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N.J. Hospitals Liable for Docs’ Lack of Insurance

(CN) - An injured patient can't sue the surgeon who improperly put screws in his foot because the doctor had no medical malpractice insurance, New Jersey's high court ruled Tuesday.

In a split ruling, the New Jersey Supreme Court held that doctors who lack malpractice insurance, either in whole or in part, should be disciplined by the state medical board, not in court.

However, the state's high court also ruled that medical facilities that hire such doctors, or allow them to perform surgeries in their facilities, can be sued if it can be proven they haven't done enough due diligence in making sure their doctors are covered by insurance or a line of credit.

James Jarrell suffered from a herniated lumbar disk and underwent a spinal fusion procedure in 2005 performed by Richard Kaul, a board-certified anesthesiologist at Market Street Surgical Center in Saddle Brook, N.J.

But Jarrell had worse pain in his left foot after the surgery that caused him to fall down. It turns out that Kaul improperly placed screws in Jarrell's foot, which pinched one of the nerves, according to court records.

Jarrell filed a medical negligence lawsuit against Kaul and MSSC, also claiming misrepresentation and negligent over the fact that Kaul had no medical malpractice insurance. However, because Kaul's medical malpractice insurance policy specifically excluded coverage for spinal surgery, only the first complaint was ruled actionable.

A trial court found Kaul, whose medial license was suspended in 2012, guilty of medical negligence. Jarrell and his wife were awarded a total of $750,000 in damages. The claims against MSSC were dropped.

On appeal, the New Jersey Superior Court's Appellate Division upheld the trial court's decision to toss the insurance-related allegations, finding that state law did not grant patients the right to sue hospitals or surgical centers that allow uninsured physicians to operate in their facilities.

The state's high court noted Tuesday that prior New Jersey cases have determined that surgical centers can't be held liable for allowing uninsured physicians to operate in their facilities and that doctors were not required under state law to inform patients if they were uninsured.

But 2004 amendments to a state law required doctors to have malpractice insurance or a letter of credit for $500,000 to cover potential surgical and medical mishaps. Doctors who do neither are subject to civil penalties and disciplinary action by the state board of medical examiners.

BME sanctions, not patient lawsuits, were likely the intended method of disciplining uninsured physicians, the New Jersey Supreme Court ruled.

"The legislative intent [of the statute] is predominantly proactive ... and to create a source of compensation for a patient injured by negligent medical care," Judge Mary Cuff wrote. "A post-injury direct claim against a noncompliant and negligent physician is reactive and does little to further the articulated goal."

The judge also shot down Jarrell's argument that lack of malpractice insurance should be disclosed to a prospective patient, and that by not doing so a patient can sue under the theory of informed consent.

"The validity of the consent obtained from a patient normally is confined to a disclosure of the risks associated with the recommended procedure and alternative procedures or therapies," Cuff wrote in the 5-2 opinion.

As for holding the medical facility culpable for hiring Kaul when he had shoddy malpractice insurance, Cuff disagreed with the lower court and wrote that MSSC did not do enough to verify that Kaul's insurance policy was comprehensive.

In a partially dissenting opinion, Justice Barry Albin noted that Kaul was credentialed only as an anesthesiologist and was therefore not insured to perform spinal surgery, which gave Jarrell an actionable claim.

"No reasonable patient would consent to spinal surgery knowing that his physician lacks malpractice insurance to perform that procedure," Albin wrote.

Albin wrote that it was "remarkable" that a patient could not sue a doctor who admitted to being uninsured for the performed procedure.

"The application of the common law to this claim of lack of informed consent would have been an unremarkable extension of our jurisprudence," wrote Albin, who was joined in the five-page dissenting opinion by New Jersey Supreme Court Chief Justice Stuart Rabner.

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