Multiple Entities, But One Claim – The Issue of Corporate Negligence

Key Points: 

• Courts have wrestled with the issue of what types of entities may be liable under theory of corporate liability pursuant to Thompson v. Nason Hosp., 591 A.2d 703 (Pa. 1991).
• In Newlin v. Vita Healthcare Group, et al., the Delaware County Court of Common Pleas decided whether multiple entities may all be liable under a theory of corporate negligence, and whether the liability of multiple entities may be a basis to reduce a corporate liability award.

Corporate liability is a frequently pursued claim in the medical malpractice arena in Pennsylvania. It is used by plaintiffs because it gives them another mechanism to get a “deep pocket” involved in their case. Under this theory, plaintiffs can claim that a hospital itself was directly negligent. 

Pennsylvania courts have adopted this doctrine as a theory of hospital liability. Corporate negligence provides that the hospital is liable if it fails to uphold the proper standard of care owed the patient, which is to ensure the patient’s safety at the hospital. Thompson v. Nason Hosp., 591 A.2d 703, 707 (Pa. 1991).

The Thompson case was the first to outline this theory, which creates a non-delegable duty that the hospital owes directly to a patient. It was a major departure from previous jurisprudence because a patient could directly pursue the hospital itself, rather than trying to tie the hospital to liability through the traditional theory of respondeat superior and vicarious liability. 

The Superior Court of Pennsylvania established that a hospital has a duty to (1) use reasonable care in the maintenance of safe and adequate facilities and equipment; (2) select and retain only competent physicians; (3) oversee all persons who practice medicine within its walls as to patient care; and (4) formulate, adopt, and enforce adequate rules and policies to ensure quality care for the patients. 

For a hospital to be found liable under this theory of liability, the plaintiff must show that the hospital had actual or constructive knowledge of the issue that created the harm. Further, the hospital’s negligence must have been a substantial factor in bringing about the harm to the injured party. 

However, there are limits to liability. Importantly, courts have wrestled with the issue of what types of entities may be liable under this theory of liability. Of course, since Thompson, a hospital can certainly be liable under this theory. Beyond that, the picture is not so clear. The answer to the question boils down to the similarity of the care provided by that entity compared to care in a hospital setting. Courts will examine whether an entity is responsible for a patient’s total health care. For example, nursing homes were found to owe a direct duty because the degree of involvement in the care of patients in skilled nursing home facilities is markedly similar to that of a hospital and, thus, subject to corporate liability. See Scampone v. Highland Park Care Ctr., LLC, 57 A.3d 582, 584 (Pa. 2012).

But what happens when there are multiple entities named as defendants? Can they all be liable under a theory of corporate negligence? Can this be a basis for an argument to reduce an award? These issues were addressed by the Delaware County Court of Common Pleas in a recent case. 

In Newlin v. Vita Healthcare Group, et al., the Court of Common Pleas entered an order on December 20, 2023, that reduced a $19 million verdict against four defendant entities. Two entities were operators of a skilled nursing facility and two other entities were providers of management services. 

The plaintiffs in Newlin alleged that a nursing home resident fell at the facility and sustained a hip fracture and subsequently developed pressure ulcers, leading to her death. The case involved multiple theories of recovery and also included a claim for punitive damages. At the conclusion of the trial, the jury returned a verdict for the plaintiff. The jury awarded $4 million in compensatory damages and $15 million in punitive damages, including $7 million against the operators and $8 million against the management entities. 

Post-trial motions were filed following the verdict. As it relates to the concept of corporate negligence, the court analyzed the Supreme Court of Pennsylvania’s decision in Scampone. There, the Supreme Court stated that a plaintiff could not recover against both a management company and the operator of the facility because only the owner/operator could be liable for corporate negligence. The owner of the entity could not delegate the legal responsibility under this theory of liability to another corporate entity. The duty under corporate liability is a non-delegable duty, and the owner of the facility cannot pass this responsibility to someone else. This is different from vicarious liability, under which both entities could be found liable. 

Accordingly, the court held that, because the non-delegable duty of care under corporate liability lies with the licensed operator only, a plaintiff cannot recover against both the licensed operator of a skilled nursing facility and a management company as well. Because the court found that only the owner/operator of the facility could be liable under corporate negligence, it vacated the punitive damages awards against the management entity. 

Scampone is significant because it illustrates how corporate negligence has evolved in the Commonwealth. It also illustrates that just because plaintiffs name multiple corporate entity defendants in a case does not mean that, suddenly, the value of the case has increased. Corporate liability involves a non-delegable duty, and courts will not find multiple entities liable under it. 

This issue should be addressed early on in each case where corporate negligence has been pled. Preliminary objections should be used to highlight the issue at an early stage of the litigation, and if those are not successful, it is a good idea to revisit this with a motion for summary judgement or even with motions in limine. The Newlin case demonstrates that it is absolutely vital to outline the nature of various entities during the course of litigation in order to ensure that the court can distinguish between the roles of various defendant entities in order to preclude excessive recovery. 

Gabor is an associate in our King of Prussia, Pennsylvania, office. 

_{Defense Digest, Vol. 30, No. 3, September 2024, is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.}