Article by Alexandra Hambsch, Law Clerk
The following offers a brief overview of the unpublished decision, McLaughlin v. Nahata, 2023 WL 4842015, decided in the Western District of the Supreme Court of Pennsylvania on July 28, 2023.
At issue in this matter was whether the law permits a party that is vicariously liable in tort to seek contribution or indemnification from a party that is also vicariously liable in tort for a common agent. Here, a vicariously liable Hospital was seeking contribution and/or indemnification from a vicariously liable health clinic that employed negligent doctors (the common agents).
In the end, the Court of Common Pleas and the Superior Court both concluded that the Hospital could seek both contribution and indemnification from the clinic. The Supreme Court of Pennsylvania held that if the hospital and the clinic were determined to be vicariously liable for the negligence of the doctors, the law permitted the Hospital to seek contribution from the clinic. However, the court was evenly split on the question of whether the Hospital could also seek indemnification. Therefore, the Superior Court’s holdings on the question of contribution and indemnification were affirmed.
Case Summary – Facts and Procedure
In this case, the Supreme Court of Pennsylvania set out to determine whether a vicariously liable Hospital was permitted to seek contribution and/or indemnity from a clinic that was the direct employer of negligent doctors. The facts and procedure of this case are as follows:
Dr. Jessie Ganjoo, M.D., and Dr. Amit Nahata, M.D. (the Doctors) were both directly employed by Dialysis Clinic, Inc. (DCI). The Doctors also had staff privileges at Washington Hospital (The Hospital). In 2013, Plaintiff Alyssa McLaughlin received treatment from these doctors at the Hospital and sustained severe and permanent neurological injuries. Plaintiff and her husband filed an action against the Hospital, the Doctors, and various other physicians.
Initially, another physician named in the case filed a motion to join DCI as an additional defendant on the grounds that they were the actual employer of the Doctors. Subsequently, the Hospital filed a cross-claim against DCI, seeking contribution and indemnity. This cross-claim was severed from the rest of Plaintiffs’ claims and set to be resolved in a separate trial. The Plaintiffs dismissed all of their claims against other named physicians. Plaintiffs also dismissed all claims against the Hospital, except those claims of ostensible agency for liability arising from conduct of the Doctors. These claims proceeded to trial where Plaintiffs were awarded $15 million in damages. Plaintiffs filed an uncontested post-trial motion for additional delay damages and received a total verdict of $17 million in damages. The Hospital then sought indemnity from the Doctors, and the trial court granted that motion.
Separately, the Hospital’s cross-claim for contribution and indemnity from DCI was scheduled for trial. Both parties filed for summary judgment. The Hospital argued that the Doctors were operating within the course and scope of their employment with DCI when they negligently treated Plaintiff, and as such, the Hospital should not be required to pay all of the liabilities for DCI’s employees. DCI argued that indemnity is a fault-shifting mechanism that does not allow secondarily liable parties to shift the blame to other secondary liable parties. They also argued that they were not joint tortfeasors under the Uniform Contribution Among Tort-Feasors Act (UCATA), and so they were not subject to contribution. The trial court denied both of these motions. The trial court amended the original order denying summary judgment to allow DCI to seek interlocutory appeal.
The Superior Court affirmed the trial court’s denial of summary judgment and agreed that the Hospital could seek to prove its right to contribution and indemnification. The Superior Court rested this decision on the fact that UCATA does not limit the right of contribution to tortfeasors who have been guilty of negligence. Additionally, the Superior Court noted that DCI’s argument concerning indemnity appeared unprecedented.
DCI appealed and asked the Supreme Court of Pennsylvania to determine the following: whether it was error to permit the Hospital to pursue a contribution claim, whether it was error to permit the Hospital to pursue an indemnification claim, and whether the Superior Court erred in affirming the trial court’s holding on the ground that it expanded a cause of action. The Supreme Court summarized the inquiry as whether the law permits a party that is vicariously liable in tort to seek contribution or indemnity from a party that is also vicariously liable in tort for a common agent.
Case Summary – Substantive Law
On appeal, DCI argued that contribution was not available to the Hospital because contribution is only available between joint tort-feasors under UCATA. DCI relied on Mamalis to conclude that two vicarious liable parties cannot be “joint tort-feasors” under UCATA. Mamalis v. Atlas Van Lines, Inc., 522 Pa. 214, 560 A.2d 1380 (1989). Notwithstanding this assertion, DCI did acknowledge that co-employers of a negligent defendant were subject to contribution in a case from the Court of Common Pleas of Somerset County (Sleasman v. Brooks, 32 Pa. D. & C.3d 187 (Pa. Com. Pls. 1984)). However, DCI argued that Sleasman was inapplicable because it did not consider that Pennsylvania was governed by UCATA and the law of contribution cannot be expanded at will.
The Hospital argued that contribution is based on equitable principles. They argue that “once the joint liability of several tortfeasors has been determined, it would be unfair to impose the financial burden of the plaintiff’s loss on one tort-feasor to the exclusion of another.” The Hospital argues that it is liable for the Doctors’ negligence only through law, and should be able to seek contribution from DCI, who is a joint tort-feasor.
The Court agreed that Pennsylvania law concerning contribution is governed by UCATA. However, while UCATA is generally concerned with joint tortfeasors with direct liability divisible between multiple actors, nothing in UCATA prohibits contribution between two parties who are vicariously liable for a common agent. UCATA provides that joint tortfeasors are two or more persons who are jointly or severally liable in tort for the same injury to persons or property. The basis of liability and the relationship among those liable is not relevant when determining whether parties are joint tortfeasors under Section 8322 of UCATA. The Court adopted the holding of Straw, which held that “contribution is available whenever two or more persons are jointly or severally liable in tort, irrespective of the theory by which tort liability is imposed.” Straw v. Fair, 187 A.3d 966, 1002 (Pa. Super. 2018). The court held that two parties that are vicariously liable for a common agent (here, the Doctors) would be jointly liable because they share the full extent of liability. Additionally, parties that are vicariously liable in this situation are severally liable because either party could be named as an initial defendant. Since vicariously liable parties are jointly and severally liable, they meet the definition of joint tortfeasors under UCATA and can seek contributions from one another.
DCI argued that as a vicariously liable party, they were not directly liable to the Plaintiff, and “absent any status as a tort-feasor” the rules of indemnity do not apply to them. DCI also argued that indemnity serves to shift the entire responsibility for damages from a faultless party to the party at fault.
The Hospital’s main argument is that indemnification allows them to transfer the judgment to DCI because the Hospital is only passively involved, whereas DCI was directly involved in Plaintiff’s treatment through its employment of the Doctors. The Hospital argued that DCI is incorrect in asserting that indemnity only applies to circumstances that include a principal and an individual tortfeasor. The Hospital rests its argument on Philadelphia Company, where one passively involved entity was required to pay for a loss, but was permitted to obtain indemnity from the entity that employed the negligent employees who caused the loss. Philadelphia Co. v. Central Traction Co., 165 Pa. 456, 30 A. 934 (1895). The Hospital believes that Pennsylvania law permits a passive entity to obtain indemnification from and against the entity whose business is responsible for causing the loss.
The Court disagreed with the Hospital’s argument. The court noted that the Hospital’s argument could be characterized as “distinguishing the vicarious liability imposed by ostensible agency from that of respondeat superior, which would cause an ostensible employer to be merely passively liable. . .[and] an ostensible employer can shift its liability to an actual employer of a common agent.” The court disagreed because they did not discern any difference between vicarious liability imposed under ostensible agency (through the MCARE Act) and respondeat superior.
The Hospital noted that under Section 516(a)(1) of the MCARE Act, a hospital may be held vicariously liable for the acts of another health care provider through principles of ostensible agency only if a reasonably prudent person would be justified in believing the care was rendered by the hospital or its agents. There is no indication that vicarious liability through ostensible agency under the MCARE Act should be treated differently than vicarious liability through respondeat superior. The court held that the commonality in liability between an ostensible and actual employer precludes one vicariously liable party from indemnifying another.
The court also held that indemnity principles do not apply in circumstances involving two vicariously liable parties responsible in tort for a common agent. To reach this conclusion, the court primarily relied on Builders Supply. In Builders Supply, the court held that the difference in liability that permits one party to obtain indemnity from another is “a difference in the character or kind of wrongs which caused the injury and the nature of the legal obligation owed by the wrongdoers.” Builders Supply Co. v. McCabe, 366 Pa. 322, 326, 77 A.2d 368, 371 (1951). The plaintiff in Builders Supply could not seek indemnity from another responsible party when the plaintiff was also at fault for the injury. In the present case, there are two principles that are vicariously liable for a common agent, so there is no difference in the character and kind of legal obligation owed to a plaintiff. The legal obligations here are akin to joint and several liability. Allowing one vicariously liable party to obtain indemnity from another vicariously liable party for a common agent would create a “circle of indemnity” because the second vicariously liable party would be able to shift liability back to the first. Lastly, the court held that even if equity favored allowing an ostensible employer to obtain indemnity from an actual employer of negligent employees, the court cannot use equity to override the MCARE Act.
Expansion of Legal Theories
Lastly, DCI argued the trial court erroneously expanded existing common law on contribution and indemnity. DCI also argued that the Superior Court erred by holding that they could not overrule the trial court’s decision merely because there was little controlling case law on the issues presented. The Court held that neither the Trial Court nor the Superior Court had made any error. Both courts recognized the lack of controlling case law and resolved the issue as best they could using controlling principles of law regarding contribution and indemnification.
No judgment was rendered as to the liability of the Hospital or the Clinic. However, if the Hospital and DCI are vicariously liable under ostensible agency (MCARE Act) and respondeat superior, the trial court should allow the Hospital to obtain contribution but not indemnification.
 Note the concurring opinion that allowed the Hospital to seek indemnification was not included in this review.