Indiana Supreme Court Adopts Restatement (Second) of Agency Section 267 and Finds Genuine Issue of Material Fact as to Apparent Agency Relationship Between Two Medical Providers Despite No Contractual Relationship

We recently wrote about the Indiana Supreme Court’s decision in Arrendale v. American Imaging & MRI, LLC in which the Court held that non-hospital medical providers could be responsible for the negligent acts or omissions of their independent contractors through apparent agency. The same day the Court issued its opinion in Arrendale, the Court also issued an opinion in Wilson v. Anonymous Defendant 1 in which it adopted Restatement (Second) of Agency section 267 and held as a matter of first impression that a medical provider can be responsible for the negligent acts or omissions of an apparent agent based upon a medical provider’s manifestations that an agency relationship exists, which causes a third party to rely on that relationship. The rule articulated in Wilson, unlike in Arrendale, does not require an independent contractor relationship.

In Wilson, Darci Wilson (“Wilson”) received medical care from Anonymous Defendant 1, an orthopedic physician group. She had a knee replacement performed at Anonymous Defendant 1’s facility and was thereafter referred for physical therapy on the second floor of Anonymous Defendant 1’s facility. Anonymous Defendant 1 and Accelerated Rehab, a physical therapy company, had a “Staffing Agreement” whereby Accelerated Rehab would provide physical therapy personnel to staff Anonymous Defendant 1’s facility. Athletico, Ltd and Athletico Management, LLC (“Athletico”) thereafter acquired Accelerated Rehab and seemingly continued to operate under the “Staffing Agreement.” However, there was no contract, agreement, or any legal relationship between Anonymous Defendant 1 and Athletico or its rehab personnel.

Wilson was injured while undergoing physical therapy with physical therapist Christopher Lingle (“Lingle”) at Anonymous Defendant 1’s facility, which also housed Athletico. Wilson filed a proposed complaint alleging medical negligence against Anonymous Defendant 1 before the Indiana Department of Insurance, and later, after the two-year statute of limitations had already expired, she filed against Lingle and Athletico, which were not qualified under the Medical Malpractice Act, in state court. Lingle and Athletico moved for summary judgment based upon the statute of limitations, which the trial court granted. Anonymous Defendant 1 also moved for summary judgment arguing it could not be liable for Lingle because it had no employment or contractual relationship with Lingle. The trial court granted Anonymous Defendant 1’s motion and Wilson appealed. On appeal the Indiana Court of Appeals agreed with Anonymous Defendant 1 finding Anonymous Defendant 1 could not be held liable for Lindle’s actions under Sword because there was no independent contractor relationship between Anonymous Defendant 1 and Lingle. However, the Indiana Supreme Court accepted transfer, thereby vacating the Court of Appeals opinion, and reversed the trial court, finding a genuine issue of material fact existed under Section 267’s apparent agency principles.

In its opinion in Wilson, the Indiana Supreme Court agreed with Anonymous Defendant 1 that Sword did not apply because there was no legal relationship between Anonymous Defendant 1 and Lingle. However, the Court adopted Restatement (Second) of Agency section 267 which does not require a legal relationship between a principal and agent. Section 267 provides that “[o]ne who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.” Restatement (Second) of Agency § 267 (1958). Under Section 267, courts look to the principal’s representations and the third-party’s reliance on those representations.

As noted by the Court, the question before the Court in applying Section 267 in Wilson was (1) whether Anonymous Defendant 1 used some form of communication, whether direct or indirect, which gave rise to a reasonable belief in Wilson that Lindle was an agent of Anonymous Physician 1 and (2) whether that belief led Wilson to get treatment from Lindle. In its opinion, the Court noted that Wilson did not know who Lingle’s employer was and there were signs indicating he was an employee of Anonymous Defendant 1. Anonymous Defendant 1 referred Wilson to the second floor of its facility, which only had Anonymous Defendant 1’s branding. Wilson signed an appointment policy that said, “Thank you for choosing [Anonymous Defendant 1] for your therapy needs.” This policy was signed by the “[Anonymous Defendant 1] Physical/Occupational Therapy Department.” The policy also noted it was the policy of Anonymous Defendant 1, not Athletico, to require at least 24 hours’ notice of any appointment cancellations. There was no indication the second floor of Anonymous Defendant 1’s facility was occupied by Accelerated Rehab or Athletico. Anonymous Defendant 1 provided Lindle with physical therapy forms to fill out. A physician with Anonymous Defendant 1 signed Wilson’s physical therapy records. Anonymous Defendant 1 also billed Wilson for her physical therapy. Given these facts, the Indiana Supreme Court found there was a genuine issue of material fact as to whether Lindle was Anonymous Defendant 1’s apparent agent thereby precluding summary judgment for Anonymous Defendant 1. Accordingly, the Court reversed the trial court and remanded the case for further proceedings.

You can read the full opinion here.