist., 720 N.E.2d 886 (N.Y. 1999)), the Court determined that the Legislature did not intend to make uninsured practice of medicine actionable in torts because it was sufficiently discouraged by disciplinary penalties, administrative enforcement, and the physician’s prospect of loosing her license.

The Court also ruled that the aggrieved patient cannot sue the uninsured physician for violation of her right to informed consent. The patient’s entitlement to informed consent – it explained – only entitles her to receive information about the nature and the risks of the recommended medical treatment and its alternatives, which includes, in appropriate cases, information about the physician’s credentials and experience with the treatment. This entitlement does not extend to information about the physician’s insurance against medical malpractice claims.

The Court, however, decided that the patient can still successfully sue the hospital or the practice that employed the uninsured physician. Importantly, the Court ruled that such an action would succeed even when the physician was an independent contractor. The patient’s cause of action would then be the physician’s negligent hiring or credentialing by the hospital (or practice). In the Court’s words,

“The provision of medical care is highly regulated in this State. Hospitals and the wide variety of alternative providers of health care services, including ambulatory care centers and surgical centers, are highly regulated. No health care facility may provide medical care unless it obtains a license, and that license is subject to renewal on an annual basis. Each set of regulations governing each type of health care facility recognizes that the health care administered in a facility is provided by employees, such as nurses and technicians, and independent contractors, such as physicians. Health care facilities are given broad responsibility to select the professionals who will provide medical care; however, regulations address the manner in which the medical staff shall be organized, the staff policies and procedures that should be addressed, and medical staff qualifications. The governing authority of each facility is required to establish criteria for delineating the privileges that will be granted, granting privileges to provide medical care in its facility in accordance with the adopted standards and procedures, and reviewing the granted privileges on a periodic basis. Physicians must submit an application to obtain privileges and must demonstrate that they are currently licensed to practice medicine in this State. Obtaining and maintaining medical malpractice liability insurance in the amounts prescribed by law is a requirement to obtain and maintain a license to practice medicine in New Jersey.

[The] basic element of competency for any physician seeking surgical privileges at [a healthcare] facility is possession of a license to practice medicine in the State of New Jersey. An essential condition for such a license is possession of a policy of medical malpractice liability insurance or an acceptable letter of credit as required by statute and the regulations adopted by the BME. Moreover, the statutory financial responsibility requirements impose a continuing obligation on the physician to maintain the appropriate type and amount of insurance.” [citations omitted and emphasis added]

This decision raises an interesting question: Can an aggrieved patient sue the physician’s hospital or practice in a state in which doctors must have liability insurance as a matter of customary practice rather than statutory mandate?

My tentative answer to this question is as follows:

  1. The patient would be able to successfully sue the hospital for negligent misrepresentation if the hospital held itself out as a fully insured (or self-insured) facility.
  2. The patient would also be able to successfully sue the hospital under the “apparent authority” doctrine if the hospital advertised itself as a full-service facility that employs its physicians.
  3. The patient, however, would not be able to sue the hospital for negligent credentialing (or negligent hiring) because, unlike in New Jersey, an uninsured physician is still considered licensed and professionally competent.

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