Dr Zarko Kamenica, Medicolegal Consultant at Medical Protection, takes a look at a recent case and what it means for vicarious liability.
The Supreme Court’s judgment in Ryan vs Health and Disability Commissioner (HDC) has confirmed the HDC’s authority to find a health employer – a GP medical practice in this case – liable for the breach of the Code of Patient’s Rights (the Code) by a GP partner in the same practice. This is otherwise referred to as ‘vicarious liability’, and the decision has understandably attracted a lot of interest and created a good deal of concern within the New Zealand health community.
GPs Dr Ryan and Dr Sparks practised separately from the Moore Street Medical Centre (MSMC). While they owned the property jointly and employed admin and nursing staff, they ran their practices quite separately from an accounting and governance perspective.
While Dr Ryan was on leave, Dr Sparks mistakenly prescribed an antibiotic to Dr Ryan’s patient, which the patient was allergic to. The allergy was documented in the patient’s clinical notes. The patient, who suffered an allergic reaction as a result, complained to the HDC, who unsurprisingly found that Dr Sparks had breached the Code. However, the HDC also found that MSMC, and therefore Dr Ryan, was liable for Dr Spark's breaches. This was found to be the case, as confirmed by the HDC’s medical expert, irrespective of MSMC having taken all necessary steps by having all relevant policies and protocols in place to prevent the omission that led to the breach.
Under section 72 of the HDC Act 1994, an ’employing authority‘ can be liable for the acts or omissions of its employees and agents (which includes contractors), in addition to the employees and agents themselves being individually liable. There is a distinction, however, between employees and agents. Section 72(5) provides the authority with a defence if it can demonstrate that it took reasonably practicable steps to prevent the employee from doing, or omitting to do, the act or omission that led to the breach.
This defence is not available for acts or omissions of agents of the employing authority. Instead, Section 72(3), dealing with agent, contains the following proviso “…unless it (the act or omission) was done or omitted without that employing authority’s express or implied consent”.
Consequently, when dealing with an agent’s conduct, the only defence available to the employing authority is if the act or omission occurred without the employing authority's express or implied authority.
The HDC found that Dr Sparks was acting as an agent of MSMC and that therefore MSMC, and Dr Ryan by default, were vicariously liable and breached the Code for his omission. A significant series of litigation followed to challenge the HDC’s decision in the High Court, Court of Appeal, and finally the Supreme Court.
The challenge was based on two possible interpretations of section 72 of the HDC Act. The HDC’s position was that the employing authority can be liable for any acts or omissions of an agent that occur in the scope of their express or implied authority. The alternative interpretation, put forward to counter the HDC’s interpretation, and relying on the proviso, is that the employing authority can be found liable only if it authorises the particular act or omission in issue. It was argued that if the former interpretation was accepted, it would deter practitioners from operating in a collective, as it would not recognise the inability of practitioners to effectively monitor each other's practices. That would adversely affect provision of healthcare in NZ.
The challenge was unfortunately unsuccessful. The Supreme Court found that Dr Sparks was an agent of MSMC and Dr Ryan, even though there was no partnership agreement, written or otherwise. The fact that they maintained separate patient registers and separate bank accounts did not alter this finding. However, they operated from the same premises, under the name of MSMC, employed staff, and owned the equipment and practice management systems, and all policies and protocols applied to all MSMC staff. Thus, by 4-1 majority decision, the Supreme Court accepted the first interpretation and dismissed the challenge confirming the HDC’s authority in this context. As the dissenting judge pointed out, this effectively makes the proviso in Section 72(3) of no value. As a result, the defence available to an employer, if its employee is negligent, is not available to a principal if its agent is negligent.
This decision means that in practice all healthcare providers are potentially liable under the HDC Act for the acts or omissions of 'agents’ of the provider, whether or not they could have done anything to prevent that act or omission. Or potentially, even if they took all practical steps to avoid it happening.
Without going into commercial implications, what are and what are not the possible medicolegal implications for health employers and practitioners?
In New Zealand, a plaintiff cannot bring a civil proceeding seeking compensatory damages, where the claim for damages arises directly or indirectly out of personal injury for which there is cover under the Accident Compensation Act. This applies to treatment injury suffered in the course of receiving healthcare. The Supreme Court decision does not remove or bypass this bar, which still applies, as the decision is only relevant to the Health and Disability Commissioner’s role in resolving complaints. It is worth nothing that the possibility to bring an action for exemplary damages continues to apply, but the bar for compensatory damages is set very high.
The decision also does not mean that the partners at the provider are liable to the disciplinary proceedings in the Health Practitioners Disciplinary Tribunal.
However, when the HDC has found the provider vicariously liable, particulars of the case in question will be published on the HDC’s website and the name of the provider can potentially be available to the public. This can certainly affect the provider’s reputation and thus their business. All the courts accepted that there were adverse consequences for a healthcare provider in the event that they are held to be in breach of the Code.
This decision also leaves an option to patients to initiate proceedings for compensation against the provider in the Human Rights Review Tribunal (HRRT), where the maximum award for compensatory damages is NZ$350,000.
How often the HDC will use their authority and how often patients will initiate proceedings for compensatory damages against providers before the HRRT as a result remains to be seen.
This case demonstrates that the ways in which GPs and practices can be held accountable can change. In order to provide peace of mind to practices, Medical Protection now offers a practice package of membership, which ensures support if the employees or agents of the practice are subject to a complaint.