MEMORANDUM OPINION & ORDER
Wayne County Hospital, Inc. and Ohio Hospital Insurance Company claim that they were compelled to pay a former patient for damages resulting from the primary negligence of Dr. Jakobson in August of 2000. Now, after over a decade of litigation, the hospital and its insurance company continue their attempts to recoup those damages. Toward that end, the Plaintiffs have filed a motion for leave to amend their complaint, a motion to exclude an expert, and a motion for partial summary judgment. Dr. Jakobson has opposed all three. Each of these motions, at least in some way, relate to the law governing ostensible agency and indemnity. The Court, having considered the arguments of the parties and reviewed the relevant case law, now holds that the motion for partial summary judgment and the motion to exclude shall be GRANTED, while the motion for leave to amend the complaint shall be GRANTED in part and DENIED in part.
Though the relevant facts of this case remain largely undisputed, the Court once again sets them forth as updated since its previous Order denying summary judgment. In August 2000, Linda Hardwick had a mammogram performed at Wayne County Hospital. Dr. Jakobson, who provided radiology services to the Hospital's patients and maintained his office in the Hospital's radiology department, read the mammogram. Although that mammogram revealed a small mass in Mrs. Hardwick's right breast, Dr. Jakobson did not believe any additional follow up beyond her annual check up was necessary. The report of the mammogram stated that the results were "NORMAL/NEGATIVE" with "[n]o evidence of cancer" and noted that "[t]he breasts remain stable without evidence for malignancy." [R. 41, Ex. 1.] The report was signed by Dr. Jakobson and sent by the Hospital to Mrs. Hardwick along with a letter, also signed by Dr. Jakobson, printed on Wayne County Hospital letterhead. [See R. 41, Ex. 2.]
Mrs. Hardwick returned to Wayne County Hospital the following August for her yearly mammogram. Dr. Jakobson also signed this report. The August 2001 Report provided as follows:
FINDINGS: The nodule seen on the previous mammogram in the right breast in the upper outer quadrant has markedly enlarged and is suspicious for CA. Biopsy should be considered. The remaining breasts are stable without skin thickening, nipple retraction, pathologic calcifications, or new discreet masses. The nodule previously was approximately 8 mm in diameter and presently is 10 mm in diameter indicating significant increase in volume of the mass.
IMPRESSION: BI-RADS CATEGORY IV, SUSPICIOUS 10 MM MASS IN RIGHT BREAST, INCREASED IN SIZE FROM 8 MM IN 1 YEAR. BIOPSY SHOULD BE CONSIDERED FOR FURTHER EVALUATION.
[R. 41, Ex. 3.] This report was sent to Mrs. Hardwick in the same manner as the previous one. The letter accompanying this report, however, advised Mrs. Hardwick that the results were "ABNORMAL" and that she "should contact [her] physician or primary care provider as soon as possible." [R. 41, Ex. 4 (emphasis in original).]
Mrs. Hardwick subsequently had a biopsy of the mass, which was determined to be Stage 1 invasive carcinoma. She then had a mastectomy and reconstructive surgery and underwent hormonal oral therapy treatment. On August 1, 2002, Mrs. Hardwick and her husband filed suit against Wayne County Hospital in Wayne Circuit Court. The Complaint alleged the Hospital, acting by and through its agents and ostensible agents, was negligent in performing and/or reading the mammogram performed on August 1, 2000. The Complaint also included a claim for loss of consortium on behalf of Mr. Hardwick. Notably, the Complaint did not name Dr. Jakobson as a defendant and neither the Hospital nor its insurer sought to join him.
The case proceeded to trial in February 2006. At the close of all the evidence, the court granted two motions for directed verdict. Granting the Hospital's motion, the court found insufficient evidence of negligence of any other employees or agents. Granting the Hardwicks' motion, the court found that Dr. Jakobson was an ostensible agent of Wayne County Hospital. The jury subsequently returned a verdict for the Hardwicks, awarding them $828,520.00 plus costs and interest on their claims, and judgment was entered consistent with that verdict.
The Hospital appealed to the Kentucky Court of Appeals. That court affirmed the Wayne Circuit Court's Judgment, and the Kentucky Supreme Court denied the Hospital's motion for discretionary review. Pursuant to its obligations under the insurance policy issued to Wayne County Hospital, OHIC paid $1,052,952.94 to the Hardwicks to satisfy the Judgment.
The Hospital and OHIC then filed the instant suit seeking indemnification and subrogation from Dr. Jakobson for the amount paid to the Hardwicks. The Plaintiffs allege that those damages were the direct and proximate result of Dr. Jakobson's negligent failure to meet the standard of care owed to Mrs. Hardwick. And, because the Hospital was only vicariously liable due to its ostensible agency relationship with Jakobson, the Hospital asserts that Jakobson must indemnify it.
The Plaintiffs initially sought summary judgment on the basis that claim and issue preclusion barred relitigation of the issues of the first trial. After substantial briefing and argument, the Court found that there was no privity between the parties at the earlier state court action and denied the motion for summary judgment. [R. 61; R. 99]. Though the Sixth Circuit found this issue improper for certification, it received reconsideration by this Court, and the issue of privity has now been finally decided for the purposes of litigation at the district court level. The parties were ordered to continue with discovery, which the Court declined to proactively limit.
Now pending before the Court are three motions of the Hospital Plaintiffs, who seek to amend their complaint, exclude a defense expert, and receive partial summary judgment. The issues of these motions are, however, bound up in similar issues of law concerning ostensible agency and indemnity. Therefore, the Court shall clarify those legal concepts and address each of the three motions herein.
When sitting in diversity, a federal court applies the substantive law of the state in which it sits. Hayes v. Equitable Energy Resourcs Co., 266 F.3d 560, 566 (6th Cir. 2001) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941)). However, when considering the issue of summary judgment, a federal court applies the standards of Fed.R.Civ.P. 56 rather than "Kentucky's summary judgment standard as expressed in Steelvest, Inc. v. Scansteel Serv. Ctr. Inc., 807 S.W.2d 476 (Ky. 1991)." Gafford v. Gen. Elec. Co. 997 F.2d 150, 165 (6th Cir. 1993). Under Rule 56, summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. A fact's materiality is determined by the substantive law, and a dispute is genuine if "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
In deciding a motion for summary judgment, the Court must view the evidence and draw all reasonable inferences in favor of the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). The burden is initially on the moving party to inform "the district court of the basis of its motion, and identifying those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrates the absence of a genuine issue of a material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). The moving party may make this showing by demonstrating the absence of evidence to support one of the essential elements of the nonmoving party's claim. Id. at 322-25. Once this burden is met, the nonmoving party, "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56. Further, "the trial court no longer has a duty to search the entire record to establish that it is bereft of a genuine issue of material fact." Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479-80 (6th Cir. 1989). Instead, "the non-moving party has an affirmative duty to direct the Court's attention to those specific portions of the record upon which it seeks to rely to create a genuine issue of material fact." In re Morris, 260 F.3d 654, 665 (6th Cir. 2001).
Though the Hospital Plaintiffs' motion for summary judgment does not seek final disposition of the case, it does ask the Court to rule as a matter of law that "if Defendant Peeter Jakobson, M.D. is found negligent, he is liable to the Plaintiffs for the amount of the judgment rendered in Linda and Alvin Hardwick's previous suit against the Plaintiffs." [R. 112-1 at 1]. That is to say, the Hospital plaintiffs seek a judicial determination that if Dr. Jakobson is found negligent, they can recover in indemnity.
"Indemnity.is simply the repayment to one party by another party who caused the loss of such amounts the first party was compelled to pay." Hall, No. 05-185-JBC, 2007 WL 1385943 at *1 (quoting Liberty Mut. Ins. Co. v. Lousiville & Nashville R.R. Co., 455 S.W.2d 537, 541 (Ky. 1970). Indemnity is "available to one exposed to liability because of the wrongful act of another with whom he/she is not in pari delicto." Degener, 27 S.W.3d at 780.
Under these standards, the Plaintiffs have argued that indemnity is appropriate because they were required to pay damages in their state trial due to their ostensible agency relationship with Dr. Jakobson, with whom they were not in pari delicto.
Under Kentucky law, a hospital may be held vicariously liable for the acts of non-employees and independent contractors who are found to be its ostensible agents acting under apparent authority. Williams v. Ky. Dep't of Educ., 113 S.W.3d 145, 151 (Ky. 2003); see also, Grubb v. Norton Hospital, 2010 WL 27877982, at *6 (Ky.Ct.App July 16, 2010)(review granted). "An apparent or ostensible agent is one whom the principle, either intentionally or by want of ordinary care, induces third persons to believe to be his agent, although he has not, either by expressly or by implication, conferred authority upon him." Vandevelde v. Poppens, 552 F.Supp.2d 662, 666 (W.D.Ky. 2008) (citing Middleton v. Frances, 77 S.W.2d 425, 426 (Ky, 1934)). In discussing ostensible and apparent agency, the Kentucky Supreme Court has expressly adopted the teachings of the Restatement (Second) of Agency § 267 (1958):
One who represents that another is his servant or other agent and thereby causes a third person justifiably to rely upon the care or skill of such apparent agent is subject to liability to the third person for harm caused by the lack of care or skill of the one appearing to be a servant or other agent as if he were such.
Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255, 257 (Ky. 1985) (citing Restatement (Second) of Agency § 267 (1958). See also, Roberts v. Galen of Virginia Inc., 11 F.3d 405, 412 (1997); Dierig v. Lees Leisure Industries, Ltd., 2012 WL 669968, at *4 (E.D.Ky Feb. 28, 2012).
In Kentucky's seminal case on ostensible agency, Paintsville Hospital Company v. Rose, the Supreme Court set forth the circumstances under which it would find that someone who was not an employee of the hospital an ostensible agent for the purpose of vicarious liability. 683 S.W.2d at 258. The Supreme Court stated that it would be "unreasonable to put a duty on the patient to inquire of each person who treats him whether he is an employee or independent contractor of the hospital." Id. Instead, citing two courts from sister states, the Supreme Court of Kentucky held as follows:
"Absent notice to the contrary, therefore, plaintiff had the right to assume that the treatment received was being rendered through hospital employees and that any negligence associated with that treatment would render the hospital responsible." Arthur v. St. Peters Hospital, 169 N.J.Super. 575, 405 A.2d 443, 447 (1979). "In our view, the critical question is whether the plaintiff, at the time of his admission to the hospital, was looking to the hospital for treatment of his physical ailments or merely viewed the hospital as the situs where his physician would treat him for his problems." Grewe v. Mt. Clemens General Hospital, 404 Mich. 240, 273 N.W.2d 429, 433 (1978).
Id. See also Roberts, 11 F.3d at 412. The Sixth Circuit has noted that under this standard, "the actions of the hospital, rather than the knowledge of the patient, is controlling in a case where the patient is unable to obtain actual knowledge of hospital's disclaimer." Roberts, 11 F.3d at 412. Therefore, a hospital who has clearly attempted to alert the public that its physicians are not employees or agents of the hospital, will not subsequently have those persons deemed ostensible agents by the court. Id.
Considering this legal background, the arguments of the parties swim upstream. As noted by Dr. Jakobson, the Hospital Plaintiffs unsuccessfully argued at the Hardwick state court trial that Dr. Jakobson was, in fact, not their ostensible agent and therefore, as a matter of law, they could not be held vicariously liable for his actions. [R. 109 at 5]. This is the more common manner in which the ostensible agency issue arises. Generally, a plaintiff (such as Hardwick) has brought suit against a hospital (such as Wayne County Hospital), who in turn tries to argue that it may not be held vicariously liable for the acts of a particular doctor (such as Dr. Jakonson), because he is an independent contractor and not an ostensible agent.
Though the Hospital Plaintiffs made and lost this argument in the Hardwick case in state court, as has been well established, the slate has been wiped clean in this case and the Hospital Plaintiffs are free to assert the counter position in this indemnity action. [R. 99]. Specifically, the Hospital Plaintiffs set forth the following facts in support of their position that they held Dr. Jakobson out as their ostensible agent:
Here, the Hospital did not distinguish Dr. Jakobson as anything other than a Hospital employee. The Hospital provided radiological services exclusively through Dr. Jakobson, marketed his services to patients through Hospital physicians, provided Dr. Jakobson an office in the radiology department of the Hospital, and required him to work regular hours there. To have Dr. Jakobson read her mammogram, Linda coordinated her visits through the Hospital Staff, and a Hospital-employed radiology technician administered Linda's mammograms using Hospital-owned equipment. The Hospital then sent Hardwick a letter on Hospital letterhead providing Dr. Jakobson's evaluation and signature, but stating "we wish to report the following on your mammography examination." To create this letter, Dr. Jakobson merely dictated his evaluation to a Hospital ...