Inherently Incompatible: the Irreconcilable Tension Between Corporate Negligence Claims and the Federal Tort Claims Act

JurisdictionUnited States,Federal
CitationVol. 10 No. 2
Publication year2023

Inherently Incompatible: The Irreconcilable Tension Between Corporate Negligence Claims and the Federal Tort Claims Act

Veronica J. Finkelstein

INHERENTLY INCOMPATIBLE: THE IRRECONCILABLE TENSION BETWEEN CORPORATE NEGLIGENCE CLAIMS AND THE FEDERAL TORT CLAIMS ACT


Veronica J. Finkelstein


Table of Contents


I. The History of Corporate Negligence Claims Against Hospitals..................................................................................... 175
II. The History, Purpose, and Statutory Scheme of the FTCA............................................................................................. 179
III. Why Corporate Negligence Claims are Antithetical to the FTCA......................................................... 185

A car crashes due to a negligently manufactured braking system, injuring the driver. Hackers breach a bank's lax online security system, resulting in a customer's identity being stolen. A hospital fails to conduct thorough backgrounds checks, resulting in hiring an unqualified physician who botches a patient's surgery.

What do these seemingly different fact patterns have in common? All are examples of corporate negligence. In most cases, the driver, customer, and patient could file a civil lawsuit against the corporate entity—the manufacturer, the bank, or the hospital. But what if the corporate entity is federally funded, as may be the case in medical malpractice litigation? In those circumstances, the Federal Tort Claims Act (the "FTCA") applies, barring a corporate negligence claim against the hospital.

As this article explains, the FTCA is premised on the theory of respondeat superior, a doctrine that holds an employer legally responsible for the tortious acts of an employee. The theory of corporate negligence, in contrast, is predicated on independent duties a corporate entity owes separate from any liability it has for the actions of its employees. Courts that permit corporate negligence claims to proceed under the FTCA frustrate the intentional balance struck by Congress. It is incumbent on counsel defending FTCA cases to more consistently and directly argue that such claims are invalid.

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To illustrate why corporate negligence claims against federally funded hospitals are inherently incompatible with the FTCA, this article first explores the history of corporate negligence claims against hospitals. With that history in mind, the article then discusses the history, purpose, and statutory scheme of the FTCA. Finally, the article explains why corporate negligence claims are antithetical to the FTCA and why courts that permit these claims to proceed violate the delicate balance struck by Congress in the FTCA.

I. The History of Corporate Negligence Claims Against Hospitals

Although claims for corporate negligence can arise in any type of tort case, today these claims are commonly asserted in medical malpractice cases.1 This was not always the case. For nearly a century, hospitals were immune from tort suit under the doctrine of charitable immunity.2 Under this doctrine, a charitable organization is shielded from liability in tort.3 Charitable immunity is justified by the belief that non-profit organizations benefit society at large and should therefore be protected from financial losses.4 In other words, charitable organizations should spend their limited funds on their charitable mission and not on defending litigation.

In its early days, the practice of medicine was viewed as intrinsically altruistic and non-commercial.5 By extension, hospitals were considered charitable institutions created to help the disadvantaged.6 Shielding hospitals from suit meant hospital resources could be applied to caring for the poor.7 New York was the first state to apply charitable immunity to bar a tort suit against a

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hospital in the landmark decision of Schloendorff v. Society of New York Hospital.8 Other states quickly followed suit.9

Over time, our societal view of hospitals has evolved.10 Hospitals began charging for services and treating both wealthy and indigent patients.11 These changes eroded the justifications underlying charitable immunity. Forty years after deciding Schloendorff, New York reversed course in Bing v. Thunig, holding that a hospital could be vicariously liable for the acts of its employees.12 Other states soon followed.13

Today, hospitals are viewed as sophisticated entites, which benefit society but which also function as profit-making enterprises.14 A large percentage of hospitals, both privately and publicly owned, are profitable.15 Medicine has become a significant commercial industry.16

The first major case endorsing the theory of corporate negligence in a medical malpractice context was the Illinois case of Darling v. Charleston Community Hospital.17 In that case, a patient's fractured leg was improperly set in the emergency room, ultimately requiring a below-the-knee amputation after the fracture failed to properly heal.18 Rather than blame the physician who set the fracture, the patient blamed the hospital for failure to ensure the nursing staff regularly monitored the leg once the physician had set the fracture.19 In essence, rather than identifying a single individual who breached the standard of care the patient blamed the hospital for its systemic failure to provide adequate care,.

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The Illinois Supreme Court endorsed this theory, agreeing that the inadequate care leading to the amputation was a failure by the hospital, not any single hospital employee.20 As the court noted, the patient did not go to the emergency room to see a specific physician acting independently but rather for a combined package of care overseen by the hospital.21 Because the hospital promised the patient comprehensive care, the hospital was responsible for ensuring that care was provided. In endorsing the patient's theory of negligence, the Darling court became the first to recognize corporate negligence in a medical malpractice case, holding that a hospital has an independent duty to supervise its staff.22

Other courts soon followed. The next major case was Purcell v. Zimbleman, decided by the Supreme Court of Arizona.23 After his physician botched a botched colon surgery, the patient discovered that the hospital had continued to employ the physician even after two prior adverse surgical outcomes.24 The patient blamed the hospital for employing a physician it knew to be negligent.

Although the hospital tried to factually shift blame by arguing that it was not directly responsible for hiring and firing decisions, the Purcell Court rejected this defense.25 The Purcell Court reasoned that the hospital had an independent duty to patients to ensure there was no negligence in the hiring or firing of hospital staff.26

Perhaps the most sweeping recognition of corporate duties appeared in Thompson v. Nason Hospital.27 After a serious motor vehicle accident, the patient in Thompson was transported to the emergency department of Nason Hospital.28 In the emergency room, she was treated by a general practitioner.29 Despite being warned that the patient was taking blood thinners for a cardiac condition, and despite noting evidence of neurological impacts, the general practitioner failed to timely diagnose a massive brain bleed.30 Despite

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recognizing the possibility of cardiac complications, the general practitioner also failed to consult with a cardiologist.31

By the time her brain bleed was discovered and the patient received specialist care, she had experienced permanent brain damage.32 She filed suit, alleging, inter alia, a corporate negligence claim against Nason Hospital.33 According to the complaint, Nason Hospital should have had better policies in place to require a cardiac consultation for emergency department patients on blood thinners.34 She alleged that Nason Hospital breached its corporate duty of care by failing to implement and enforce proper policies and procedures.35

The Pennsylvania Supreme Court agreed that such a duty existed, recognized a duty flowing from the hospital to the patient, irrespective of any respondeat superior liability for the actions of physicians in the hospital.36 As the Thompson court noted:

[c]orporate negligence is a doctrine under which the hospital is liable if it fails to uphold the proper standard of care owed the patient, which is to ensure the patient's safety and well-being while at the hospital. This theory of liability creates a nondelegable duty which the hospital owes directly to a patient.37

The Thompson Court then identified four duties owed by any hospital to its patients: a duty to use reasonable care in the maintenance of safe and adequate facilities and equipment; a duty to select and retain only competent physicians; a duty to oversee all persons who practice medicine in the hospital; and a duty to formulate, adopt, and enforce adequate and appropriate rules, policies, and procedures to ensure quality care for the patients.38

Since the Thompson case was decided, courts across the country have recognized a variety of corporate duties owed to patients by hospitals including the duty to: select and retain only competent physicians;39 oversee the care

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provided;40 properly credential staff;41 and effectively train staff.42 Today every jurisdiction recognizes some form of corporate liability against hospitals by patients.43

At the time corporate negligence was first being recognized as a state law tort theory applicable to medical malpractices cases, a federal statute known as the FTCA had already been in existence for several decades. Because most medical malpractices cases are litigated outside the context of the FTCA, often in state court, a robust body of caselaw developed to support corporate negligence as a theory against hospitals without regard for the implications of the FTCA. Yet the FTCA has implications in the medical malpractice realm because some medical malpractice...

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