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State: Pennsylvania
Subject Matter: Corporate Liability
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On November 21, 2012, the Pennsylvania Supreme Court issued its long anticipated opinion in Scampone v Highland Park.  A copy is attached.  The momentous decision fundamentally changes how the corporate liability doctrine will be applied in the future.  While the focus of Scampone was a SNF and its management company, the decision reaches far beyond that realm.
 
By way of background, the issue before the Court was whether a SNF and/or its operating company could be directly liable under a theory of corporate negligence (as opposed to vicarious liability only for the negligence of its staff members).  In other words, do these entities have a direct duty to the resident/patient.  The Superior Court answered this in the affirmative, relying on the case of Thompson v Nason Hospital and its progeny.
 
Thompson was the first case to recognize a theory of corporate liability.  The holding was premised upon the recognition that a hospital plays a central role in the healthcare of its patients.  As such, it owes certain non-delegable duties to its patients, such as oversight of the care provided within its walls.  Since Thompson was decided, however, the lower courts have struggled with its application to non-hospital entities, such as HMO’s and physician practices.  In each case, the lower courts have seized upon the Thompson language and applied (or limited) application of corporate liability based upon an analysis of whether the entity played a central role in the healthcare of the patient.  That has now changed.
 
In Scampone, the Supreme Court held that the “central role” inquiry does not capture the appropriate standard in deciding whether a duty of care exists.  Rather, the trial court must apply either Section 323 of the Restatement(Second) of Torts or the factors articulated in an earlier Supreme Court case,  Althaus v Cohen.  The Althaus case set forth the following factors a court must consider when determining whether a direct duty exists:  1) the relationship between the parties; 2) the social utility of the actor’s conduct; 3) the nature of the risk imposed and foreseeability of the harm incurred; 4) the consequences of imposing a duty upon the actor; and 5) the overall public interest in the proposed solution. 
 
In reaching this conclusion, the Court stated that immunity or exemption from liability is generally created through the legislature.  SNFs and their related entities do not enjoy such carve-outs under the current law, nor would the Court create one by judicial fiat.  The Court went on to state:
 
“We do not doubt that the industry operates on a thin margin; nevertheless, the question of tort insulation requires an assessment and balancing of policies best left to the General Assembly.”
 
Next, the court addressed the Thompson holding and whether its analysis was limited to hospitals and similar entities, or whether it should be interpreted more broadly.  The Court held the latter, stating that the relevant question is whether the Plaintiff offered sufficient evidence of the relationship with the SNF, and separately with the operating company, to establish that duties of care exist through application of Section 323 of The Restatement (Second) of Torts or the factors outlined in Althaus.  Notably, the Court stated that there must be an individualized inquiry as to each entity  “which ensures that multiple entities are not exposed to liability for breach of the same non-delegable duties.”
 
Going forward, it will not be a difficult task to establish a corporate duty between the resident and the licensed facility.   The more significant issue will be whether a duty exists between the operating/management company (or related entities) and the resident.  The trial court will be called upon to analyze the proffered evidence in each case to determine whether a direct “corporate” duty is established as to each named entity.  Thus, it is anticipated that there will be an increased emphasis during discovery on establishing a duty for each named entity.  
 
Given the above, it is imperative that providers address this issue appropriately in discovery to limit potential liability.
 
Please feel free to contact me with any questions.
 
Best Regards,
 
Bill
William J. Mundy, Esquire

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Document Author: PA Supreme Court
Firm/Company: PA Supreme Court
Document Date: November 21 2012
Search Tags: corporate negligence liability management
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