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Time for a Checkup: Admitting Facilities Must Ensure Physicians Carry the Proper Medical Malpractice Insurance

By on December 8, 2015 in Uncategorized with 0 Comments

On September 29, 2015, the New Jersey Supreme Court, in Jarrell v. Kaul,[1] clarified what is actionable under the statutory medical malpractice insurance mandate imposed on physicians practicing medicine in the State of New Jersey.

Notably, under the Court’s decision in Jarrell, healthcare facilities which grant privileges to physicians, both employees and contractors, have a continuous responsibility to ensure that the physicians comply with licensure requirements, including the maintenance of proper malpractice insurance. However, the Court ruled that patients have neither a private cause of action against a physician who violates the malpractice insurance mandate nor the ability to bring an informed consent claim against the physician premised upon said physician’s uninsured status.

According to the Court’s opinion, Dr. Richard Kaul performed a spinal fusion procedure on his patient, James Jarrell, at the Market Street Surgical Center, however, his insurance policy expressly excluded spinal surgical procedures from coverage.  Following the procedure, Jarrell experienced a new pain in his left side and “drop foot.” Jarrell underwent a revision surgery, performed by another doctor, to correct Dr. Kaul’s work.  Jarrell thereafter asserted several claims against Dr. Kaul, among them: (1) a direct negligence claim against Dr. Kaul based on his uninsured status; (2) a claim seeking damages for lack of informed consent; and (3) a negligent hiring claim against Market Street Surgical Center, the facility granting privileges to Dr. Kaul.

Physicians in New Jersey, pursuant to N.J.S.A. 45:9-19.17, must maintain medical malpractice liability insurance in the sum of $1,000,000.00 per occurrence and $3,000,000.00 per policy year or provide a letter of credit for at least $500,000.00. Failure to maintain these minimum standards is punishable via civil penalties and license revocation or suspension. The public policy consideration behind these provisions is to provide some level of recourse in the event of medical malpractice.

While neither the statute nor the regulations expressly permit a patient to bring claims against a treating physician who does not comply with the insurance mandate, the Supreme Court in Jarrell clarified that the statutory and regulatory scheme does not implicitly provide for such a private cause of action against a noncompliant physician. The Court reasoned that the Board of Medical Examiners’ oversight and enforcement was the legislature’s chosen mechanism to enforce the law’s compliance — an aggrieved patient bringing a lawsuit is not the vehicle by which the legislature wished to enforce compliance.

The Court further held that Dr. Kaul’s lack of malpractice insurance did not implicate the doctrine of informed consent. The Court was unwilling to expand informed consent jurisprudence to the financial consequences of an uninsured physician’s negligence.  The Court so ruled because a physician’s medical malpractice insurance or lack thereof has little bearing on the nature of the attendant risks of the patient’s treatment. A patient’s inability to recover a judgment is not the injury contemplated by the informed consent doctrine.

However, and importantly, Jarrell’s claim against the Market Street Surgical Center for negligent hiring survived. The Court held that when a principal, in this case the surgical center, retains an independent contractor, here the physician, for a task that requires certain permits and licenses, the principal has a continuing duty to ensure that the contractor maintains the requisite licensure. Because medical malpractice insurance is an essential condition for a license to practice medicine in New Jersey, the surgical center had a continuous duty to ensure that physicians with privileges to practice at the facility carry the required malpractice insurance.

In the wake of the Court’s decision in Jarrell, healthcare facilities granting privileges to physicians must be vigilant and take extra care in ensuring that physicians at their facility, whether employees or contractors, have the minimum required professional liability insurance as well as any other required licenses.

[1] Jarrell v. Kaul, 2015 N.J. LEXIS 963 (Sept. 29, 2015)


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