Hepler Broom, LLC

The Antiquity of “Apparent Agency” in the Modern Health Care System

June 13, 2019

The question of what constitutes “apparent agency” in the context of alleged medical malpractice continues to be analyzed by the Illinois appellate courts. The issue was first addressed by the Illinois Supreme Court in the case of Gilbert v. Sycamore Municipal Hospital. 156 Ill.2d 511 (1993). In Gilbert, the Court set forth a multi-factor test to determine whether a hospital could be held vicariously liable for the alleged acts of its independent contractor physicians. Id. at 525. Specifically, in order to hold a hospital liable under the theory of “apparent agency,” a plaintiff must show that:

“(1) The hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.”

Id. Of particular importance to the Court, however, was the financial benefit that the hospital derived from its independent contractor physicians and, in particular, the marketing of those physicians. As the Court noted, hospitals have become “big business” and market themselves as providers of quality health care in such a way that it induces patients to seek services from which the hospitals benefit. Id. at 520-523. In the Court’s view, these “big business” practices result in patients relying upon the reputation of the hospital itself when seeking treatment from its physicians. Id. The patients therefore would not necessarily know or have reason to know that the hospital’s physicians are independent contractors and not employees. Id. The Gilbert Court ultimately based its determination on this premise in holding that the hospital at issue could be held vicariously liable under the theory of “apparent agency” for the conduct of its independent contractor physicians. Id. at 526.

The Illinois Supreme Court later limited its holding in Gilbert in the case of Yarbrough v. Northwestern Memorial Hospital. 104 N.E.3d 445 (2017). In Yarbrough, the Court held that a hospital could not be vicariously liable under the theory of “apparent agency” for the acts of the employees of an unrelated, independently owned clinic. Id. at 454. In contrast to Gilbert, the Yarbrough Court did not find the kind of “big business” marketing practices and accompanying financial gain by the hospital at issue that would obscure the fact that the medical clinic where the alleged negligent acts occurred was a separate entity. Id. at 453-454. Further, the hospital’s name and branding was not used by the clinic. Id. Thus, the plaintiff had reason to know that the clinic was independent from the hospital, and the hospital therefore could not be held liable under an “apparent agency” theory. Id.

Most recently, in Harris v. Symphony Countryside, LLC, the First District Court of Appeals considered whether the former owners of a nursing home could be held vicariously liable under the theory of “apparent agency” for the acts of the new owner’s employees. 2019 IL App. 180160 (1st Dist. 2019). In Harris, two entities known as Countryside Care Centre, Inc. and Countryside Care, LLC (the “Countryside defendants”) sold their interest in a nursing home known as “Countryside Care Centre” to Symphony Countryside, LLC (“Symphony”). Id. at *1-3. Symphony continued to use “Countryside Care Centre” as the name of the nursing home after purchasing it from the Countryside defendants. Id. Several years after the sale of Countryside Care Centre to Symphony, a resident died due to the alleged negligence of the employees at the nursing home. Id. The plaintiff sued the current owner of the nursing home, Symphony, as well as the Countryside defendants on the theory that Symphony was the apparent agent of the Countryside defendants. Id. The First District found that, although the nursing home retained the name “Countryside Care Centre,” the Countryside defendants had no involvement with the nursing home’s operations at the time of the decedent’s residency. Id. at *5. The Countryside defendants therefore derived no financial benefit from the nursing home. Id. Thus, according to the Court, the case did not fall under the same “big business” premise that lead to the Supreme Court’s decision in Gilbert. Id. Further, the nursing home’s website also made it clear that the home was a member of the Symphony medical network. Id. Accordingly, the plaintiff knew or should have known that Symphony, rather than the Countryside defendants, owned and operated the nursing home. Id. at *5-6. In sum, the Harris Court found the evidence to be most analogous to Yarbrough and found that the Countryside defendants could not be held vicariously liable for the conduct of Symphony. Id.

The Gilbert, Yarbrough and Harris decisions seem to indicate that where a healthcare provider is perceived as “big business,” there is a greater likelihood that a court may find the existence of “apparent agency.” To the extent that courts rely on such a rationale, it is an impractical oversimplification. Courts should instead focus primarily on what the plaintiff knew or should have known based upon the information provided by the healthcare provider. Otherwise, in a world where hospital systems continue to merge into various affiliated entities, the law on “apparent agency” will continue to lag far behind the reality of modern healthcare.