When Curing Health Care Costs Creates Liability

Abstract

In Wickline versus State of California (1986), the jury held that third-party payors of health care services can be held legally accountable when medically inappropriate decisions result from faulty design or implementation of cost-containment mechanisms. A key element in determining potential liability is establishing whether medical personnel are either corporate agents/employees or independent contractors. When the employer hires medical personnel, potential liability is the greatest. Even without direct hiring, courts may hold that cost control is sufficient to establish a master-servant relationship or that employee perceptions of an employer's closeness to the medical decision making warrants the finding of liability under the theory of apparent authority. The use of an independent trust to select medical care might insulate the employer from liability, but any direct benefit might posit a case for vicarious liability.