Connecticut Supreme Court Permits Tort Liability for the Acts of an Apparent (Not Actual) Agent

June 15, 2016 Advisory

In Cefaratti v. Aranow, No. SC 19443 (June 14, 2016), the Connecticut Supreme Court resolved a dispute among lower Connecticut courts and recognized tort liability for the acts of an apparent agent. See 321 Conn. 593. The Court spelled out the parameters for apparent agency liability in a medical malpractice case. In so doing, the Court expressly overruled a series of Connecticut Appellate Court decisions spanning three decades.

Cefaratti involved a surgeon, Dr. Jonathan Aranow, who had left a surgical sponge in the patient's abdominal cavity during gastric bypass surgery at Middlesex Hospital. The hospital argued that it could not be liable for the surgeon's alleged malpractice because the surgeon, who had hospital privileges, was not the hospital's agent or employee.

Ms. Cefaratti had herself selected Dr. Aranow as her surgeon based on her research to find the best gastric bypass surgeon in the state. Ms. Cefaratti, however, also attended several informational sessions at the hospital, conducted by Dr. Aranow's staff, as well as a seminar that the surgeon conducted at the hospital. The patient received a pamphlet, prepared by the hospital, referring to the education program developed by "the health care team who will be caring for you" and the importance of the program in which "(w)e will discuss" preparation for the operation. The patient alleged that these actions by the hospital made her believe that the surgeon was a hospital employee because he had privileges there.

The Superior Court granted the hospital's summary judgment motion and the Appellate Court affirmed on the ground that apparent agency is not a ground for tort liability. By a 4-3 vote, the Supreme Court reversed, recognizing apparent agency as a basis for tort liability. The Court eased the way to imposing liability on a hospital if it holds out an independent physician or group as having authority to act for the hospital, and the patient relied on the hospital to select the physician, as might happen for emergency or radiology services (to name just two examples). The Court nevertheless imposed strict limits on apparent agency authority if the patient selected the independent physician, as happened in Ms. Cefaratti's case. In that instance, the plaintiff must prove that she detrimentally relied on the appearance that the physician was a hospital agent or employee, and the Court opined that it would be the "rare" case where a tort plaintiff can prove that reliance. Ms. Cefaratti must still prove that reliance on remand to the trial court.

Apparent Agency and Apparent Authority

In Cefaratti, the Supreme Court first addressed the meaning of apparent agency and a related but distinct doctrine, apparent authority. The doctrines are rooted in contract law, but the Court held that apparent authority was recognized in tort law in its earlier 1941 decision in Fireman's Fund Indemnity Co. v. Longshore Beach & Country Club, Inc., where the club's customer tipped an employee to retrieve his car, the car was driven into a body of water, and the auto insurer brought a subrogation action against the club for the employee's negligence. The Supreme Court described the doctrine of apparent authority but found under the facts that the club could not be held liable for its employee's actions, which fell outside of his actual or apparent authority as a watchman. The Supreme Court in Cefaratti read Fireman's Fund as implicitly recognizing the doctrine of apparent authority in negligence actions, even if rejected in that case.

Middlesex Hospital countered that there's a difference between apparent authority and apparent agency, with the former applicable to an actual agent under the employer's control but who is acting beyond the scope of his authority, and the latter applicable to a person who was never an agent for any purpose. The Court in Cefarrati rejected the distinction and ruled that the two doctrines have merged, adopting the test set forth in the Restatement (Third) of Agency § 2.03 (2006). The Restatement provides: "Apparent authority is the power held by an agent or other actor to affect a principal's legal relations with third parties when a third party reasonably believes the actor has authority to act on behalf of the principal and that belief is traceable to the principal's manifestations." Under that test, it makes no difference whether the alleged tortfeasor was an "agent" who exceeded actual authority "or" was an "other actor" and never an agent. In either instance, the key ingredient to holding the principal liable for actions taken beyond an actual agency relationship is that the principal and not the alleged agent took steps in public view to portray the alleged agent as possessing authority to act for the principal in the particular transaction, and the affected person justifiably believed that the principal, by its actions, had conferred agency authority. As emphasized by the Court, it is the principal who must cloak the actor with the public appearance of authority to act for the principal, and that doctrine can bind the principal whether the actor was never an agent or employee or, instead, was an agent or employee going beyond the scope of actual authority.

Detrimental Reliance

The hospital argued that even if apparent agency is recognized in a tort action, the injured party must still allege and prove detrimental reliance on the appearance of agency or authority—that is, Ms. Cefaratti must show she relied on the hospital's actions in allegedly cloaking the surgeon with the appearance of being an agent or employee. Ms. Cefaratti, however, argued that detrimental reliance is not a traditional factor in an apparent agency relationship. On this question, the Court agreed with the hospital . . . sort of.

Apparent agency often arises in contract disputes, where the parties have chosen to interact with each other, and implicit in the principal's actions in giving someone the appearance of authority is that the other person will detrimentally rely on that appearance. The Supreme Court illustrated that point through a hypothetical car sale: "[I]f A agrees to pay B $1000 for a car, and A gives the $1000 to C, reasonably believing B's representations that C was his agent, it reasonably may be presumed that A would not have given the money to C but for B's representations." Person A certainly would not have handed $1000 to a stranger with no expectation of receiving B's car in return.

The analysis is more difficult in tort cases, where reliance on the appearance of an agency relationship is not implicit in the behavior of the parties. No one chooses to have an accident with a truck because the brand name on the side of the truck made it appear that the truck driver acted for the owner of the brand.

The Supreme Court nevertheless dispensed with detrimental reliance as a required element of proof in situations it analogized to contract cases, i.e., where the patient chooses the hospital, and the hospital selects the physician to treat the patient. This could arise, for example, if a patient arrives at the hospital to use emergency or radiology services or a patient chooses a hospital for the reputation of its cardiology programs and meets caregivers when first visiting the hospital. In these cases, where a patient chooses a medical facility and is assigned health care providers, the Supreme Court held that it will presume detrimental reliance. Therefore, a plaintiff may establish apparent agency by proving: "(1) the principal held itself out as providing certain services; (2) the plaintiff selected the principal on the basis of its representations; and (3) the plaintiff relied on the principal to select the specific person who performed the services that resulted in the harm complained of by the plaintiff."

The Supreme Court then recognized a different scenario, where the patient selects a community physician, perhaps based on reputation, and is treated at the hospital where the physician has privileges. In that case, the Supreme Court will not presume that the patient relied on a reasonable belief that the hospital has appeared to confer agency authority on the physician. The Court explained: "It would make little sense to hold a principal vicariously liable for the negligence of a person who was not an agent or an employee of the principal when the plaintiff would have dealt with the apparent agent regardless of the principal's representations." In this second scenario, the plaintiff must prove that: "(1) the principal held the apparent agent or employee out to the public as possessing the authority to engage in the conduct at issue, or knowingly permitted the apparent agent or employee to act as having such authority; (2) the plaintiff knew of these acts by the principal, and actually and reasonably believed that the agent or employee or apparent agent or employee possessed the necessary authority; and (3) the plaintiff detrimentally relied on the principal's acts, i.e., the plaintiff would not have dealt with the tortfeasor if the plaintiff had known that the tortfeasor was not the principal's agent or employee." The Court emphasized that this is a narrow path to establishing tort liability for the acts of an apparent agent, and it will be the "rare tort action" where the plaintiff can prove detrimental reliance under this scenario.

Because Ms. Cefaratti had chosen Dr. Aranow as her surgeon, the Supreme Court treated her case as falling within this second scenario. Because the Court had minted a new standard in its opinion, it reversed the hospital's summary judgment but remanded the case to the trial court to give the plaintiff a chance to prove that she detrimentally relied on her belief that Dr. Aranow was the hospital's agent or employee. The Court "emphasize[d] that, to meet this burden, the plaintiff must set forth facts and evidence capable of raising a reasonable inference that she would not have allowed Aranow to perform the surgery if she had known that he was not Middlesex' agent or employee."

What Can Be Done?

After Cefaratti, what can a hospital, or other potential apparent principal, do to avoid the effects of apparent agency? The answer to that is not clear in circumstances where the patient has not chosen the physician providing the services. Some jurisdictions have allowed hospitals to rebut the appearance of an agency relationship by posting signs indicating that medical providers are not agents or employees of the hospital or by requiring potential patients to sign disclaimers to that effect. However, that disclaimer may not be effective in an emergency situation or other situations where the court believes there is no informed patient choice of provider. The Supreme Court, while acknowledging the differences between jurisdictions in this area, stated that it need not answer this question at this time. The issue will undoubtedly arise and have to be decided in other cases.

Despite the lack of clarity in the law, hospitals and other medical institutions may want to post signs. It may also make sense to have doctors disclose to patients, in non-emergent situations, that the doctor is not an agent or employee of the hospital and that the patient may choose to go elsewhere or, where available, choose another doctor. In this way the hospital can try to categorize a future lawsuit as one where the patient either did not have a reasonable belief that the physician was an agent or employee or has selected the physician and so must prove detrimental reliance. It will also allow the health care institution to pursue in court the open question of whether signs and disclaimers are effective to rebut a claim of apparent agency.