Health Facilities May Be Insuring Doctors without Knowing It

A September 29 ruling by the New Jersey Supreme Court effectively makes a health facility liable for the professional negligence of a medical staff member who doesn’t have malpractice insurance or who has insurance that doesn’t cover the acts in question.

Dr. Kaul performed a spinal fusion on Jim Jarrell at the Market St. Surgical Center.  It went badly—so badly that a jury awarded Jim and his wife three-quarters of a million dollars.  New Jersey law requires physicians to maintain malpractice coverage of at least $1 million per occurrence.  Dr. Kaul had malpractice insurance, but the policy specifically excluded spinal surgery.

The court held that Jim and his wife have a “negligent hiring” claim against the surgery center for giving credentials to a doctor who wasn’t in compliance with the statutory malpractice insurance requirement.  Interestingly, the court ruled that they don’t have a claim against Dr. Kaul for failing to meet the requirement (although they do have a claim for the underlying malpractice).

The lesson is that a facility that credentials a physician lacking appropriate insurance coverage may find itself liable for the shortfall when the physician can’t fund the amount awarded to a patient.

The case is Jarrell v. Kaul, 2015 BL 315262, N.J. No. A-42-13 (N.J. 2015).

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