Author: Tanya Sara George and Arnav Sinha are 3rd-year law students at Maharashtra National Law University, Mumbai.
The article examines the rise of independent contractors (ICs) in India’s healthcare sector, revealing a significant legal lacuna in the liability for malpractice or negligence by medical ICs. The authors argue that vicarious liability principles, which exempt hospitals from IC actions, are presently inadequate and distinguishes the healthcare sector from other industries using the non-delegable duty of care standard, which thereby necessitates a higher degree of liability. The authors observe that the present shift has resulted in judicial inconsistencies and diminished patient protection. The authors propose two key reforms: mandating written contracts with explicit liability clauses and adopting a “Victim First” policy to ensure immediate compensation for patients, with hospitals pursuing recourse from the responsible IC later. Drawing parallels with the U.S. medical malpractice insurance system, the authors stress the need for legislative reform to balance accountability and trust in India’s corporatized healthcare landscape.
Introduction
A recent decision in Pennsauken Diagnostics Center, LLC v. NJ Dep’t of Labor emphasizes the risks encountered by hospitals when utilizing independent contractors (hereinafter “IC”) as doctors. The 21st-century medical industry in India is witnessing a significant growth of health professionals opting for independent contractual relationships rather than the traditional model of employer-employee relations. At the root of these relationships lies the liability dilemma, i.e., a scenario wherein there is a major legal lacuna when it comes to ascertaining the liability for acts done by an IC.
Notably, there is an evident legal lacuna regarding the inclusion of a ‘liability clause’ in contracts between an IC and the hospital. This raises the question of how the liability of ICs is legally determined, giving rise to the modern-day ‘liability dilemma’ between medical ICs and healthcare institutions.
While the literature on gig economies has been debated previously, the authors analyse the remodelling of employed medical professionals to ICs and establish that there lies an array of consequences, particularly concerning legal liability which are yet to be debated upon. These recent shifts expose the legislative ambiguities associated with the liability of the hospital for the actions of an independent medical practitioner. To address these issues, the authors propose the mandatory inclusion of a liability clause in IC contracts and suggest a “victim-first” principle to guide liability determinations in cases of IC malpractice or negligence.
The Onus of Vicarious Liability
The principle of vicarious liability allows for the master to be sued due to the acts of the servant, as the servant is seen as an extension of the master. As the traditional model of vicarious liability extended solely to individuals who were classified as ‘employees,’ the actions of medical ICs are at times exempted under the principle of vicarious liability, resulting in significant reduction in their quality of recourse and compensation available to affected individuals.
The traditional justification for establishing vicarious liability on the hospital was that the employers had a duty to ensure the quality of work. The corollary for independent contractors then becomes distinct as employers are concerned solely with the result achieved, and not the process of working.
The authors argue that, while the principle of vicarious liability arising out of the acts of the ICs may be exempted in other industries, it must stay solidified in the healthcare sector. This stance is substantiated by firstly distinguishing the healthcare sector as an industry requiring a higher level of protection and recourse when compared to other segments in the market and secondly, holding that independent physicians have to work under the hospital mandate, pushing them out of the ambit of a traditional IC.
The rationale for exempting vicarious liabilities in the actions of IC is that the employer does not have adequate control over the course of their work and is concerned only with the end result. However, hospitals, as a part of safety-critical industry, are prima facie responsible for the treatment of the patients , whether by a medical employee or an IC. Consider the example of medical residents or students; they do not classify as ‘employees’ and are equipped with independent medical judgment, yet they are still legally construed as employees.
Hospitals, unlike other sectors, cannot disassociate themselves from the responsibilities inherent in the care provided within their facilities. They bear a non-delegable duty of care to ensure the safety of their patients or to establish an adequate source of recourse when they are unable to do so. Thus, this principle must not be extended to medical ICs, thereby aligning legal accountability with the hospital’s overarching duty to its patients.
The Judicial Trend
Ordinarily, courts have, in various judgments, including Aparna Dutta vs Apollo Hospitals, applied frameworks such as the master-servant relationship and the apparent agency doctrine to establish hospital liability, reasoning that the IC was perceived as an employee acting under the hospital’s sanction.
However, in the absence of clear legal guidelines, courts have also ruled that hospitals may not be liable for the actions of independent practitioners. For instance, in Padam Chandra Singhi & Others vs Dr. P.B. Desai & Others, the court refrained from imposing liability on the hospital, as the doctor responsible for negligence was an IC.
This lack of consistency poses significant risks. Firstly, this perception holds for a significant risk and undermines the very principle of respondeat superior, as the patient would now be entitled to a notably reduced amount of compensation and safeguards. Secondly, the patient, in effect, has no knowledge of whether there is an established liability clause and may rationally presume that, in the event of negligence, the hospital would also be liable, as is the case in normal circumstances and international jurisdictions. This effectively provides major hospital corporations with a legally valid mechanism to shield themselves from liability.
These conflicting judicial opinions further contribute to the ‘liability dilemma,’ as some benches have leaned on international precedents to impose hospital liability for IC actions, while others have leaned on interpreted legal lacuna to exonerate hospitals. These inconsistencies are compounded by the lack of legislative guidance, leaving the scope of medical ICs within Indian law uncertain and unregulated.
The Lack of Legislative Clarity
In the Indian Medical sector, the medical service agreements between the hospitals and the doctors who act as independent contractors are primarily governed by the Indian Contract Act. However, the applicability of the Act is limited in addressing certain necessary elements unique to the medico-legal field. Despite the utilization of the act, a significant regulatory vacuum exists: neither the Indian Medical Association nor the Ministry of Health and Family Welfare has established any specific guidelines or rules directly governing these service agreements.
This issue becomes increasingly pertinent as the healthcare landscape shifts from practitioner-owned small and medium-sized hospitals to larger corporate hospitals. There is an overt gig economy in the healthcare industry and the rise of medical ICs. In such commercial arrangements, it is neither mandatory for the doctor and the hospital to formalize their engagement through a written contract nor for such contracts, if executed, to contain a liability clause. This regulatory oversight leaves both doctors and hospitals exposed to uncertainty, particularly when disputes arise from incidents of professional misconduct, negligence, or patient harm.
Moreover, this lack of clarity not only complicates the resolution of disputes between the contracting parties but places the aggrieved patient or their family in a precarious position. Victims may face significant delays in receiving compensation as they are forced to navigate through the legal ambiguities of liability. In certain cases, such as Padam Chandra, the absence of an explicit liability clause has allowed hospitals to argue that doctors, being independent contractors, bear sole responsibility, thereby evading financial accountability.
Despite the high stakes involved, neither the IMA nor the MoHFW has mandated the inclusion of liability clauses in medical service agreements. This lack of regulatory oversight is troubling given the increasing corporatization of healthcare and the rise in litigation surrounding medical malpractice. Unlike jurisdictions where healthcare regulations ensure comprehensive liability frameworks, India lacks a consistent mechanism to govern these arrangements, exposing both healthcare professionals and institutions to unpredictable risks.
A Call to Reform
Various cases show the court’s increasing inclination towards placing liability on the hospital, even in cases concerning healthcare practitioners. This inclination is, however, not met with adequate legislative support and is based on the US doctrine of non-delegable duty. If, domestically, pre-equipped with legally mandated liability clauses, this provides for an avenue of non-judicial and speedy recourse for both the victim and the healthcare professionals.
To address the regulatory vacuum in medical service agreements, the IMA and the MoHFW should ensure a written contract as a prerequisite for all IC engagements, detailing clear liability provisions that outline responsibility in cases of medical malpractice or negligence. Such a mandate aligns with the judiciary’s increasing inclination towards placing liability on the hospital, even in cases concerning healthcare practitioners.
Moreover, a mandatory “Victim First” policy should be instituted, mirroring the doctrine of subrogation in cases of insurance and contracts of indemnity. In cases where an injury or harm to a patient occurs, hospitals would be required to immediately compensate the victim and subsequently recover costs from the responsible IC or other liable entities. A similar scenario to this principle can be found in the US procedure of medical malpractice insurance, wherein the hospital, acting as a guarantor, pays back the victim, and they are later indemnified by the IC. This not only prioritizes patient welfare but also ensures timely compensation and allows hospitals to pursue recourse, strengthening accountability and promoting trust in the healthcare system.
Conclusion
The current regulatory framework surrounding independent contractors in the healthcare sector is fraught with ambiguity, leaving patients, healthcare professionals, and hospitals exposed to unpredictable liabilities. As the healthcare industry increasingly embraces the gig economy model, it is crucial to adapt regulatory measures that ensure patient safety and equitable recourse. This paper advocates for legislative clarity that mandates written contracts with explicit liability clauses for all hospital-IC engagements, as well as a “Victim First” policy that prioritizes immediate compensation for aggrieved patients.
The authors, through the paper, attempt to bring a call for change against the status quo and advocate for a framework to meet the legal expectations inherent in this vital industry.
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