James R. Jarrell v. Richard A. Kaul, M.D. (072363)James R. Jarrell v. Richard A. Kaul, M.D. (072363)
Lead Opinion
(temporarily assigned) delivered the opinion of the Court.
In this appeal, we examine three issues related to the statutory requirement that physicians licensed to practice medicine in New Jersey and providing medical care in this State must obtain and maintain medical malpractice liability insurance. The first issue presented in this appeal is whether an injured patient may bring a direct action against a negligent, uninsured physician. The second issue is whether a physician has a duty to advise a prospective patient that he is in compliance with the statutory medical malpractice liability
Plaintiff James R. Jarrell sought treatment for persistent pain in his back from defendant Dr. Richard A. Kaul, a board certified anesthesiologist. The doctor performed a spinal fusion procedure at a surgical center. At the time of the operation, Dr. Kaul was required to have medical malpractice liability insurance or to have posted a letter of credit. The medical malpractice liability insurance issued to him expressly excluded spinal surgical procedures. Dr. Kaul instead maintains that he produced a suitable letter of credit.
The surgery performed by Dr. Kaul actually increased Jarrell’s discomfort, so he sought treatment from another physician. Another surgeon performed a surgical revision of the procedure performed by Dr. Kaul.
Jarrell and his wife, Sheila, filed a complaint alleging that Dr. Kaul negligently performed the initial spinal procedure, and they sought compensatory damages for pain and suffering and economic losses caused by the physician’s negligence. They also asserted a direct claim against Dr. Kaul based on his status as an uninsured physician at the time he treated Jarrell. Based on Dr. Kaul’s lack of liability insurance, plaintiffs also asserted claims seeking damages for misrepresentation, fraud, deceit, and lack of informed consent. They also asserted a negligent hiring claim against the facility where Dr. Kaul performed the surgery. Jarrell’s wife asserted a loss of consortium claim. Only the negligence claim proceeded to trial. A jury awarded $500,000 to Jarrell and $250,000 to his wife. All of the other claims were dismissed prior to trial.
Although it is undisputed that Dr. Kaul was uninsured for the procedure he performed on Jarrell, we affirm the dismissal of Jarrell’s direct claim against the physician for his failure to maintain insurance. The statute imposing the medical malpractice liability insurance requirement does not expressly authorize a direct action against a noncompliant physician and neither the language nor the purpose of the statute supports such a claim.
Although a reasonably prudent patient may consider a physician’s compliance with the statutorily imposed liability insurance requirement material information, lack of compliance or failure to disclose compliance does not necessarily provide the predicate for an informed consent claim. Indeed, using the informed consent doctrine to address the financial insecurity of a physician and the inability of a patient to satisfy a judgment or to fund a settlement would represent a marked departure from our prior informed consent jurisprudence. We decline to follow that course.
Finally, we hold that a health care facility that grants privileges to physicians has a continuing duty to ensure that those physicians have and maintain the required medical malpractice liability insurance or have posted a suitable letter of credit that conforms with the statutory requirement.
I.
Jarrell suffered from chronic back pain for many years. His chiropractor referred him to Dr. Kaul, a board certified anesthesiologist, in September 2005. Dr. Kaul’s practice focused on pain management and minimally invasive spinal procedures. In 2005, Dr. Kaul saw patients and performed procedures at Market Street Surgical Center (MSSC) in Saddle Brook several times
Dr. Kaul diagnosed Jarrell with a herniated lumbar disc, lumbar radiculopathy, and discogenic back pain. On October 11, 2005, Dr. Kaul performed a spinal fusion procedure in which he fused the L4, L5, and SI vertebrae using two mesh cages attached by rods and pedicle screws. Immediately following the surgery, Jarrell experienced new pain in his left side that worsened over time and eventually led to a “drop foot,”
A friend referred Jarrell to Dr. Alfred Steinberger, a board certified neurosurgeon, in January 2006. Following an examination and diagnostic tests, Dr. Steinberger concluded that Dr. Kaul improperly placed some screws that pinched a nerve causing the pain and drop foot. On January 31, 2006, Dr. Steinberger removed and replaced the fixation devices implanted by Dr. Kaul in October 2005. Jarrell’s pain decreased immediately following the second procedure; however, at the time of his January 2012 trial, he still required pain medication, including fentanyl patches, and his physical activity was limited.
Dr. Kaul was educated in England, where he practiced as a dental anesthesiologist. He relocated to New Jersey and obtained a license to practice medicine in 1995. Thereafter, he commenced a pain management practice and performed various spinal procedures, including the spinal fusion procedure he conducted on Jarrell.
At the time of the October 2005 spinal procedure, Dr. Kaul had a malpractice insurance policy that specifically excluded spinal surgery. He claimed to have $500,000 in liquid assets but did not have a letter of credit from a bank or other financial institution. Dr. Kaul did not discuss his insurance coverage, or lack thereof, with Jarrell or his wife. Neither Jarrell nor his wife inquired about Dr. Kaul’s insurance coverage.
The Board of Medical Examiners (BME)
II.
Jarrell and his wife filed a nine-count complaint in the Superior Court against Dr. Kaul and MSSC. Jarrell asserted a claim against Dr. Kaul for medical negligence alleging that he departed from accepted standards of medical care in his choice of procedure and his selection of medical devices for use in the surgery. (Count One). Jarrell further alleged that Dr. Kaul misrepresented his qualifications and training, thereby wrongfully obtaining his informed consent for the surgery. (Count Two). Jarrell also claimed that MSSC negligently and unreasonably facilitated performance of an unauthorized surgical procedure by an unqualified physician. (Count Five). His wife asserted a loss of consortium claim. (Count Seven).
Jarrell also alleged that Dr. Kaul performed the October 2005 surgical procedure without the statutorily required malpractice insurance or letter of credit and withheld this information from him. He alleged that Dr. Haul’s noncompliance formed the basis for a claim sounding in deceit, fraudulent misrepresentation, and lack of informed consent (Count Eight), as
Plaintiffs’ motion for summary judgment based on Dr. Haul’s failure to carry medical malpractice insurance that covered the spinal procedure performed on Jarrell was denied. The motion judge reasoned that Dr. Kaul had informed the BME that he had substantially complied with the statutory requirement, and the BME had not placed any limits on his license to practice medicine. Plaintiffs renewed this motion immediately prior to trial and Dr. Kaul filed a cross-motion for summary judgment. The trial court granted Dr. Kaul’s cross-motion. The court reasoned that Basil v. Wolf, 193 N.J. 38,
Trial proceeded solely against Dr. Kaul limited to the issue of medical negligence. The jury found that Dr. Kaul negligently performed the October 2005 spinal fusion and his negligence proximately caused injury to Jarrell. The jury awarded $500,000 in damages to Jarrell for his pain, suffering, and disability, and $250,000 to his wife for loss of consortium. All post-trial motions for a new trial or remittitur were denied.
Dr. Kaul appealed, arguing that significant trial errors required a reversal of the judgment and a new trial. Plaintiffs filed a cross-appeal contending that the trial court erroneously denied their motion for summary judgment and erroneously granted partial summary judgment in favor of Dr. Kaul based on Dr. Kaul’s lack of insurance. They also contended that the trial court erred in granting summary judgment in favor of MSSC based on Dr. Kaul’s credentials and lack of insurance.
In an unreported opinion, the Appellate Division affirmed the summary judgment orders, the jury verdict, and the damages award. The appellate panel held that the trial court properly dismissed all claims against Dr. Kaul based on his lack of insurance because N.J.S.A. 45:9-19.17 does not provide a private cause of action for injured patients. The panel based this decision largely on this Court’s opinion in Basil, supra, 193 N.J. at 72,
This Court denied Dr. Kaul’s petition for certification but granted plaintiffs’ cross-petition. Jarrell v. Kaul, 216 N.J. 366,
III.
Plaintiffs urge that the Appellate Division’s reliance on Basil was misplaced. They contend that the discussion on which it relied to foreclose a direct cause of
Finally, plaintiffs maintain that Howard v. University of Medicine & Dentistry of New Jersey, 172 N.J. 537,
As to MSSC, plaintiffs urge that the Appellate Division misunderstood their claim against the facility. Plaintiffs contend that they did not assert a respondeat superior or any theory of vicarious liability against MSSC. Rather, they maintain that their claim against MSSC is premised on a duty of the surgical center to ensure that surgeons who perform procedures in its facility are qualified to perform those procedures and those qualifications include proper insurance or other suitable financial security.
Dr. Kaul responds that his lack of insurance does not permit a private right of action by injured patients. He further contends that there is no legal basis to support plaintiffs’ theory that lack of insurance vitiates any consent to perform a procedure. Furthermore, he claims that although the policy of insurance excluded spinal surgery, he maintained insurance at the time of the surgery performed on Jarrell and he held sufficient financial assets at the time to comply with the statute.
MSSC contends that plaintiffs are attempting to establish a new duty for health care facilities that will expose them to “financial ruin.” It argues that N.J.S.A. 45:9-19.17 does not impose on health care facilities the duty to enforce the insurance requirement, and the BME has not adopted regulations requiring such action. It urges that the Appellate Division judgment barring a direct negligence claim against it based on the credentialing process should be affirmed.
Amicus NJAJ asserts that this appeal presents an opportunity for this Court to hold as a matter of law and sound public policy that patients’ right to informed consent includes the right to know if their physician possesses insurance that covers the procedure for which consent is sought. Furthermore, every medical facility should be obliged to confirm on a regular basis that the physicians who have been granted privileges to perform procedures have the minimum amount of insurance coverage required by statute and that the insurance covers all procedures performed at the facility by the physician.
IV.
The Legislature first required physicians to maintain medical malpractice liability insurance in 1998. L. 1997, c. 365. The obligation extended to those physicians who were licensed in this State and
In 2004, the Legislature amended the statute. The legislation established the minimum amount of medical malpractice liability insurance that a physician must obtain and maintain at $1,000,000 per occurrence and $3,000,000 per policy year. L. 2004, c. 17, § 25. The Legislature also set the minimum amount of the letter of credit at $500,000 and authorized the BME to require higher amounts for both insurance and the letter of credit. Ibid. It has not done so. See N.J.AC. 13:35-6.18 (establishing minimum amounts per occurrence and per policy year at $1,000,000 and $3,000,000 respectively and $500,000 for letter of credit).
Codified as N.J.SA 45:9-19.17, the statute provides as follows:
a. A physician who maintains a professional medical practice in this State and has responsibility for patient care is required to be covered by medical malpractice liability insurance issued by a carrier authorized to write medical malpractice liability insurance policies in this State, in the sum of $1,000,000 per occurrence and $3,000,000 per policy year and unless renewal coverage includes the premium retroactive date, the policy shall provide for extended reporting endorsement coverage for claims made policies, also known as “tail coverage,” or, if such liability coverage is not available, by a letter of credit for at least $500,000.
The physician shall notify the State Board of Medical Examiners of the name and address of the insurance carrier or the institution issuing the letter of credit, pursuant to section 7 of P.L.1989, c.300 ([N.J.SA.] 45:9-19.7).
b. A physician who is in violation of this section is subject to disciplinary action and civil penalties pursuant to sections 8, 9 and 12 of P.L.1978, c.73 ([N.J.SA] 45:1-21 to 22 and 45:1-25).
c. The State Board of Medical Examiners may, pursuant to the “Administrative Procedure Act,” P.L.1968, c.410 ([N.J.S.A] 52:14B-1 et seq.), establish by regulation, minimum amounts for medical malpractice liability insurance coverage and lines of credit in excess of those amounts required pursuant to subsection a. of this section.
d. The State Board of Medical Examiners shall notify all physicians licensed by the board of the requirements of this section within 30 days of the date of enactment of P.L.2004, c.17.
The statement of the Assembly Health Committee accompanying the 1998 bill provided that the intent of the bill was “to ensure the citizens of the State that they will have some recourse for adequate compensation in the event that a physician or podiatrist is found responsible for acts of malpractice.” Assembly Health Comm., Statement to S. 267 (Sept. 19,1996).
The BME adopted implementing regulations on April 5, 1999, which defined key phrases including “Maintaining a
A physician who does not have medical malpractice insurance must present to the BME a letter of credit in the amount of $500,000, N.J.AC. 13:35 — 6.18(b), and must promptly notify the BME if a demand for payment on the letter has been made or the continuing viability of the letter has been compromised, N.J.AC. 13:35 — 6.18(d)(1)—(2). The failure of a physician obliged to obtain medical malpractice liability insurance or a letter of credit as required by the regulation is considered professional misconduct, N.J AC. 13:35 — 6.18(e), and he or she is subject to discipline in accordance with N.J.SA 45:1 — 21(e). Such discipline may include revocation or suspension of the physician’s license to practice medicine in this State. See N.J.SA 45:1-21.
It is against this statutory and regulatory backdrop that we examine the three issues presented in this appeal.
V.
We commence our discussion of whether N.J.SA. 45:9-19.17 bestows on an injured patient a private right of action against a physician who does not obtain or maintain statutorily required medical malpractice insurance
Both the United States Supreme Court and this Court have held that a statute that does not expressly create a private cause of action may, nonetheless, implicitly create one. See Cort v. Ash, 422 U.S. 66, 78, 95 S.Ct. 2080, 2088,
[1] whether the plaintiff is “one of the class for whose especial benefit the statute was enacted”; [2] whether there is any evidence that the Legislature intended to create a private cause of action under the statute; and [3] whether implication of a private cause of action in this case would be “consistent with the underlying purposes of the legislative scheme.”
[State Comm’n of Investigation, supra, 108 N.J. at 41, 527 A.2d 851 (citations omitted) (quoting Cort, supra, 422 U.S. at 78, 95 S.Ct. at 2088,45 L.Ed.2d at 36 ).]
Through this inquiry the Court seeks to ascertain the underlying legislative intent. Jalowiecki v. Leuc, 182 N.J.Super. 22, 30,
There is scant legislative history associated with N.J.S.A. 45:9-19.17. The committee statement accompanying this legislation simply states that the insurance requirement is designed to ensure a source of some compensation in the event of medical negligence. Assembly Health Comm., Statement to S. 267, supra. Notably, N.J.S.A. 45:9 generally regulates the practice of medicine and further requires physicians to undertake certain health-related tasks. For example, N.J.S.A 45:9-19.11 immunizes members of the BME from liability for actions taken in the course of their administrative obligations, and N.J.S.A. 45:9-22.3(b) immunizes a physician from liability for failing to distribute a breast cancer information booklet to a patient. These instances suggest that the Legislature was content to entrust oversight of these responsibilities to the BME.
In Basil, supra, this Court noted that N.J.S.A. 45:9-19.17, when originally adopted in 1998, did not authorize a direct action against an uninsured physician. 193 N.J. at 71, 72,
Applying the three-part test adopted by this Court in State Commission of Investigation, we determine that N.J.S.A. 45:9— 19.17 does not create, expressly or implicitly, a direct cause of action by a patient against a noncompliant treating physician. To be sure, a patient, such as Jarrell, may receive a direct benefit by virtue of the availability of insurance to provide a source of funds to recompense for negligent care. On the other hand, there is no evidence that the Legislature contemplated that enforcement of its determination — that physicians providing medical care in this State must be insured — would be advanced
It is difficult to quarrel with this approach. A physician is prohibited from providing medical care in New Jersey without a license, and the BME will not issue a license unless a physician establishes financial responsibility. Noncompliance is considered professional misconduct and the BME has the authority to suspend or revoke a license to practice medicine of a noncompliant physician. Administrative oversight and enforcement is the declared enforcement mechanism and that choice reflects a legislative decision to encourage and force compliance rather than wait for a complaint by an injured patient that may never be filed.
The underlying purpose of the legislation is predominately proactive. The legislative intent is to create a source of compensation for a patient injured by negligent medical care. A post-injury direct claim against a noncompliant and negligent physician is reactive and does little to further the articulated goal.
We therefore conclude that N.J.S.A. 45:9-19.17 does not expressly, and cannot be read to implicitly, recognize a direct cause of action by an injured patient against a physician who fails to obtain the statutorily required medical malpractice liability insurance or letter of credit. The Appellate Division judgment that rejected such a cause of action is affirmed.
VI.
In Count Eight of the amended complaint, plaintiffs allege that Dr. Kaul knew that he was uninsured at the time that he obtained Jarrell’s consent to perform surgery. Jarrell alleged that Dr. Kaul’s uninsured status “would have been significant in [his] decision-making.” Plaintiffs asserted that the failure to disclose this information constitutes “deceit, misrepresentation and outrageous conduct.”
Before the trial court and on appeal, plaintiffs argued that the claims asserted in the amended complaint, as they pertained to Dr. Kaul’s lack of insurance, implicated the doctrine of informed consent.
Plaintiffs argue that the existence, or absence, of medical malpractice insurance is as important a piece of information as are the risks attendant to the medical treatment recommended by a physician. They insist that a discussion of the nature and risks of the treatment and the risks associated with failing to pursue a particular course of treatment is incomplete and any decision to pursue or reject a certain course of treatment cannot be eonsidered
In Largey v. Rothman, 110 N.J. 204,
Informed consent is
essentially a negligence concept, predicated on the duty of a physician to disclose to a patient such information as will enable the patient to make an evaluation of the nature of the treatment and of any attendant substantial risks, as well as of available options in the form of alternative therapies.
[Largey, supra, 110 N.J. at 208,540 A.2d 504 .]
If a physician withholds facts that are necessary to form the basis of an intelligent consent to proposed treatment, the physician has not discharged his duty to the patient. Ibid.; see Salgo v. Leland Stanford, Jr. Univ. Bd. of Trs., 154 Cal.App. 2d 560,
Largey, supra, adopted the “prudent patient” or “materiality of risk” standard. 110 N.J. at 213,
the scope of the duty to disclose “must be measured by the patient’s need, and that need is the information material to the decision. Thus the test for determining whether a particular peril must be divulged is its materiality to the patient’s decision: all risks potentially affecting the decision must be unmasked. And to safeguard the patient’s interest in achieving his own determination on treatment, the law must itself set the standard for adequate disclosure.”
[Ibid, (quoting Canterbury, supra, 464 F.2d at 786-87).]
The breadth of the duty to disclose risks is measured by a standard that is not personal to the physician or to the patient. Rather, it is an objective standard ‘“with due regard for the patient’s informational needs and with suitable leeway for the physician’s situation.’ ” Ibid, (quoting Canterbury, supra,
Thus, the Largey Court reversed the verdict in favor of a physician, where the trial court instructed the jury to evaluate the plaintiffs informed consent claim in accordance with the prevailing “reasonable physician” standard. Id. at 205, 216,
“[t]he topics importantly demanding a communication of information are the inherent and potential hazards of the proposed treatment, the alternatives to that treatment, if any, and the results likely if the patient remains untreated. The factors contributing significance to the dangerousness of a medical technique are, of course, the incidence of injury and the degree of harm threatened.”
[Id. at 213,540 A.2d 504 (alteration in original) (quoting Canterbury, supra, 464 F.2d at 787-88).]
In Matthies, supra, the Court emphasized that a physician is required to explain the risks associated with all medically reasonable alternatives, including invasive and noninvasive treatments. 160 N.J. at 34,
The validity of the consent obtained from a patient normally is confined to a disclosure of the risks associated with the recommended procedure and alternative procedures or therapies. The Court has recognized, however, that in certain circumstances consent may be vitiated if the physician made significant misrepresentations of his credentials or experience. In Howard, supra, a neurologist disclosed to the plaintiff the significant risks, including paralysis, of the surgery proposed to address a large cervical disc herniation. 172 N.J. at 543,
The Court acknowledged in Howard that a misrepresentation about a physician’s credentials or experience is “not a perfect fit” with the prevailing doctrine of informed consent. Id. at 557,
[i]n certain circumstances, a serious misrepresentation concerning the quality or extent of a physician’s professional experience, viewed from the perspective of the reasonably prudent patient assessing the risks attendant to a medical procedure, can be material to the grant of intelligent and informed consent to the procedure.
[Id, at 555,800 A.2d 73 (citing 1 Dan B. Dobbs, The Law of Toils, § 251 at 660-61 (2001)).]
Thus, to succeed on an informed consent claim based on misrepresented credentials and experience, the plaintiff in Howard also was required to show that the additional risk posed by the physician’s actual credentials and experience increased the plaintiffs risk of paralysis from the procedure. Id. at 558,
Requiring a physician to disclose whether he maintains medical malpractice liability insurance, the amount of the coverage, and any restrictions, reservations, or limitations of the insurance coverage, or whether a physician has posted a letter of credit with the BME is also “not a perfect fit” with our informed consent jurisprudence.
We recognize that the existence or not of medical malpractice liability insurance or the permissible letter of credit may be material information for some patients. To encourage compliance and to enforce the legislative mandate, the BME has adopted regulations that declare that the failure to obtain and maintain medical malpractice liability insurance constitutes professional misconduct. N.J.A.C. 13:35 — 6.18(e). In addition, a physician’s failure to have the required coverage subjects him or her to discipline in accordance with N.J.S.A 45:9 — 19.17(b), which may include revocation or suspension of the physician’s license to practice medicine in this State. See N.J.S.A 45:1-21.
Declaring that failure to comply with the statutory requirement to maintain liability insurance is an act of professional misconduct, which subjects a physician to substantial discipline by the BME, and recognizing that some patients would consider the existence or not of such insurance material information do not lead inexorably to the conclusion that noncompliance with the statutory mandate should give rise to an
To be sure, a patient who has been injured due to negligent care by an uninsured physician has sustained a financial loss, but such a loss is not the injury that the informed consent doctrine ever contemplated. Applying the informed consent jurisprudence to the financial consequences of negligent care by an uninsured physician untethers the remedy from its theoretical underpinnings and is a stark departure from our prior jurisprudence. We discern no principled reason to extend the additional and questionable relief that the informed consent doctrine may provide to an injured patient to address the financial insecurity of a physician.
VII.
Plaintiffs also asserted a negligence claim against MSSC based on its action permitting Dr. Kaul to perform a medical procedure for which he was uninsured at its facility. Plaintiffs do not seek to hold MSSC vicariously liable for Dr. Kaul’s negligent treatment. Rather, they contend that MSSC owed a duty to them and others to limit use of its facility only to those who satisfy the statutory mandate to obtain and maintain the minimum level of medical malpractice liability insurance. In essence, plaintiffs asserted a claim of negligent hiring against MSSC.
Generally, a person who engages an independent contractor is not liable for the negligence of that contractor. Majestic Realty Assocs. v. Toti Contracting Co., 30 N.J. 425, 430-31,153 A.2d 321 (1959). An individual will be held liable if he or she: (1) retains control of the manner and means by which the work will be performed; (2) retains an incompetent contractor; or (3) retains an independent contractor to perform work that constitutes a nuisance per se. Ibid. Plaintiffs urge that a surgical center that grants privileges to a physician to perform a procedure for which he is uninsured invokes the second exception because it permitted an incompetent physician to use its facility.
The incompetent contractor exception is founded on the premise that
[a]n employer is subject to liability for physical harm to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor
(a) to do work which will involve the risk of physical harm unless it is skillfully and carefully done, or
(b) to perform any duty which the employer owes to third persons.
[Restatement (Second) of Torts § 411 (1965).]
A competent and careful contractor is “a contractor who possesses the knowledge, skill, experience, and available equipment which a reasonable [person] would realize that a contractor must have in order to do the work which he is employed to do without creating unreasonable risk of injury to others.” Id. at cmt. (a). Any liability for failing to engage a competent contractor is limited “to the physical harm as is so caused.” Id. at cmt. (b). In order for the employer to be liable, “that harm shall result from some quality in the contractor which made it negligent for the employer to entrust the work to him.” Ibid.
Efforts to invoke the second Majestic exception to the ordinary rule that a principal is not liable for the negligent acts of an independent contractor have often arisen in the context of a tradesman, such as a paver, a tree surgeon, or a carpenter, who was employed to perform a certain task and is later determined to be insolvent. See Mavrikidis v. Petullo, 153 N.J. 117,137-38,
Mavrikidis illustrates this rule and comment. In Mavrikidis, a trucking firm retained by a gasoline station operator to pave the surface of the station used a grossly overloaded truck with faulty brakes to haul hot asphalt to the gas station. 153 N.J. at 124-25, 128,
In Puckrein v. ATI Transport, Inc., 186 N.J. 563, 579-80,
Discovery revealed that equipment bearing markings other than the retained trucking firm occasionally appeared at the facility to collect solid waste and recyclable materials. Id. at 571,
The incident that formed the basis for the plaintiffs complaint in Puckrein occurred when the driver of a tractor-trailer drove through a red light and struck an automobile with three occupants. Id. at 568,
Relying on basic negligence principles and § 411 of the Restatement, the Court recognized a duty of an employer “to exercise reasonable care to employ a competent and careful contractor” to perform work that involves a risk of physical harm unless it is done with skill. Id. at 575,
to prevail against the principal for hiring an incompetent contractor, a plaintiff must show that the contractor was, in fact, incompetent or unskilled to perform the job for which he/she was hired, that the harm that resulted arose out of that incompetence, and that the principal knew or should have known of the incompetence.
[Id. at 576,897 A.2d 1034 (citing Mavrikidis, supra, 153 N.J. at 136-37,707 A.2d 977 ).]
In so holding, the Court addressed the contrary result reached in Mavrikidis.
The Puckrein Court did not view its earlier opinion in Mavrikidis as the final word on the Majestic incompetent contractor exception; instead, the Court viewed the disposition in Mavrikidis as
a difference of opinion over whether to consider that contract narrowly as a paving contract, or more broadly as including pre- and post-paving activities. Although that issue may be debatable, what is not debatable is that the tipping point between the majority and the dissent in Mavrikidis was not a disagreement over the basic legal principles to which we have adverted. That is the backdrop for our inquiry.
[Id. at 577,897 A.2d 1034 .]
Ultimately, the Puckrein Court determined that summary judgment had been improperly granted in favor of the business that had retained the wastehauler. Id. at 580,
the core question here is not whether [the retained trucker] was competent to transport [the business’s] loads upon the public highways — it was not. The question is whether [the business] violated its duty to use reasonable care in selecting a trucker and whether it knew or should have known of [the retained trucker’s] incompetence.
[Id at 579, 897A.2d 1034.]
A later ease rephrased the essential question as whether the principal that engaged an independent contractor inquired “into an independent contractor’s essential competency.” Fox v. Millman, 210 N.J. 401, 427,
A year following this Court’s decision in Puckrein, the Court restated the circumstances that would permit a person to prevail on a claim against a principal who retained an incompetent or unskilled contractor. Basil, supra, 193 N.J. at 68,
The Court proceeded, however, to emphasize that the current state of the law requiring medical malpractice liability insurance as a condition of licensure imposed a continuing responsibility on an insurer that retains physicians to treat or examine injured workers to ensure that the retained physician is qualified to practice. Id. at 73,
State regulations now clearly require practicing physicians maintaining a professional office ... to obtain a minimum amount of medical malpractice insurance as a condition for licensure. An IME contract physician who lacked malpractice insurance after ... (the effective date of [N.J.A.C. 13:35 — 6.18(a)]), is unqualified to practice medicine. Consistent with our 2006 holding in Puckrein, supra, an insurance company that engages an IME physician for evaluative purposes now must be aware that it is under a continuing duty of inquiry in respect of malpractice insurance requirements in order to ensure that the physicians it engages are qualified to practice.
[Ibid, (internal citation omitted).]
In sum, Puckrein establishes that, when a business retains a contractor to perform a task that requires special skill and specific permits or licenses, its retention of a contractor without those necessary credentials subjects the business to liability for hiring an incompetent contractor. Similarly, Basil counsels that granting privileges to a physician without the appropriate credentials also exposes the health care facility to liability for hiring an incompetent contractor.
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. See, e.g., N.J.AC. 8:43(3-1.1 to - 7A.10 (establishing hospital
In the context of plaintiffs’ negligent hiring claim against MSSC, the basic element of competency for any physician seeking surgical privileges at MSSC’s 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.
As recognized in Puckrein and Basil, when the task that a principal retains an independent contractor to perform requires specific qualifications, such as possession of certain permits and licenses, the principal has an initial duty to ascertain that the contractor possesses the requisite license and a continuing duty to assure that the requisite license is maintained. Here, MSSC had a duty to withhold privileges to any physician who did not meet the financial responsibility requirements for a license to practice medicine in this State. To be sure, the Legislature delegated the authority to enforce the liability insurance requirement to the BME. The record before the trial court, however, demonstrates that MSSC knew that Dr. Kaul possessed an insurance policy that expressly excluded the procedure performed on plaintiff. The record also reveals that Dr. Kaul asserted that he advised the BME and MSSC that he possessed sufficient assets to satisfy the alternative letter of credit requirement. Yet, a simple representation that a physician possesses sufficient assets does not satisfy the regulatory definition of a letter of credit. See N.J.A.C. 13:35-6.18(a). More importantly, the record is barren of any evidence that the BME accepted this bare representation of financial responsibility
A negligent hiring cause of action is not a strict liability claim. To the contrary, it is founded on basic negligence principles. Thus, a plaintiff who asserts such a claim against a health care facility must do more than prove that the facility granted privileges to a physician without the statutorily required medical malpractice liability insurance or letter of credit.
Here, having misconstrued the nature of plaintiffs’ claim against MSSC, the trial court dismissed the negligent hiring claim. As noted in this opinion, there are several open questions about whether Dr. Kaul complied with the alternative letter of credit requirement. As described by Dr. Kaul, his bare assertion of adequate financial assets to respond to a negligence claim does not comply with the BME definition of a letter of credit. N.J.AC. 13:35-6.18(a). Moreover, Dr. Kaul asserts either he or MSSC personnel discussed the sufficiency of his purported letter of credit with BME personnel. Discovery is required to clarify this and other issues integral to this claim. We therefore reverse the summary judgment entered in favor of MSSC in the negligent hiring claim asserted by plaintiffs.
VIII.
In summary, we conclude that N.J.S.A. 45:9-19.17 does not create a direct action by an injured patient against a physician who does not possess medical malpractice liability insurance or a suitable letter of credit. Moreover, failure to comply with the statutory liability insurance mandate does not give rise to an informed consent claim. The inability to recover a judgment is not the injury contemplated by the informed consent doctrine.
Finally, we hold that a cause of action for negligent hiring may be asserted against a health care facility that grants privileges to a physician who has not complied with the statutorily required insurance. A health care facility that grants privileges to physicians to use its facility has a continuing duty to ensure that any physician granted privileges maintains the required insurance, which is a condition of obtaining and maintaining a license to practice medicine in this State.
IX.
The judgment of the Appellate Division is affirmed in part and reversed in part and remanded for further proceedings consistent with this opinion.
Notes
"Drop foot” is “a general term for difficulty lifting the front part of the foot. If you have foot drop, you may drag the front of your foot on the ground when you walk.” Mayo Clinic Staff, Diseases and Conditions: Foot drop, MayoClinic.org (last visited June 19, 2015), www.mayoclinic.org/disease-conditions/footdrop/basics/defmition/con-20032918.
The BME is the administrative body that regulates the practice of medicine in this State.
The BME is the agency responsible for the licensure and discipline of licensed physicians in this State. N.J.S.A. 45:9-1, -2.
When we refer to the requirement to maintain medical malpractice liability insurance, we include by implication the letter of credit alternative. See N.J.S.A. 45:9-19.17(a).
. N.J.A.C. 13:35-6.18.
In Count Two, plaintiffs alleged that Dr. Kaul misrepresented his professional training and experience.
We readily acknowledge in Howard, supra, that even exaggerating one's credentials was "not a perfect fit'' with our informed consent jurisprudence. 172 N.J. at 557,
Concurrence Opinion
dissenting and concurring.
The facts here present the quintessential case of lack of informed consent. Dr. Kaul did not have the medical malpractice insurance required by law to perform the invasive surgical procedure on his patient, plaintiff James Jarrell. Performing the procedure without the requisite insurance constituted professional misconduct. Yet, Dr. Kaul never explained any of this to his patient, presumably because plaintiff never would have agreed to the procedure had he been fully informed.
Dr. Kaul failed to disclose material facts to his patient. He denied plaintiff the right to decide whether a financially incompetent — or worse yet, a professionally incompetent — physician should perform invasive surgery on him. Dr. Kaul was credentialed only as an anesthesiologist; he was not insured to perform spinal surgery.
A cause of action for lack of informed consent would recognize that a physician cannot hide material facts and that the patient has a right to make critical choices concerning his health. No reasonable patient would consent to spinal surgery knowing that his physician lacks malpractice insurance to perform that procedure. Because the majority is unwilling to find that Dr. Kaul breached a common-law duty by failing to disclose to the patient his lack of insurance to perform spinal surgery, I respectfully dissent. I concur in the remainder of the Court’s opinion.
I.
A physician is statutorily required to maintain medical malpractice liability insurance. N.J.S.A. 45:9-19.17. The purpose of the law is “to ensure the citizens of the State that they will have some recourse for adequate compensation in the event that a physician or podiatrist is found responsible for acts of malpractice.” Assembly Health Comm., Statement to S. 267 (Sept. 19, 1996). A physician who does not maintain medical malpractice liability insurance for a procedure he performs is subject to discipline for professional misconduct — discipline that includes possible revocation or suspension of his license to practice medicine. See N.J.S.A. 45:1-21; N.J.A.C. 13:35-6.18(e). The public therefore presumes that a physician is insured to perform a surgical procedure.
Physicians are obligated to provide information that is material to a reasonable patient’s ability to make an informed decision about whether to proceed with a course of treatment or procedure. Matthies v. Mastromonaco, 160 N.J. 26, 36,
A patient has a right to know whether a physician performing a procedure is in a financially responsible position in the event that the patient suffers injuries due to medical malpractice. A reasonable patient would consider a physician’s lack of insurance a material factor in making a decision whether to have spinal surgery. That is so because an uninsured physician provides no financial safety net for a patient who is harmed by the physician. Lack of insurance also may suggest that the carrier considered the physician incompetent to perform the procedure.
If the physician does not tell the patient that he is not lawfully permitted to perform the uninsured medical procedure, then the patient should be able to file a cause of action for lack of informed consent, provided he would not have undergone the procedure had he been properly informed and he can prove damages.
II.
The goals of tort law are to deter persons from engaging in unreasonable conduct and to compensate victims for the damage done to them by tortfeasors. The application of the common law to this claim of lack of informed consent would have been an unremarkable extension of our jurisprudence. It is remarkable that a patient has no cause of action against a physician who performs a surgical procedure under the false pretense that he is insured.
For those reasons, I respectfully dissent in part and concur in part.
For reversal in part/affirmance in part/remandment — Justices LaVECCHIA, PATTERSON, FERNANDEZ-VINA, SOLOMON and Judge CUFF (temporarily assigned) — 5.
For concurrence in part/dissent in part — Chief Justice RABNER and Justice ALBIN — 2.