Fadely v. Encompass Health Valley of the Sun Rehab. Hosp. – 6/28/2022

August 29, 2022

The Court of Appeals Division One holds hospital liable for abuse and neglect under the Adult Protective Services Act based on enterprise formed with exempt physicians.

A seventy-three year old woman experienced pain and rapid decline after a spinal surgery.  Two physicians at her in-patient rehabilitation hospital examined her, but neither performed allegedly appropriate follow-up.  Days later, she was rushed to emergency surgery.  Her injuries resulted in paralysis and long-term care.  She sued the rehabilitation hospital under Arizona’s Adult Protective Services Act (“APSA”), which creates private right of action against caregivers who abuse, neglect, or exploit a vulnerable adult.

The trial court found that the rehabilitation hospital did not directly cause the woman’s injuries but was nevertheless liable under APSA for the “actions and inactions” of the two treating physicians. The hospital was liable either under a theory of vicarious liability/apparent agency or because the hospital formed an “enterprise” with the physicians to provide the patient’s care.  The hospital appealed, arguing that the physicians were not agents or employees, and that they could not form part of an enterprise because they are exempt from civil liability under APSA.

The Court of Appeals reversed the trial court’s determination on apparent agency, finding the lower court had confused the doctrine with that of respondeat superior, which the patient did not assert.  Explaining the correct legal standard for apparent agency, the Court found the patient did not prove the hospital “intentionally or inadvertently” represented the physicians as agents or employees—in fact, she signed a consent form that defined physicians as non-employee independent practitioners.

The Court affirmed the ruling on APSA. A group of associated persons form an enterprise under APSA if they are working as a unit for the common purpose of caring for a vulnerable adult.  Here, neither the hospital nor physicians could treat the patient on their own and thus they formed an enterprise to care for her.  The Court explained that although most physicians are specifically exempt from civil liability under APSA, they are not exempt or excluded from forming part of an enterprise.  Because the hospital was not exempt from liability—and the physicians were not exempt from forming part of an enterprise—the hospital was liable under APSA.

Judge Weinzweig authored the opinion of the Court, in which Judges Furuya and Perkins joined.

Posted by: Payslie M. Bowman