Jai Medical Systems Managed Care Organization, Inc. v. Bradford

WRIGHT, J. This appeal arises from a jury verdict in the Circuit Court for Baltimore City in favor of appellee, Wilhelmina Bradford, finding appellant, JAI Medical Systems Managed Care Organization, Inc. (“JAI”), vicariously liable for the negligent medical care of a provider in its network. Prior to trial, JAI filed a motion for summary judgment on the grounds that Dr. Steven W. Bennett was not an employee or agent of JAI, which was denied. At the close of Bradford’s case, JAI moved for judgment as a matter of law based on insufficient evidence of agency, and the trial court deferred ruling on the motion. ⁷¹ JAI renewed its motion at the close of all evidence and the trial court denied the motion. The jury found in favor of Bradford and awarded damages of $3,064,000.

JAI filed post-trial motions for Judgment Notwithstanding the Verdict (“JNOV”), a new trial, and remittitur under Md.Code (1973, 2006 Repl. Vol.) § 3-2A-09(b)(l)(ii) of the Courts and Judicial Proceedings Article. The trial court denied the motions for JNOV and a new trial and granted the motion for remittitur. Judgment was entered against JAI for $714,000, and JAI filed this timely appeal.

Questions Presented JAI asks us to determine: 1 1) Whether the trial court erred as a matter of law when it determined that the doctrine of vicarious liability was so broad as to permit a managed care organization to be held liable for the actions of a physician in its provider network under a theory of apparent agency. 2) Whether the trial court erred when it determined that the Plaintiff had presented sufficient evidence that the relationship between [JAI] and Dr. Bennett was other than that of a managed care organization and a network provider member and allowed the jury to determine that [JAI] was vicariously liable for the actions of Dr. Bennett as its apparent agent. Finding that the trial court erred in submitting the issue of apparent authority to the jury and denying JAI’s motions for judgment, we reverse the circuit court’s judgment. Facts and Procedural History JAI is a managed care organization (“MCO”) formed in 1996 to provide health insurance to Medicaid patients. Medicaid recipients enroll in a MCO through the Maryland Department ⁷² of Health and Mental Hygiene (“DHMH”).

After an individual enrolls through DHMH, the State notifies the MCO selected by the individual of the new enrollment. The MCO, in this case JAI, then sends each new enrolled member a Member Handbook (“Handbook”) containing information about the health insurance benefits provided by JAI, how the member can obtain the covered health care services, how the services are paid, and the grievance procedure. Each member also receives a Provider Directory (“Directory”), which lists the approximately 4,000 providers in the JAI network, including hospitals and pharmacies. Each member selects a primary care physician (“PCP”) from the list of providers in JAI’s network to provide the majority of their care.

The PCP refers the member to a specialist, when necessary, using a referral form. A member can self-refer to any health care provider but, generally, JAI will only pay for the services if the member receives a referral from their PCP and the chosen provider is within JAI’s network of providers. JAI enters into contracts with health care providers, hospitals, and specialists to become part of the JAI network. Each health care provider signs a standard form contract and can belong to other networks concurrently.

One of JAI’s in-network health care providers, Hollis Seunarine, M.D., P.A., (“Dr. Seunarine”) 2 owns and operates several medical clinics, including the Eutaw Medical Center. The reception area of the Eutaw Medical Center displays a sign stating that the provider accepts “several insurances ... Jai Medical Systems Managed Care Organizaion, Maryland Primary Care, Aetna, Blue Cross/Blue Shield, CareFirst Blue ⁷³ Cross Blue Shield, the Department of Social Services or DSS, Medicare, Medicaid.” Dr. Seunarine employs Bradford’s PCP, Dr. Peter Chiang, 3 at the Eutaw Medical Center. Dr. Bennett was not employed by Dr. Seunarine, but was a member of the JAI network of providers.

Dr. Bennett signed the standard contract that every JAI network provider signs, and while JAI reviewed and approved Dr. Bennett’s credentials before he joined the network, JAI did not provide Dr. Bennett with training or direct his activities or medical decisions. Dr. Bennett was listed in the Directory as a specialist (podiatrist) with an office address on Pennsylvania Avenue. Bradford, a 57-year-old widow and mother of two who had an eighth-grade education, enrolled in JAI in 1998. At the time Bradford enrolled in JAI, she was suffering from depression, hypertension, HIV, and alcohol abuse. 4 Bradford initially received medical care at a walk-in clinic on Park Heights Avenue named “Jai Medical Center” but ultimately changed to the Eutaw Medical Center.

The Eutaw Medical Center was listed on Bradford’s member card as her PCP. Bradford testified that when she enrolled in JAI, she was told “that I cannot go to no clinic, no hospital, unless they accepted my card.... I have to always have a referral for some, for somebody to go to [a] specialist with a referral that works with Jai.” In July 2008, Bradford visited Dr. Chiang for treatment of pain in her right foot and a large bunion. Bradford sought a referral from Dr. Chiang for a specialist, and she specifically requested a referral for Dr. Bennett because she had spoken to another patient in the waiting area who recommended Dr. Bennett.

On two subsequent occasions, Bradford specifically ⁷⁴ requested referrals to Dr. Bennett. Bradford testified that neither Dr. Chiang, nor Dr. Carr, another employee of Dr. Seunarine’s at the Eutaw Medical Center she occasionally saw for primary care, recommended Dr. Bennett or told her anything other than “he take [sic] Jai Medical Assistance.” Bradford testified that she had observed Dr. Bennett in a white lab coat at the Eutaw Medical Center one time, one to two years before she became his patient. 5 After receiving the referral to Dr. Bennett, Bradford had her first office visit with Dr. Bennett in his Pennsylvania Avenue office on July 17, 2008. On July 30, 2008, Dr. Bennett performed surgery at Bon Secours Hospital on Bradford’s right foot to remove her bunion. On August 8, 2008, Bradford went to Dr. Bennett’s Pennsylvania Avenue office for her first follow-up visit, and Dr. Bennett performed a cursory examination that did not involve removing all of Bradford’s bandages.

On August 12, 2008, Dr. Bennett’s nurse discovered that Bradford’s toes were gangrenous and sent her to Bon Secours Hospital for treatment. On August 15, 2008, Bradford was transferred to Mercy Hospital, where her toes and part of her right foot were amputated and a bypass was performed on her right leg leaving her lower limb disfigured. It was undisputed that Dr. Bennett was negligent. 6 On May 8, 2009, Bradford filed a complaint in the circuit court against Dr. Bennett, Bon Secours Hospital Baltimore, Inc., and Bon Secours Baltimore Health Corporation for negligence and lack of informed consent. Bradford amended her complaint, adding JAI, Jai Medical Systems, Inc., 7 and Hollis ⁷⁵ Seunarine, M.D., P.A., as defendants.

The claim asserted against the three new defendants was that they were “responsible for the acts and/or omissions of Dr. Bennett” as he was their agent, servant, or employee. JAI filed a motion for summary judgment prior to trial asserting that it was an insurance company that did not employ any health care providers. The motion was denied because, according to the trial court: The concern the Court has is that JAI’s fingerprint seems to be all over this case. All over the medical treatment of Ms. Bradford.

The fact that the initial doctor was in a JAI building and Dr. Cheng [sic] and, Dr. Cheng [sic] and another JAI physician referred her to Dr. Bennett, who is also connected with the system gives this Court reason to pause as far as summary judgment is concerned. Based on these concerns, the motion for summary judgment is denied. A three-day trial began on February 22, 2011. JAI moved for judgment at the close of Bradford’s case.

The trial court reserved ruling on the motion in order to review the cases on apparent agency cited by counsel, and the trial proceeded with the defense. At the close of all evidence, JAI renewed its motion for judgment which was denied. The case was submitted to the jury to determine damages and the issue of whether Dr. Bennett was the apparent agent of either JAI or Dr. Seunarine. The jury found that Dr. Bennett was not the apparent agent of Dr. Seunarine but was the apparent agent of JAI.

JAI then filed timely motions for JNOV and a new trial. The court denied both motions without a hearing or written opinion. Additional facts will be provided as necessary, in the relevant sections, below. ⁷⁶ Discussion I. Standard of Review The standard of review of a trial court’s denial of a motion for JNOV is the same as for a denial of a motion for judgment at the close of the evidence, that is, “whether on the evidence presented a reasonable fact-finder could find the elements of the cause of action by a preponderance of the evidence.” Univ. of Md. Med. Sys.

Corp. v. Gholston, 203 Md.App. 321, 329 , 37 A.3d 1074 (2012) (citing Wash. Metro. Area Transit Autho. v. Djan, 187 Md.App. 487, 491-92 , 979 A.2d 194 (2009)). “If there is any competent evidence, however slight, supporting the plaintiffs right to recover, the motion must be denied” and in a jury trial, the case should proceed to the jury for decision. Johns Hopkins Univ. v. Ritter, 114 Md.App. 77, 92 , 689 A.2d 91 (1996); see Gholston, 203 Md.App. at 329 , 37 A.3d 1074 .

The evidence must be legally sufficient, when viewed in a light most favorable to the non-moving party, to withstand a motion for judgment. Ritter, 114 Md.App. at 92 , 689 A.2d 91 . However, if the evidence “does not rise above speculation, hypothesis, and conjecture, and does not lead to the jury’s conclusion with reasonable certainty, then the denial of the JNOV was error.” Jacobs v. Flynn, 131 Md.App. 342, 353 , 749 A.2d 174 (2000) (citation omitted). We review the sufficiency of the evidence de novo.

Gholston, 203 Md.App. at 329 , 37 A.3d 1074 (citing Polk v. State, 378 Md. 1, 7-8 , 835 A.2d 575 (2003)).

II

Apparent Agency Maryland has adopted the Restatement (Second) of Agency, § 267 (1958) (“Restatement”) in determining the existence of an apparent agency relationship, which states: One who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care of skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care of skill of the one appearing to be a servant or other agent as if he were such. ⁷⁷ Jacobs, 131 Md.App. at 384-85 , 749 A.2d 174 . The Court of Appeals explained in Chevron, U.S.A., Inc. v. Lesch, 319 Md. 25, 35 , 570 A.2d 840 (1990): The first [test] is objective: could a reasonable man believe that the company’s manifestations of apparent authority indicate it is holding the operator out as its agent? The second is subjective: did the facts known by the plaintiff in a particular case reasonably justify his assumption that the operator was the company’s agent? (Citation omitted).

The Chevron Court concluded that in order for liability to attach under the doctrine of apparent agency, a party must show that 1) they were misled by the appearances of another into believing that the tortfeasor was the other’s agent; 2) that belief was objectively reasonable under all the circumstances; and 3) they relied on the existence of that relationship in making their decision to trust the tortfeasor. Id. at 34-35 , 570 A.2d 840 . Regarding the third element, the Court stated, “[t]he mere fact that acts are done by one whom the injured party believes to be the defendant’s servant is not sufficient to cause the apparent master to be liable. There must be such reliance upon the manifestation as exposes the plaintiff to the negligent conduct.” Id. at 35 , 570 A.2d 840 (citing Restatement (Second) of Agency § 267 cmt. a (1958)).

A. Representations of Agency by JAI JAI argues that it was not a health care provider, but instead was an MCO formed solely to act as an administrator of the State Medical Assistance Program (the “Program”). See Md.Code (1982, 2009 Repl.Vol.) §§ 15-101 et. seq. of the Health-General Article (“HG”). In this capacity, JAI asserts that it is an insurance provider, managing its members’ access to health care providers and facilitating billing. See Code of Maryland Regulations (“COMAR”) 10.09.62 through 10.09.75.

JAI avers that it made no representations about any of the health care providers in its network and that its Handbook, Directory, and membership card were all supplied to Bradford to comply with State regulations, using language provided by ⁷⁸ the State. JAI argues that the only evidence presented by Bradford at trial to support her argument that JAI made manifestations of apparent agency was its compliance with State law. Bradford responds that sufficient evidence was adduced at trial that JAI, “by its words or actions, led Appellee Bradford to believe that Dr. Bennett was an agent.” Bradford contends that the testimony of Jai Seunarine supports her argument that JAI, “Jai Medical Systems,” and the buildings owned by Dr. Seunarine created confusion because of the similarity in names and the sharing of facilities among the various business entities. Bradford argues that the materials provided to JAI members also made representations that the medical providers in the network were agents of JAI.

Bradford bears the burden to show that appearances created by JAI led her to believe that Dr. Bennett was an agent of JAI. See Mercedes-Benz of N.Am., Inc. v. Garten, 94 Md.App. 547, 557 , 618 A.2d 233 (1993). At first blush it may appear that JAI and the facilities owned and operated by Dr. Seunarine are so intertwined in name, ownership, and management as to create some confusion. However, our review of the record reveals that JAI’s materials comport with State requirements for an MCO, and that JAI consistently defined itself to Bradford as an insurance provider.

Medical records demonstrate that Bradford supplied JAI as the name of her insurance carrier to the various hospitals where she was treated, as well as Dr. Bennett’s office,