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Defense Digest

The Continuing Evolution of Derivative Claims

Defense Digest, Vol. 28, No. 12, December 2022

December 1, 2022

by Maura Waters Brady

Key Points:

  • Through derivative claims, plaintiffs often seek to find additional sources of funds to cover judgments or settlements in cases valued in excess of a doctor’s usual $1 million liability policy.
  • These attempts need to be evaluated, as they may place a health care provider’s personal assets at risk.

It is obvious to all of us who practice in the health care defense litigation field that both judgments and settlements have increased in value. In contrast, the availability of insurance coverage to cover those claims has actually decreased. While most doctors continue to maintain the minimum required $1–$3 million policy for their own liability, many of their practices have switched their policies to shared limit policies, which do not provide the “excess coverage” that has been traditionally available in a separate group policy.

For plaintiffs, the obvious question is where to find additional sources of funds to cover judgments or settlements in cases valued in excess of that usual $1 million policy. If plaintiffs are thinking about this, we should be thinking about it, too. In the last few years, we have seen plaintiffs file a variety of motions seeking to expand liability, including attacking the charitable immunity status of hospitals based upon their profits and seeking to obtain information about the personal assets of individual physicians who own thriving practices. These lines of attack have only resulted in minimal success and will need legislative input to support such approaches.

However, working within the confines of the current case law, we are now seeing new approaches to hold parties in cases on derivative claims for the negligence of another physician. In recent trial court opinions, we have seen corporate defendants brought into cases as direct defendants where a franchisee has been named as a defendant and, in another, a surgeon held in on a derivative claim in a case against a defendant anesthesiologist. In both of these cases, the rulings arguably put physicians’ personal assets at risk.

Estate of Cordero v. Christ Hospital, 958 A.2d 101 (N.J. Super. App. Div. 2008) confirmed that when a hospital provides a doctor to a patient and the circumstances are such that a reasonable patient would believe that the doctor’s care is rendered on behalf of the hospital, an agency relationship is presumed unless rebutted. Accordingly, it has become common practice to make patients aware that the physicians were not employees of the hospital but of a different practice group.

In a case where the treating medical care provider worked in a franchise location, the doctor was questioned during his deposition as to what information was provided to the patient to make it clear that he was not an employee of the corporate franchisor. The doctor denied having specifically advised the patient that he was not an employee of the corporation; consequently, the corporation was then joined as a defendant on a theory of “apparent authority.” However, pursuant to the franchise agreement, the corporate defendant had a right to seek indemnification from the provider. In the event that a judgement is entered against the defendant/provider for an amount in excess of his policy limits, he will be personally liable to the corporation for the excess amount.

In another case, the court denied a motion for summary judgment brought by the defendant surgeon and the surgeon’s practice, which owns a surgical center, in a case brought against the codefendant anesthesiologist on a claim of “apparent authority.” The court found the defense argument that Cordero did apply, as it the practice group was not a hospital, was “a distinction with no relevance.” The practice group was in the business of offering medical care that required the services of an anesthesiologist, and the difference, therefore, was merely “one of semantics.” The court noted that the anesthesiologist was identified as a member of a different practice and, arguably, was an independent contractor.

Nonetheless, the extent to which the practice group represented that they “would provide the anesthesiologist” and that “the anesthesiologist was part of the surgical team” was an indicator of an apparent agency relationship upon which a reasonable fact finder could find the practice group “vicariously liable” for the actions of the anesthesiologist. That fact, therefore, remained in dispute, and the jury was required to decide whether the defendants could overcome the presumption of agency.

The court made it clear it was not holding the doctor in the case under a theory of “Captain of the Ship,” which is not a recognized doctrine in New Jersey, but there remained an open question as to whether the doctor could be vicariously liable for the actions of other individuals involved in the surgical procedure. Of greater concern is the fact that the surgeon maintains a policy of insurance relative to his medical care of a patient. The practice group maintains a policy of insurance that “shares” policy limits with the doctor’s policy but denies coverage for any other physician’s medical care. Should the jury find that a reasonable patient would have concluded the practice group was vicariously liable for the care of the anesthesiologist, the group could be held responsible for any judgment in excess of the anesthesiologist’s policy. However, since there is no coverage for another physician’s care, the plaintiff could argue the physician who owns the group is personally liable for the excess judgment.

On the defense side, we should be facing these issues head-on. We know that in cases where facts are very specific, appeal of issues such as these can often lead to unfavorable precedent. The risk of personal liability could require recommending settlement of an otherwise defensible case. Medical care providers who own or have relationships with other corporations, such as surgical centers, urgent care centers or corporations with multiple sites and franchises, should be made aware of these risks. We should anticipate arguments like these and evaluate the practices of both the provider and the corporation to determine whether an argument for vicarious liability would be successful and potentially expose the doctor to personal liability. Even if it is not an issue in the case in front of us, it may be an issue in a future matter. Evaluating and addressing these issues now may go a long way to preventing an unfavorable opinion in the future when, inevitably, this issue is considered on appeal.

Firm Highlights

Thought Leadership

U.S. Supreme Court Decides Key Issue Regarding Interstate Freight Broker Liability

Freight brokers are intermediaries.  They connect shippers of goods with trucking companies that transport those goods.  Freight brokers match a load of freight with a trucking company and oversee the logistics of the transportation. For a number of years there has been a division among the Federal Circuits regarding the potential liability of freight brokers when the trucking companies that they retain for interstate loads are involved in accidents.  At the center of this division was the Federal Aviation Administration Authorization Act of 1994 (FAAAA).  Some Federal Circuit Courts have held that state law negligent hiring claims against freight brokers were preempted by the FAAAA .  Other Federal Circuits Courts have held that even if preemption applied, the “safety exception” in the FAAAA saved state law negligent hiring claims from federal preemption.  On May 14, 2026, the U.S. Supreme Court addressed the conflict in Montgomery v. Caribe Transport II, LLC, et al, No24-1238. In that case freight broker C.H. Robinson selected Caribe Transport to haul an interstate load. The commercial truck driver employed by Caribe Transport allegedly caused an accident and the plaintiff, Montgomery, was seriously injured. Montgomery brought an action against the driver, Caribe Transport and C.H. Robinson. The allegation against C.H. Robinson was that it negligently retained Caribe Transport when it knew, or should have known, that it was an unsafe company. The Seventh Circuit Court of Appeals held that Montgomery’s claims against C.H. Robinson were preempted by the FAAAA. The plaintiff appealed to the U.S. Supreme Court.  The U.S. Supreme Court’s decision focused primarily on the safety exception in the FAAAA.  That provision provides that the FAAAA preemption “…shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” C.H. Robinson argued, as freight brokers historically have, that their function was not “with respect to motor vehicles” because they do not own trucks or employ drivers. They are merely intermediaries, connecting entities who need freight moved with entities who can do that job. Therefore, C.H. Robinson argued that preemption applied, not the safety exception. The U.S. Supreme Court did not accept that argument. The Court focused on the meaning of the phrase “with respect to” in the safety exception. The Court held that it means “referring to”, “concerning” or “regarding”. Therefore, writing for a unanimous Court, Justice Barrett concluded that “[r]equiring C.H. Robinson to exercise ordinary care in selecting a carrier therefore “concerns” motor vehicles—most obviously, the trucks that will transport the goods. So, Montgomery’s negligent-hiring claim falls within the FAAAA’s safety exception, which saves it from preemption.” Justice Kavanaugh, in his concurring opinion, noted the effect this ruling may have on freight brokers and their insurers throughout the country: Importantly, the Court's decision today should not be read to mean that brokers will routinely be subject to state tort liability in the wake of truck accidents. As even plaintiff's counsel stressed, brokers should be able to successfully defend against state tort suits if the brokers have acted reasonably and arranged transportation with reputable trucking companies. Tr. of Oral Arg. 27-29. In plaintiff's counsel's words, the brokers "just have to hire carriers that actually have a reasonable policy," and "the broker is not going to have a problem if it's asking the hard questions of the carrier." Id., at 42, 45. In addition, the proximate-cause requirement in typical state tort law should help protect brokers from excessive liability. Id., at 25. That said, the brokers rightly caution against naivete. In the real world, as the brokers forcefully respond, state tort law can be unpredictable, and the costs to brokers of litigation and insurance may be significant even when brokers prevail in lawsuits. Moreover, the costs of litigation and insurance, as well as the costs of brokers' conducting more substantial inquiries into trucking companies, will cascade through the economy and be paid in part by American consumers in the form of higher prices. The concerns expressed by the brokers are legitimate and weighty. The key point here is that freight brokers can no longer claim they are protected from negligent retention claims by the FAAAA (in cases involving interstate transportation). The challenge will be to determine what is considered ”reasonable efforts” used by brokers when retaining transportation companies. 

Result

No-Cause Jury Verdict Secured in Wrongful Death Trial

We successfully obtained a no-cause jury verdict in a 13-day wrongful death trial. The decedent, a 59-year-old man, was admitted to the emergency room on February 15, 2019, with complaints of abdominal pain, decreased appetite, and constipation, despite the use of laxatives. The patient did not complain of any nausea, vomiting, or diarrhea. He had a significant medical history including diabetes, hypertension, prior coronary artery stenting, morbid obesity (with past gastric bypass surgery), longstanding ventral hernia, and back pain. A CT scan revealed multiple hernias and a potential closed-loop bowel obstruction, leading to a surgery consultation. Our client, an emergency general surgeon, interpreted that the patient did not have a closed loop or any significant obstruction and recommended non-surgical management. The patient was approved to have clear liquids, and had a vomiting incident shortly after, but our client was not notified. The patient was returned to NPO status, and after improving overnight, he was returned to “clears” and additional medical and renal consults were ordered. Our client did not receive any communications from the residents/nurses of any changes in the patient’s condition. On February 18, 2019, two rapid responses were called due to increased heart rate and vomiting. It is believed that the vomiting resulted in aspiration, causing sepsis, ultimately leading to the patient’s death. During the trial, the plaintiff’s sole medical expert highlighted imaging on the wrong hernia, which called into question all of his opinions in the case. We made key objections related to the expert testimony, limiting what the allegations were, and preventing new allegations from being made. After approximately two and a half hours of deliberating, the jury returned a no-cause verdict. 

Thought Leadership

PA Middle District Dismisses Claims Against School District and its Superintendent, Principal, Special Education Director, and Classroom Teacher

A five-year-old special education student was enrolled in the Wyoming Valley West School District and attended the State Street Elementary School during the 2024-2025 school year. The student refused to clean up classroom toys at dismissal. When his teacher allegedly grabbed him by the wrist to walk him back to his seat, the student dropped to the floor and began crying. The teacher then allegedly grabbed the student by the ankle and dragged him across the floor. Following an investigation, criminal charges were not advanced by the county DA, and the school permitted the teacher to return to the classroom. The student’s parents sued, lodging thirteen legal counts under both state and federal law, which sought monetary damages from the teacher, the school district, the superintendent, the principal, and the director of special education. The plaintiff’s 42 USC 1983 claims were dismissed as to the school district for failure to allege a policy or custom violation, and the failure to alleged deliberate indifference in the failure-to-train context. As to the superintendent, building principal, and special education director, the Section 1983 claims were also dismissed for failure to allege personal involvement on the part of the individuals. Regarding an equal protection claim asserted against all defendants, the motion to dismiss was also granted for a failure to advance a plausible equal protection claim, holding that “plaintiffs' single-act allegations do not include a factual basis to even infer that the act was motivated by discriminatory animus rather than some other non-discriminatory impulse.” The court further dismissed the plaintiff’s negligence-based claims including negligence against the teacher and district administrators, NIED, and vicarious liability under the Political Subdivision Tort Claims Act (PSTCA). The federal claims under the IDEA, Section 504, and the ADA were also dismissed in various respects. The IDEA claim was dismissed against all defendants with prejudice for failure to exhaust administrative remedies. The Section 504 claims against the individual defendants were also dismissed with prejudice, as districts, not individuals, are the recipients of federal funds under Section 504. However, the Section 504 and ADA claims were dismissed without prejudice as to defendant Wyoming Valley West, and the plaintiff was permitted leave to amend.