Trial News

The Seventh Circuit has affirmed a verdict against a diagnostic imaging facility after a jury found that a radiologist working at the facility negligently failed to diagnose the plaintiff’s cancer. The court ruled that Indiana’s apparent agency rule applied and rejected the argument that the defendant should not be liable because the radiologist was an independent contractor hired by a third party. (Webster v. CDI Indiana, LLC, 2019 WL 943171 (7th Cir. Feb. 27, 2019).)

In 2009, Courtney Webster was treated for rectal cancer, and by 2010 she showed no signs of the disease. During a colonoscopy in 2014, Webster’s gastroenterologist discovered a large mass. Webster then underwent an abdominal and pelvic CT scan at CDI Indiana, LLC’s Carmel, Ind., facility. Radiologists staffing this facility were independent contractors hired by another company, Medical Scanning Consultants (MSC), which contracted with CDI to staff its facilities. Brian Walker, the radiologist who interpreted Webster’s scans, did not identify any mass in his report despite the images showing that one existed.

In 2016, another colonoscopy and CT scan showed that Webster’s mass—a tumor—had grown since 2014 and had metastasized to her lungs and liver, making it incurable. Webster and her husband sued CDI in federal court under diversity jurisdiction for medical negligence arising from the radiologist’s negligent reporting.

After discovery, CDI and the Websters moved for summary judgment. The defendant argued that Walker was not its apparent agent under Sword v. NKC Hospital, Inc. (714 N.E.2d 142 (Ind. 1999)), in which the Indiana Supreme Court held that a “hospital ‘could be held liable for the alleged negligence of its independent contractor physician.’” The district court denied both motions.

A jury awarded the Websters $15 million. The district court applied Sword ’s apparent agency holding and denied the defendant’s posttrial motions to vacate the verdict, finding the jury’s determination that CDI should be liable for Walker’s negligence was supported by applicable state law.

On appeal, the defendant argued that the district court erred in applying Sword because MSC—not CDI—hired Walker as an independent contractor. The Seventh Circuit rejected this claim, finding that Sword does not indicate that a facility “must have a direct employment relationship with an independent contractor physician to be held liable for the acts of its apparent agent.”

At trial, the parties had jointly stipulated that CDI was responsible for the “training, hiring, employing, [and] supervising” of the radiation technologists at the Carmel facility. Webster also testified that she was never given information or written notice about CDI and MSC’s relationship and believed that CDI had provided the scanning services she received in 2014. The court noted that accepting CDI’s position that only MSC could be liable for Walker’s negligence would allow health care facilities to “easily evade liability” by creating a “complex corporate arrangement of interrelated companies.”

The court also emphasized that the key considerations under Sword are not the technicalities of employment contracts but rather the “medical center’s manifestations and the patient’s reliance.” Here, Webster believed that CDI controlled and supervised Walker, and there was no evidence that she was aware of the contractual relationships between CDI, MSC, and Walker. “As the district court astutely observed, ‘[i]f anything, the complicated web of interrelated entities in this case . . . illustrates the paramount importance of the Sword factors in an increasingly complicated and opaque medical environment,” the Seventh Circuit wrote, affirming the verdict.

Notably, the Websters were able to sue CDI in federal court only because the company had failed to register as a qualified health care provider as required for the Indiana Medical Malpractice Act to apply. Had CDI been covered by the act, the Websters’ claim would have been subject to the state’s damages cap.

“We are pleased with the Seventh Circuit’s decision affirming the jury’s verdict and that the Websters will now receive a measure of justice for what they have had to endure,” said Indianapolis attorney Jerry Garau, who represents the plaintiffs. “This case also emphasizes the unfairness of Indiana’s caps on damages for medical malpractice damages. If CDI had been a qualified provider under Indiana law, the Websters’ damages would have been limited to $1.25 million despite the enormity of their loss.”