SYLLABUS

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the 

convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the 

interest of brevity, portions of any opinion may not have been summarized.)

James R. Jarrell, et al. v. Richard A. Kaul, M.D., et al. (A-42-13) (072363)

Argued October 20, 2014 -- Decided September 29, 2015

CUFF, P.J.A.D. (temporarily assigned), writing for a majority of the Court.

In these appeals, the Court examines three issues related to the statutory requirement that physicians 

licensed to practice medicine in New Jersey must obtain and maintain medical malpractice liability insurance 

pursuant to N.J.S.A. 45:9-19.17. Specifically, the court considers whether: (1) an injured patient may bring a direct 

action against a negligent, uninsured physician; (2) failure to comply with the statutory liability insurance mandate 

gives rise to an informed consent claim; and (3) a health care facility that grants privileges to a physician to use its 

facilities to treat patients has a continuing duty to ascertain a physician’s compliance with the insurance requirement.

In September 2005, plaintiff James Jarrell, who suffered from chronic back pain, was referred to defendant 

Dr. Richard A. Kaul, a board certified anesthesiologist who practiced at defendant Market Street Surgical Center 

(MSSC). In October 2005, Dr. Kaul performed a spinal fusion procedure on Jarrell. Following the surgery, Jarrell 

experienced new pain in his left side that worsened over time and led to a “drop foot.” In January 2006, Jarrell was 

examined by a board certified neurosurgeon, who concluded that the pain and drop foot were caused by Dr. Kaul’s 

improper placement of some screws that pinched a nerve. At the time of the October 2005 procedure, Dr. Kaul had 

a malpractice insurance policy that specifically excluded spinal surgery. Although he claimed to have $500,000 in 

liquid assets, he did not have a letter of credit in that amount. The Board of Medical Examiners (BME) revoked Dr. 

Kaul’s license to practice medicine in 2012.

Jarrell and his wife (collectively, plaintiffs) filed a complaint against Dr. Kaul and MSSC. On summary 

judgment, the court found that there was no cause of action against Dr. Kaul for deceit, misrepresentation, lack of 

informed consent, or battery based on his failure to maintain insurance. The trial court also dismissed plaintiffs’ 

claims against MSSC because they lacked an expert who would testify that MSSC deviated from accepted standards 

of medical care by failing to properly ascertain Dr. Kaul’s credentials and by permitting an uninsured physician to 

perform spinal procedures in its facility. Trial proceeded against Dr. Kaul limited to the issue of medical 

negligence, and the jury found that Dr. Kaul negligently performed the spinal fusion, which proximately caused 

Jarrell’s injury.

Dr. Kaul appealed and plaintiffs cross-appealed. The Appellate Division affirmed the summary judgment 

orders, the jury verdict, and the damages award. The panel held that the trial court properly dismissed all claims 

against Dr. Kaul based on his lack of insurance because N.J.S.A. 45:9-19.17 does not provide a private cause of 

action for injured parties. For the same reasons, the panel concluded that N.J.S.A. 45:19-17(b), does not permit a 

direct action by a patient against a surgical center that permits an uninsured or underinsured physician to use its 

facilities. This Court denied Dr. Kaul’s petition for certification, but granted plaintiffs’ cross-petition. 216 N.J. 366 

(2013).

 

HELD: Under N.J.S.A. 45:9-19.17, an injured patient does not have a direct cause of action against a physician 

who does not possess medical malpractice liability insurance or a suitable letter of credit. Moreover, failure to 

comply with the statutory liability insurance mandate does not give rise to an informed consent claim. Finally, a 

cause of action for negligent hiring may be asserted against a health care facility that grants privileges to a physician 

who has not complied with the statutorily required insurance provisions. 

1. Beginning in 1998, the Legislature required physicians to maintain medical malpractice liability insurance. If a 

physician could not obtain insurance, he or she could post a letter of credit. The statute, N.J.S.A. 45:9-19.17, was 

later amended to require physicians to maintain insurance in the amount of at least $1 million per occurrence and $3 

million per policy year, or to post a letter of credit for $500,000. The intent of these provisions is to ensure that 

citizens will have some recourse for adequate compensation in the event of medical malpractice. (pp. 12-16)

 

2. While both the statute and its implementing regulations expressly provide that a physician who does not obtain 

medical malpractice insurance or a suitable letter of credit is subject to disciplinary action by the BME and civil 

penalties, neither expressly provides that an injured patient has a direct cause of action against a treating physician 

who does not comply with the statutory requirements. However, although courts should hesitate to recognize any 
2

unmentioned remedy, both the United States Supreme Court and this Court have held that a statute may implicitly 

create a private cause of action. (pp. 16-18) 

3. In order to determine whether an implicit private cause of action exists here, the Court considers the legislative 

history and statutory language. The Court finds that the BME was expressly deemed the intended vehicle to ensure 

compliance with the statutory requirements, a choice which reflects a legislative decision to encourage and force 

compliance, rather than wait for a complaint by an injured patient. A post-injury direct claim is reactive and does 

little to further the goal of creating a source of compensation for patients injured by negligent medical care. Thus, 

the Court concludes that N.J.S.A. 45:9-19.17 neither expressly nor implicitly recognizes a direct cause of action by 

an injured patient against a physician who fails to obtain the statutorily required medical malpractice liability 

insurance or letter of credit. (pp. 18-21) 

4. The Court next turns to the question of informed consent, which is a negligence concept predicated on a 

physician’s duty to disclose material information that will allow a patient to intelligently assess the nature and risks 

of a proposed treatment or procedure. A risk is material if a reasonable patient would likely attach significance to it 

in deciding whether to forego the treatment. The validity of the consent obtained from a patient normally is 

confined to disclosure of the associated risks, but consent may, in certain circumstances, be vitiated by a physician’s 

significant misrepresentations of credentials or experience. In such circumstances, a plaintiff must show that the 

physician’s more limited experience or credentials could have substantially increased the risk and that the increased 

risk would cause a reasonably prudent patient not to consent. A physician’s failure to comply with N.J.S.A. 45:9-

19.17 is not a perfect fit with this jurisprudence since it does not necessarily mean that the physician is unskilled and 

since lack of insurance bears no relation to the risks attendant to a proposed treatment or procedure. The Court 

discerns no principled reason to depart from its prior jurisprudence and extend the relief that the informed consent 

doctrine may provide to an injured patient in order to address the financial insecurity of a physician. (pp. 21-31)

5. Turning to plaintiffs’ claim that MSSC had a duty to limit the use of its facility only to those physicians who 

satisfy the statutory insurance requirements, the Court notes that, generally, a person who engages an independent 

contractor is not liable for the negligence of that contractor. An exception is made if the contractor is incompetent, 

although liability is limited to the physical harm that is caused. In cases invoking this exception, lack of financial 

responsibility, including the absence of insurance, was not considered as indicative of incompetence. However, 

when a task requires specific permits or licenses, retention of a contractor without those necessary credentials 

subjects the business to liability for hiring an incompetent contractor. Likewise, granting privileges to a physician

lacking the appropriate credentials also exposes a health care facility to liability. (pp. 31-41)

6. Here, the basic element of competency for any physician seeking surgical privileges at MSSC’s facility is 

possession of a license to practice medicine in New Jersey, and an essential condition for such a license is 

possession of a medical malpractice liability insurance policy or an acceptable letter of credit. MSSC had an initial 

duty to ascertain that Dr. Kaul possessed the requisite license and a continuing duty to assure that his license was 

maintained. The record reveals that MSSC knew that Dr. Kaul possessed an insurance policy that expressly 

excluded the procedure performed on Jarrell. Although Dr. Kaul asserted that he had advised the BME and MSSC 

that he possessed sufficient assets to satisfy the alternative letter of credit requirement, such a representation does 

not satisfy the regulatory definition of a letter of credit. Moreover, the record is barren of any evidence that the 

BME accepted this representation. Consequently, since discovery is required to clarify several issues integral to 

plaintiffs’ negligent hiring claim, the trial court erred in granting summary judgment in favor of MSSC. (pp. 41-44)

The judgment of the Appellate Division is AFFIRMED IN PART and REVERSED IN PART, and the 

matter is REMANDED for further proceedings consistent with the Court’s opinion.

JUSTICE ALBIN, DISSENTING IN PART and CONCURRING IN PART, joined by CHIEF 

JUSTICE RABNER, expresses the view that the facts here present the quintessential case of lack of informed 

consent, and that a logical extension of New Jersey’s informed consent jurisprudence would permit a cause of action 

if a plaintiff established four elements: (1) the physician was uninsured to perform the medical procedure; (2) the 

physician failed to inform the patient that he was uninsured; (3) the patient would not have undergone the procedure 

if properly informed; and (4) the plaintiff can prove damages.

JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, and SOLOMON join in JUDGE 

CUFF’s opinion. JUSTICE ALBIN filed a separate opinion dissenting in part and concurring in part, in 

which CHIEF JUSTICE RABNER joins. 
1

SUPREME COURT OF NEW JERSEY

A-42 September Term 2013

072363

JAMES R. JARRELL and SHEILA 

G. JARRELL, his wife,

Plaintiffs-Appellants,

v.

RICHARD A. KAUL, M.D. and

MARKET STREET SURGICAL 

CENTER,

Defendants-Respondents,

and

JOHN T. FORD, SUSSEX COUNTY 

TOTAL HEALTH CENTER, INC.,

Defendants.

Argued October 20, 2014 – Decided September 29, 2015

On certification to the Superior Court, 

Appellate Division.

Lewis Stein argued the cause for appellants

(Nusbaum, Stein, Goldstein, Bronstein & 

Kron).

Jeffrey B. Randolph argued the cause for 

respondent Richard A. Kaul, M.D.

Peter E. Rhatican argued the cause for 

respondent Market Street Surgical Center.

Abbott S. Brown argued the cause for amicus

curiae New Jersey Association for Justice 

(Lomurro, Davison, Eastman and Munoz, 

attorneys; Mr. Brown and Christina Vassiliou 

Harvey, on the brief).
2

JUDGE CUFF (temporarily assigned) delivered the opinion of 

the Court.

In this appeal, we examine three issues related to the 

statutory requirement that physicians licensed to practice 

medicine in New Jersey and providing medical care in this State

must obtain and maintain medical malpractice liability 

insurance. The first issue presented in this appeal is whether 

an injured patient may bring a direct action against a 

negligent, uninsured physician. The second issue is whether a 

physician has a duty to advise a prospective patient that he is 

in compliance with the statutory medical malpractice liability 

insurance requirement and whether the failure to obtain such 

insurance gives rise to a lack of informed consent claim. The 

third issue is whether a health care facility that grants 

privileges to a physician to use its facilities to treat

patients has a continuing duty to ascertain a physician’s 

compliance with the insurance requirement.

Plaintiff James R. Jarrell sought treatment for persistent 

pain in his back from defendant Dr. Richard A. Kaul, a board 

certified anesthesiologist. The doctor performed a spinal 

fusion procedure at a surgical center. At the time of the 

operation, Dr. Kaul was required to have medical malpractice 

liability insurance or to have posted a letter of credit. The 

medical malpractice liability insurance issued to him expressly 
3

excluded spinal surgical procedures. Dr. Kaul instead maintains 

that he produced a suitable letter of credit. 

The surgery performed by Dr. Kaul actually increased

Jarrell’s discomfort, so he sought treatment from another 

physician. Another surgeon performed a surgical revision of the 

procedure performed by Dr. Kaul.

Jarrell and his wife, Sheila, filed a complaint alleging 

that Dr. Kaul negligently performed the initial spinal

procedure, and they sought compensatory damages for pain and 

suffering and economic losses caused by the physician’s 

negligence. They also asserted a direct claim against Dr. Kaul 

based on his status as an uninsured physician at the time he 

treated Jarrell. Based on Dr. Kaul’s lack of liability 

insurance, plaintiffs also asserted claims seeking damages for 

misrepresentation, fraud, deceit, and lack of informed consent. 

They also asserted a negligent hiring claim against the facility 

where Dr. Kaul performed the surgery. Jarrell’s wife asserted a 

loss of consortium claim. Only the negligence claim proceeded 

to trial. A jury awarded $500,000 to Jarrell and $250,000 to 

his wife. All of the other claims were dismissed prior to 

trial. 

Although it is undisputed that Dr. Kaul was uninsured for 

the procedure he performed on Jarrell, we affirm the dismissal 

of Jarrell’s direct claim against the physician for his failure 
4

to maintain insurance. The statute imposing the medical 

malpractice liability insurance requirement does not expressly 

authorize a direct action against a noncompliant physician and 

neither the language nor the purpose of the statute supports 

such a claim. 

Although a reasonably prudent patient may consider a 

physician’s compliance with the statutorily imposed liability 

insurance requirement material information, lack of compliance 

or failure to disclose compliance does not necessarily provide 

the predicate for an informed consent claim. Indeed, using the 

informed consent doctrine to address the financial insecurity of 

a physician and the inability of a patient to satisfy a judgment 

or to fund a settlement would represent a marked departure from 

our prior informed consent jurisprudence. We decline to follow 

that course. 

Finally, we hold that a health care facility that grants 

privileges to physicians has a continuing duty to ensure that

those physicians have and maintain the required medical 

malpractice liability insurance or have posted a suitable letter 

of credit that conforms with the statutory requirement.

I.

Jarrell suffered from chronic back pain for many years. 

His chiropractor referred him to Dr. Kaul, a board certified 

anesthesiologist, in September 2005. Dr. Kaul’s practice 
5

focused on pain management and minimally invasive spinal 

procedures. In 2005, Dr. Kaul saw patients and performed 

procedures at Market Street Surgical Center (MSSC) in Saddle 

Brook several times a week. Dr. Kaul also served as the Medical 

Director of MSSC until 2007. 

Dr. Kaul diagnosed Jarrell with a herniated lumbar disc, 

lumbar radiculopathy, and discogenic back pain. On October 11, 

2005, Dr. Kaul performed a spinal fusion procedure in which he 

fused the L4, L5, and S1 vertebrae using two mesh cages attached 

by rods and pedicle screws. Immediately following the surgery, 

Jarrell experienced new pain in his left side that worsened over 

time and eventually led to a “drop foot,”1 causing him to fall.

A friend referred Jarrell to Dr. Alfred Steinberger, a 

board certified neurosurgeon, in January 2006. Following an 

examination and diagnostic tests, Dr. Steinberger concluded that 

Dr. Kaul improperly placed some screws that pinched a nerve 

causing the pain and drop foot. On January 31, 2006, Dr. 

Steinberger removed and replaced the fixation devices implanted 

by Dr. Kaul in October 2005. Jarrell’s pain decreased 

immediately following the second procedure; however, at the time 

 

1 “Drop foot” is “a general term for difficulty lifting the front 

part of the foot. If you have foot drop, you may drag the front 

of your foot on the ground when you walk.” Mayo Clinic Staff, 

Diseases and Conditions: Foot drop, MayoClinic.org (last 

visited June 19, 2015), www.mayoclinic.org/diseaseconditions/foot-drop/basics/definition/con-20032918.
6

of his January 2012 trial, he still required pain medication, 

including fentanyl patches, and his physical activity was 

limited. 

Dr. Kaul was educated in England, where he practiced as a 

dental anesthesiologist. He relocated to New Jersey and 

obtained a license to practice medicine in 1995. Thereafter, he 

commenced a pain management practice and performed various 

spinal procedures, including the spinal fusion procedure he 

conducted on Jarrell. 

At the time of the October 2005 spinal procedure, Dr. Kaul 

had a malpractice insurance policy that specifically excluded 

spinal surgery. He claimed to have $500,000 in liquid assets 

but did not have a letter of credit from a bank or other 

financial institution. Dr. Kaul did not discuss his insurance 

coverage, or lack thereof, with Jarrell or his wife. Neither 

Jarrell nor his wife inquired about Dr. Kaul’s insurance 

coverage. 

The Board of Medical Examiners (BME)2 revoked Dr. Kaul’s

license to practice medicine in 2012. 

II.

Jarrell and his wife filed a nine-count complaint in the 

Superior Court against Dr. Kaul and MSSC. Jarrell asserted a 

 

2 The BME is the administrative body that regulates the practice 

of medicine in this State.
7

claim against Dr. Kaul for medical negligence alleging that he

departed from accepted standards of medical care in his choice 

of procedure and his selection of medical devices for use in the 

surgery. (Count One). Jarrell further alleged that Dr. Kaul 

misrepresented his qualifications and training, thereby 

wrongfully obtaining his informed consent for the surgery.

(Count Two). Jarrell also claimed that MSSC negligently and 

unreasonably facilitated performance of an unauthorized surgical 

procedure by an unqualified physician. (Count Five). His wife

asserted a loss of consortium claim. (Count Seven). 

Jarrell also alleged that Dr. Kaul performed the October 

2005 surgical procedure without the statutorily required 

malpractice insurance or letter of credit and withheld this 

information from him. He alleged that Dr. Kaul’s noncompliance 

formed the basis for a claim sounding in deceit, fraudulent 

misrepresentation, and lack of informed consent (Count Eight),

as well as a battery claim (Count Nine). Plaintiffs also 

asserted claims against John T. Ford and Sussex County Total 

Health Center, Inc. (Counts Three and Four), which were 

dismissed.

Plaintiffs’ motion for summary judgment based on Dr. Kaul’s 

failure to carry medical malpractice insurance that covered the 

spinal procedure performed on Jarrell was denied. The motion 

judge reasoned that Dr. Kaul had informed the BME that he had 
8

substantially complied with the statutory requirement, and the 

BME had not placed any limits on his license to practice 

medicine. Plaintiffs renewed this motion immediately prior to 

trial and Dr. Kaul filed a cross-motion for summary judgment. 

The trial court granted Dr. Kaul’s cross-motion. The court 

reasoned that Basil v. Wolf, 193 N.J. 38 (2007), precluded any

form of direct action against Dr. Kaul for failing to maintain 

insurance. The court held that there was no cause of action 

against Dr. Kaul for deceit, misrepresentation, lack of informed 

consent, and battery based on the failure to maintain insurance. 

The trial court also dismissed plaintiffs’ claims against MSSC 

because plaintiffs lacked an expert who would testify that MSSC 

deviated from accepted standards of medical care by failing to 

properly ascertain Dr. Kaul’s credentials and permitting an 

uninsured and unqualified physician to perform spinal procedures 

in its facility. 

Trial proceeded solely against Dr. Kaul limited to the 

issue of medical negligence. The jury found that Dr. Kaul 

negligently performed the October 2005 spinal fusion and his 

negligence proximately caused injury to Jarrell. The jury 

awarded $500,000 in damages to Jarrell for his pain, suffering,

and disability, and $250,000 to his wife for loss of consortium.

All post-trial motions for a new trial or remittitur were 

denied. 
9

Dr. Kaul appealed, arguing that significant trial errors 

required a reversal of the judgment and a new trial. Plaintiffs 

filed a cross-appeal contending that the trial court erroneously 

denied their motion for summary judgment and erroneously granted 

partial summary judgment in favor of Dr. Kaul based on Dr. 

Kaul’s lack of insurance. They also contended that the trial 

court erred in granting summary judgment in favor of MSSC based 

on Dr. Kaul’s credentials and lack of insurance. 

In an unreported opinion, the Appellate Division affirmed 

the summary judgment orders, the jury verdict, and the damages 

award. The appellate panel held that the trial court properly 

dismissed all claims against Dr. Kaul based on his lack of 

insurance because N.J.S.A. 45:9-19.17 does not provide a private 

cause of action for injured patients. The panel based this 

decision largely on this Court’s opinion in Basil, supra, 193 

N.J. at 72, in which the Court stated that the statutory medical 

malpractice insurance requirement placed noncompliant physicians 

on notice only that they may be subject to disciplinary action 

by the BME. For the same reasons, the panel concluded that 

N.J.S.A. 45:9-19.17(b) does not permit a direct action by a 

patient against a surgical center that permits an uninsured or 

underinsured physician to use its facilities. 

This Court denied Dr. Kaul’s petition for certification but 

granted plaintiffs’ cross-petition. Jarrell v. Kaul, 216 N.J.
10

366 (2013). The Court also admitted the New Jersey Association 

for Justice (NJAJ) to appear as amicus curiae. 

III.

Plaintiffs urge that the Appellate Division’s reliance on 

Basil was misplaced. They contend that the discussion on which 

it relied to foreclose a direct cause of action against Dr. Kaul 

due to his lack of medical malpractice insurance is mere dicta. 

They also urge this Court to draw a distinction between “mere 

negligent failure to maintain malpractice insurance versus gross 

negligence or intentional concealment, deceit, and lack of 

informed consent (battery).” They request that the Court 

reconsider its position in Basil because the Court did not 

consider whether the statute requiring medical malpractice 

insurance implicitly authorized a direct action by a patient 

against an uninsured physician. Plaintiffs urge that 

application of the three-prong analysis set forth in In re 

Resolution of State Commission of Investigation, 108 N.J. 35 

(1987), leads to the conclusion that the Legislature implicitly 

created a private right of action. Therefore, plaintiffs argue 

that all claims premised on Dr. Kaul’s lack of insurance must be 

reinstated. 

Finally, plaintiffs maintain that Howard v. University of 

Medicine & Dentistry of New Jersey, 172 N.J. 537 (2002),

suggests that an informed consent claim against Dr. Kaul should 
11

be permitted. They contend that the ability of a physician to 

compensate a patient in the event of negligence is information 

that would be material to the reasonably prudent patient 

selecting a surgeon.

As to MSSC, plaintiffs urge that the Appellate Division 

misunderstood their claim against the facility. Plaintiffs 

contend that they did not assert a respondeat superior or any 

theory of vicarious liability against MSSC. Rather, they 

maintain that their claim against MSSC is premised on a duty of 

the surgical center to ensure that surgeons who perform 

procedures in its facility are qualified to perform those 

procedures and those qualifications include proper insurance or 

other suitable financial security. 

Dr. Kaul responds that his lack of insurance does not 

permit a private right of action by injured patients. He 

further contends that there is no legal basis to support 

plaintiffs’ theory that lack of insurance vitiates any consent 

to perform a procedure. Furthermore, he claims that although 

the policy of insurance excluded spinal surgery, he maintained 

insurance at the time of the surgery performed on Jarrell and he 

held sufficient financial assets at the time to comply with the 

statute. 

MSSC contends that plaintiffs are attempting to establish a 

new duty for health care facilities that will expose them to 
12

“financial ruin.” It argues that N.J.S.A. 45:9-19.17 does not 

impose on health care facilities the duty to enforce the 

insurance requirement, and the BME has not adopted regulations 

requiring such action. It urges that the Appellate Division 

judgment barring a direct negligence claim against it based on

the credentialing process should be affirmed.

Amicus NJAJ asserts that this appeal presents an 

opportunity for this Court to hold as a matter of law and sound 

public policy that patients’ right to informed consent includes 

the right to know if their physician possesses insurance that 

covers the procedure for which consent is sought. Furthermore, 

every medical facility should be obliged to confirm on a regular 

basis that the physicians who have been granted privileges to

perform procedures have the minimum amount of insurance coverage

required by statute and that the insurance covers all procedures 

performed at the facility by the physician. 

IV.

The Legislature first required physicians to maintain 

medical malpractice liability insurance in 1998. L. 1997, c.

365. The obligation extended to those physicians who were 

licensed in this State and who treated patients in this State. 

Id. at § 1. The 1998 legislation also permitted a physician to 

post a letter of credit if medical malpractice liability 

insurance was not available. Ibid. In addition, the 
13

Legislature delegated to the BME3 the authority to establish the 

minimum amounts per occurrence and per policy year of the 

required coverage. Ibid. The BME adopted a regulation that 

required physicians to maintain “insurance in the sum of $1 

million per occurrence and $3 million dollars per policy year.” 

N.J.A.C. 13:35-6.18(a).

In 2004, the Legislature amended the statute. The 

legislation established the minimum amount of medical 

malpractice liability insurance that a physician must obtain and 

maintain at $1,000,000 per occurrence and $3,000,000 per policy 

year. L. 2004, c. 17, § 25. The Legislature also set the 

minimum amount of the letter of credit at $500,000 and 

authorized the BME to require higher amounts for both insurance 

and the letter of credit. Ibid. It has not done so. See

N.J.A.C. 13:35-6.18 (establishing minimum amounts per occurrence 

and per policy year at $1,000,000 and $3,000,000 respectively 

and $500,000 for letter of credit). 

Codified as N.J.S.A. 45:9-19.17, the statute provides as 

follows: 

a. A physician who maintains a 

professional medical practice in this State 

and has responsibility for patient care is 

required to be covered by medical malpractice 

liability insurance issued by a carrier 

authorized to write medical malpractice 

 

3 The BME is the agency responsible for the licensure and discipline 

of licensed physicians in this State. N.J.S.A. 45:9-1, -2.
14

liability insurance policies in this State, in 

the sum of $1,000,000 per occurrence and 

$3,000,000 per policy year and unless renewal 

coverage includes the premium retroactive 

date, the policy shall provide for extended 

reporting endorsement coverage for claims made 

policies, also known as “tail coverage,” or, 

if such liability coverage is not available, 

by a letter of credit for at least $500,000.

The physician shall notify the State 

Board of Medical Examiners of the name and 

address of the insurance carrier or the 

institution issuing the letter of credit, 

pursuant to section 7 of P.L. 1989, c. 300 

([N.J.S.A.] 45:9-19.7).

b. A physician who is in violation of 

this section is subject to disciplinary action 

and civil penalties pursuant to sections 8, 9 

and 12 of P.L. 1978, c. 73 ([N.J.S.A.] 45:1-

21 to 22 and 45:1-25).

c. The State Board of Medical Examiners 

may, pursuant to the “Administrative Procedure 

Act,” P.L. 1968, c. 410 ([N.J.S.A.] 52:14B-1 

et seq.), establish by regulation, minimum 

amounts for medical malpractice liability 

insurance coverage and lines of credit in 

excess of those amounts required pursuant to 

subsection a. of this section.

d. The State Board of Medical Examiners 

shall notify all physicians licensed by the 

board of the requirements of this section 

within 30 days of the date of enactment of 

P.L. 2004, c. 17.

The statement of the Assembly Health Committee accompanying the 

1998 bill provided that the intent of the bill was “to ensure 

the citizens of the State that they will have some recourse for 

adequate compensation in the event that a physician or 
15

podiatrist is found responsible for acts of malpractice.”

Assembly Health Comm., Statement to S. 267 (Sept. 19, 1996).

The BME adopted implementing regulations on April 5, 1999, 

which defined key phrases including “[m]aintaining a 

professional practice with responsibility for patient care,”

“[l]etter of credit,” and “[n]ot available.” N.J.A.C. 13:35-

6.18(a). A “[l]etter of credit” is defined as “a nonassignable, non-transferrable, unexpired, continuous irrevocable 

obligation, liability bond or other instrument issued by a bank 

or savings association authorized to do business in this State.”

Ibid. Coverage is “[n]ot available” when the physician is 

unable to purchase insurance coverage from a carrier authorized 

to write it; however, insurance coverage that is unaffordable is 

still considered available. Ibid. 

A physician who does not have medical malpractice insurance 

must present to the BME a letter of credit in the amount of 

$500,000, N.J.A.C. 13:35-6.18(b), and must promptly notify the 

BME if a demand for payment on the letter has been made or the 

continuing viability of the letter has been compromised, 

N.J.A.C. 13:35-6.18(d)(1)-(2). The failure of a physician 

obliged to obtain medical malpractice liability insurance or a 

letter of credit as required by the regulation is considered 

professional misconduct, N.J.A.C. 13:35-6.18(e), and he or she 

is subject to discipline in accordance with N.J.S.A. 45:1-21(e). 
16

Such discipline may include revocation or suspension of the 

physician’s license to practice medicine in this State. See

N.J.S.A. 45:1-21. 

It is against this statutory and regulatory backdrop that 

we examine the three issues presented in this appeal.

V.

We commence our discussion of whether N.J.S.A. 45:9-19.17 

bestows on an injured patient a private right of action against 

a physician who does not obtain or maintain statutorily required 

medical malpractice insurance4 with an examination of the express 

language of the statute and the regulations adopted by the BME 

implementing this requirement. As set forth above, the express 

terms of N.J.S.A. 45:9-19.17 provide that a physician who 

obtains neither a policy of medical malpractice insurance nor a 

letter of credit is subject to disciplinary action by the BME 

and civil penalties. The implementing regulations reflect this 

legislative decision. See N.J.A.C. 13:35-6.18(e). Neither the 

statute nor the implementing regulations expressly provide that 

an injured patient has a direct cause of action against a 

treating physician who does not comply with the statutory 

financial responsibility provisions.

 

4 When we refer to the requirement to maintain medical 

malpractice liability insurance, we include by implication the 

letter of credit alternative. See N.J.S.A. 45:9-19.17(a).
17

Both the United States Supreme Court and this Court have 

held that a statute that does not expressly create a private 

cause of action may, nonetheless, implicitly create one. See

Cort v. Ash, 422 U.S. 66, 78, 95 S. Ct. 2080, 2088, 45 L. Ed. 2d 

26, 36 (1975) (addressing whether statute imposing criminal 

liability on corporation making political contributions created 

private right of action); State Comm’n of Investigation, supra,

108 N.J. at 40-41 (addressing whether subjects of investigation 

may seek enforcement of confidentiality obligations of 

investigatory agency). This Court employs a three-prong test 

that inquires 

[1] whether the plaintiff is “one of the class 

for whose especial benefit the statute was 

enacted”; [2] whether there is any evidence 

that the Legislature intended to create a 

private cause of action under the statute; and 

[3] whether implication of a private cause of 

action in this case would be “consistent with 

the underlying purposes of the legislative 

scheme.”

[State Comm’n of Investigation, supra, 108 

N.J. at 41 (citations omitted) (quoting Cort, 

supra, 422 U.S. at 78, 95 S. Ct. at 2088, 45 

L. Ed. 2d at 36).]

Through this inquiry the Court seeks to ascertain the 

underlying legislative intent. Jalowiecki v. Leuc, 182 N.J. 

Super. 22, 30 (App. Div. 1981). When the Legislature has 

expressly created specific remedies, a court should always 

hesitate to recognize another unmentioned remedy. See 
18

Transamerica Mortg. Advisors, Inc. v. Lewis, 444 U.S. 11, 19, 

100 S. Ct. 242, 247, 62 L. Ed. 2d 146, 154-55 (1979). Stated 

differently, “[i]n the absence of strong indicia of a contrary 

[legislative] intent, we are compelled to conclude that [the 

Legislature] provided precisely the remedies it considered 

appropriate.” Middlesex Cnty. Sewerage Auth. v. Nat’l Sea 

Clammers Ass’n, 453 U.S. 1, 15, 101 S. Ct. 2615, 2623, 69 L. Ed.

2d 435, 447 (1981). 

There is scant legislative history associated with N.J.S.A.

45:9-19.17. The committee statement accompanying this 

legislation simply states that the insurance requirement is 

designed to ensure a source of some compensation in the event of 

medical negligence. Assembly Health Comm., Statement to S. 267, 

supra. Notably, N.J.S.A. 45:9 generally regulates the practice 

of medicine and further requires physicians to undertake certain

health-related tasks. For example, N.J.S.A. 45:9-19.11

immunizes members of the BME from liability for actions taken in 

the course of their administrative obligations, and N.J.S.A.

45:9-22.3(b) immunizes a physician from liability for failing to 

distribute a breast cancer information booklet to a patient. 

These instances suggest that the Legislature was content to 

entrust oversight of these responsibilities to the BME.

In Basil, supra, this Court noted that N.J.S.A. 45:9-19.17,

when originally adopted in 1998, did not authorize a direct 
19

action against an uninsured physician. 193 N.J. at 71, 72. We 

reached that conclusion in the context of the statutory and 

regulatory scheme in place at the time the defendant physician

examined the plaintiff. Id. at 71-72, 73. Notably, until the 

BME adopted regulations in 1999 to implement the 1998 statute, 

including a definition of “maintaining a professional practice 

with responsibility for patient care,”5 it was not abundantly 

clear that physicians who simply performed independent medical 

examinations, such as the defendant physican, were required to 

maintain medical malpractice liability insurance. Id. at 71-72. 

Following the adoption of the regulations, however, “all 

practitioners . . . were on notice that . . . any physician who 

does not satisfy the insurance requirement would be incompetent 

to practice his profession.” Id. at 72. Here, at the time Dr. 

Kaul treated plaintiff, there was no question that he was 

required to maintain liability insurance. 

Applying the three-part test adopted by this Court in State 

Commission of Investigation, we determine that N.J.S.A. 45:9-

19.17 does not create, expressly or implicitly, a direct cause 

of action by a patient against a noncompliant treating 

physician. To be sure, a patient, such as Jarrell, may receive 

a direct benefit by virtue of the availability of insurance to 

 

5 N.J.A.C. 13:35-6.18.
20

provide a source of funds to recompense for negligent care. On 

the other hand, there is no evidence that the Legislature

contemplated that enforcement of its determination -- that

physicians providing medical care in this State must be insured

-- would be advanced by bestowing a direct cause of action on an 

injured patient. To the contrary, the Legislature expressly 

concluded that the administrative agency charged with regulating 

the licensure and discipline of physicians -- the BME -- would 

be the most likely vehicle to ensure compliance with the 

liability insurance requirement. 

It is difficult to quarrel with this approach. A physician 

is prohibited from providing medical care in New Jersey without 

a license, and the BME will not issue a license unless a 

physician establishes financial responsibility. Noncompliance 

is considered professional misconduct and the BME has the 

authority to suspend or revoke a license to practice medicine of

a noncompliant physician. Administrative oversight and 

enforcement is the declared enforcement mechanism and that 

choice reflects a legislative decision to encourage and force

compliance rather than wait for a complaint by an injured 

patient that may never be filed. 

The underlying purpose of the legislation is predominately 

proactive. The legislative intent is to create a source of 

compensation for a patient injured by negligent medical care. A 
21

post-injury direct claim against a noncompliant and negligent 

physician is reactive and does little to further the articulated 

goal.

We therefore conclude that N.J.S.A. 45:9-19.17 does not 

expressly, and cannot be read to implicitly, recognize a direct 

cause of action by an injured patient against a physician who 

fails to obtain the statutorily required medical malpractice 

liability insurance or letter of credit. The Appellate Division 

judgment that rejected such a cause of action is affirmed. 

VI.

In Count Eight of the amended complaint, plaintiffs allege 

that Dr. Kaul knew that he was uninsured at the time that he 

obtained Jarrell’s consent to perform surgery. Jarrell alleged 

that Dr. Kaul’s uninsured status “would have been significant in 

[his] decision-making.” Plaintiffs asserted that the failure to 

disclose this information constitutes “deceit, misrepresentation 

and outrageous conduct.”

Before the trial court and on appeal, plaintiffs argued 

that the claims asserted in the amended complaint, as they 

pertained to Dr. Kaul’s lack of insurance, implicated the 

doctrine of informed consent.6 All of the claims asserted by 

plaintiffs against Dr. Kaul, other than the medical malpractice 

 

6 In Count Two, plaintiffs alleged that Dr. Kaul misrepresented 

his professional training and experience.
22

claim asserted in Count One, were construed as direct claims

under the statute cast in various guises against Dr. Kaul based 

on his lack of financial responsibility. As a result, neither 

the trial court nor the appellate panel considered whether the 

absence of statutorily required medical malpractice liability 

insurance may be information that a reasonably prudent patient

would consider material to his or her decision to proceed with a 

course of medical treatment or surgical procedure. 

Plaintiffs argue that the existence, or absence, of medical 

malpractice insurance is as important a piece of information as

are the risks attendant to the medical treatment recommended by 

a physician. They insist that a discussion of the nature and 

risks of the treatment and the risks associated with failing to 

pursue a particular course of treatment is incomplete and any 

decision to pursue or reject a certain course of treatment 

cannot be considered informed if the physician fails to advise 

the patient that he does not possess the statutorily required 

medical malpractice insurance. Dr. Kaul responds that a 

physician’s duty to obtain informed consent from a patient prior 

to undertaking medical treatment is limited to the risks 

associated with the treatment, not whether a patient may have a 

source to pay a monetary judgment in the event the physician 

negligently discharges his professional duties. 
23

In Largey v. Rothman, 110 N.J. 204 (1988), the Court 

observed that the origins of the duty of a physician to obtain a 

patient’s consent to a medical procedure can be traced to the 

eighteenth century. Id. at 207 (citing Slater v. Baker & 

Stapleton (1767), 95 Eng. Rep. 860 (K.B.)). In In re Conroy, 98 

N.J. 321 (1985), this Court stated that “‘[e]very human being of 

adult years and sound mind has a right to determine what shall 

be done with his own body; and a surgeon who performs an 

operation without his patient’s consent commits an assault for 

which he is liable in damages.’” Id. at 346 (quoting

Schloendorff v. Soc’y of N.Y. Hosp., 105 N.E. 92, 93 (N.Y.

1914)). 

Informed consent is 

essentially a negligence concept, predicated 

on the duty of a physician to disclose to a 

patient such information as will enable the 

patient to make an evaluation of the nature of 

the treatment and of any attendant substantial 

risks, as well as of available options in the 

form of alternative therapies. 

[Largey, supra, 110 N.J. at 208.] 

If a physician withholds facts that are necessary to form the 

basis of an intelligent consent to proposed treatment, the 

physician has not discharged his duty to the patient. Ibid.; 

see Salgo v. Leland Stanford, Jr. Univ. Bd. of Trs., 317 P.2d 

170, 181 (Cal. Ct. App. 1957). The duty extends to the need to 

provide information to a patient not only about risks attendant 
24

to the proposed treatment but also to alternative treatments or 

therapies and the risks of pursuing no treatment at all. 

Matthies v. Mastromonaco, 160 N.J. 26, 38 (1999). 

Largey, supra, adopted the “prudent patient” or 

“materiality of risk” standard. 110 N.J. at 213. The Court 

recognized that “[t]he foundation for the physician’s duty to 

disclose in the first place is found in the idea that ‘it is the 

prerogative of the patient, not the physician, to determine for 

himself the direction in which his interests seem to lie.’” Id.

at 214 (quoting Canterbury v. Spence, 464 F.2d 772, 781 (D.C. 

Cir.), cert. denied, 409 U.S. 1064, 93 S. Ct. 560, 34 L. Ed. 2d

518 (1972)). Thus, this Court acknowledged a physician’s duty

to “‘warn of the dangers lurking in the proposed treatment’ and 

to ‘impart information [that] the patient has every right to 

expect,’ as well as a duty of ‘reasonable disclosure of the 

choices with respect to proposed therapy and the dangers 

inherently and potentially involved.’” Id. at 211 (alteration 

in original) (quoting Canterbury, supra, 464 F.2d at 782). The 

Court stated that

the scope of the duty to disclose “must be 

measured by the patient’s need, and that need 

is the information material to the decision. 

Thus the test for determining whether a 

particular peril must be divulged is its 

materiality to the patient’s decision: all 

risks potentially affecting the decision must 

be unmasked. And to safeguard the patient’s 

interest in achieving his own determination on 
25

treatment, the law must itself set the 

standard for adequate disclosure.”

[Ibid. (quoting Canterbury, supra, 464 F.2d at 

786-87).]

The breadth of the duty to disclose risks is measured by a 

standard that is not personal to the physician or to the 

patient. Rather, it is an objective standard “‘with due regard 

for the patient’s informational needs and with suitable leeway 

for the physician’s situation.’” Ibid. (quoting Canterbury, 

supra, 464 F.2d at 787). A risk is “material” if the reasonable 

patient “would be ‘likely to attach significance to the risk or 

cluster of risks’ in deciding whether to forego the proposed 

therapy or to submit to it.” Id. at 211-12 (quoting Canterbury, 

supra, 464 F.2d at 787). 

Thus, the Largey Court reversed the verdict in favor of a 

physician, where the trial court instructed the jury to evaluate 

the plaintiff’s informed consent claim in accordance with the 

prevailing “reasonable physician” standard. Id. at 205, 216. 

In the course of deciding that the plaintiff’s informed consent 

claim should be evaluated in accordance with the prudent patient 

standard, the Court stated that 

“[t]he topics importantly demanding a 

communication of information are the inherent 

and potential hazards of the proposed 

treatment, the alternatives to that treatment, 

if any, and the results likely if the patient 

remains untreated. The factors contributing 

significance to the dangerousness of a medical 
26

technique are, of course, the incidence of 

injury and the degree of harm threatened.”

[Id. at 213 (alteration in original) (quoting 

Canterbury, supra, 464 F.2d at 787-88).]

In Matthies, supra, the Court emphasized that a physician 

is required to explain the risks associated with all medically 

reasonable alternatives, including invasive and noninvasive 

treatments. 160 N.J. at 34. In that case, an eighty-one-yearold, partially paralyzed woman living independently fell and 

fractured her hip. Id. at 29-30. Without consulting the

patient or her family, her physician unilaterally decided not to 

surgically repair her fractured hip and placed her on bed rest. 

Id. at 31. The Court emphasized that “the decisive factor [in 

any informed consent analysis] is not whether a treatment 

alternative is invasive or noninvasive, but whether the 

physician adequately presents the material facts so that the 

patient can make an informed decision.” Id. at 36. Dismissing 

the contention that the plaintiff’s position would require a

physician to provide a detailed explanation of every treatment 

option, the Court emphasized that “[t]he standard obligates the 

physician to disclose only that information material to a 

reasonable patient’s informed decision.” Ibid. (citing Largey, 

supra, 110 N.J. at 211-12). Because the physician impermissibly

arrogated to himself the decision concerning which treatment 
27

alternative would be pursued, the Court remanded the matter for 

a new trial. Id. at 34, 41. 

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. The Court has recognized, however, that in certain 

circumstances consent may be vitiated if the physician made 

significant misrepresentations of his credentials or experience. 

In Howard, supra, a neurologist disclosed to the plaintiff the 

significant risks, including paralysis, of the surgery proposed 

to address a large cervical disc herniation. 172 N.J. at 543. 

The plaintiff claimed that the defendant physician informed him 

that he was a board certified physician and in each of the prior 

eleven years had performed sixty procedures similar to the 

procedure he proposed to perform on the plaintiff. Ibid. 

Following the surgery, which left the plaintiff a quadriplegic, 

the plaintiff learned that the defendant neurologist was not 

board certified and had performed the procedure no more than 

twenty-five times. Id. at 544.

The Court acknowledged in Howard that a misrepresentation 

about a physician’s credentials or experience is “not a perfect 

fit” with the prevailing doctrine of informed consent. Id. at 

557. Nevertheless, the Court determined that “the possibility 

of materiality is present” when the physician makes significant 
28

misrepresentations about his credentials and experience when 

discussing the risks associated with the proposed surgical 

procedure, and those misrepresentations may undermine the 

validity of the consent obtained from the patient. Id. at 558. 

The Court stated that

[i]n certain circumstances, a serious 

misrepresentation concerning the quality or 

extent of a physician’s professional 

experience, viewed from the perspective of the 

reasonably prudent patient assessing the risks 

attendant to a medical procedure, can be 

material to the grant of intelligent and 

informed consent to the procedure.

[Id. at 555 (citing 1 Dan B. Dobbs, The Law of 

Torts, § 251 at 660-61 (2001)).]

Thus, to succeed on an informed consent claim based on 

misrepresented credentials and experience, the plaintiff in 

Howard also was required to show that the additional risk posed 

by the physician’s actual credentials and experience increased 

the plaintiff’s risk of paralysis from the procedure. Id. at 

558. That demonstration is guided by two inquiries: first, 

“whether the more limited experience or credentials possessed by 

defendant [physician] could have substantially increased 

plaintiff’s risk of paralysis,” ibid., and second, “whether that 

substantially increased risk would cause a reasonably prudent 

person not to consent to undergo the procedure,” ibid.

Requiring a physician to disclose whether he maintains 

medical malpractice liability insurance, the amount of the 
29

coverage, and any restrictions, reservations, or limitations of 

the insurance coverage, or whether a physician has posted a 

letter of credit with the BME is also “not a perfect fit” with 

our informed consent jurisprudence. 

We recognize that the existence or not of medical 

malpractice liability insurance or the permissible letter of 

credit may be material information for some patients. To 

encourage compliance and to enforce the legislative mandate, the 

BME has adopted regulations that declare that the failure to 

obtain and maintain medical malpractice liability insurance 

constitutes professional misconduct. N.J.A.C. 13:35-6.18(e). 

In addition, a physician’s failure to have the required coverage 

subjects him or her to discipline in accordance with N.J.S.A.

45:9-19.17(b), which may include revocation or suspension of the 

physician’s license to practice medicine in this State. See

N.J.S.A. 45:1-21.

Declaring that failure to comply with the statutory 

requirement to maintain liability insurance is an act of 

professional misconduct, which subjects a physician to 

substantial discipline by the BME, and recognizing that some 

patients would consider the existence or not of such insurance 

material information do not lead inexorably to the conclusion 

that noncompliance with the statutory mandate should give rise 

to an informed consent claim. As explained in Largey, supra,
30

informed consent is predicated on the duty of the physician to 

disclose to the patient the information that will enable the 

patient to make a reasoned evaluation of the nature of the 

proposed treatment, any risks associated with it, and those 

risks associated with any alternative treatments. 110 N.J. at 

208. Yet, there may be many reasons that explain a physician’s 

lack of liability insurance and some of those reasons do not 

necessarily mean that the physician is unskilled to perform the 

proposed procedure or to administer the proposed treatment.7 In 

such circumstances, the absence of insurance bears no relation

to the nature of the proposed medical course or to the risks 

attendant to a proposed procedure or treatment.

To be sure, a patient who has been injured due to negligent 

care by an uninsured physician has sustained a financial loss, 

but such a loss is not the injury that the informed consent 

doctrine ever contemplated. Applying the informed consent 

jurisprudence to the financial consequences of negligent care by 

an uninsured physician untethers the remedy from its theoretical 

underpinnings and is a stark departure from our prior 

 

7 We readily acknowledge in Howard, supra, that even exaggerating 

one’s credentials was “not a perfect fit” with our informed consent 

jurisprudence. 172 N.J. at 557. Nevertheless, we permitted a 

plaintiff to proceed with such a claim if he could establish that 

the actual experience of the physician “could have substantially 

increased plaintiff’s risk of paralysis” and that a patient facing 

that increased risk would not consent to the procedure. Id. at 

558.
31

jurisprudence. We discern no principled reason to extend the 

additional and questionable relief that the informed consent 

doctrine may provide to an injured patient to address the 

financial insecurity of a physician.

VII.

Plaintiffs also asserted a negligence claim against MSSC 

based on its action permitting Dr. Kaul to perform a medical 

procedure for which he was uninsured at its facility. 

Plaintiffs do not seek to hold MSSC vicariously liable for Dr. 

Kaul’s negligent treatment. Rather, they contend that MSSC owed 

a duty to them and others to limit use of its facility only to 

those who satisfy the statutory mandate to obtain and maintain 

the minimum level of medical malpractice liability insurance. 

In essence, plaintiffs asserted a claim of negligent hiring 

against MSSC. 

Generally, a person who engages an independent contractor 

is not liable for the negligence of that contractor. Majestic 

Realty Assocs. v. Toti Contracting Co., 30 N.J. 425, 430-31 

(1959). An individual will be held liable if he or she: (1) 

retains control of the manner and means by which the work will 

be performed; (2) retains an incompetent contractor; or (3) 

retains an independent contractor to perform work that 

constitutes a nuisance per se. Ibid. Plaintiffs urge that a 

surgical center that grants privileges to a physician to perform 
32

a procedure for which he is uninsured invokes the second 

exception because it permitted an incompetent physician to use 

its facility.

The incompetent contractor exception is founded on the 

premise that

[a]n employer is subject to liability for 

physical harm to third persons caused by his 

failure to exercise reasonable care to employ 

a competent and careful contractor 

(a) to do work which will involve the 

risk of physical harm unless it is skillfully 

and carefully done, or

(b) to perform any duty which the 

employer owes to third persons.

[Restatement (Second) of Torts § 411 (1965).]

A competent and careful contractor is “a contractor who 

possesses the knowledge, skill, experience, and available 

equipment which a reasonable [person] would realize that a 

contractor must have in order to do the work which he is 

employed to do without creating unreasonable risk of injury to 

others.” Id. at cmt. (a). Any liability for failing to engage 

a competent contractor is limited “to the physical harm as is so 

caused.” Id. at cmt. (b). In order for the employer to be 

liable, “that harm shall result from some quality in the 

contractor which made it negligent for the employer to entrust 

the work to him.” Ibid. 
33

Efforts to invoke the second Majestic exception to the 

ordinary rule that a principal is not liable for the negligent 

acts of an independent contractor have often arisen in the 

context of a tradesman, such as a paver, a tree surgeon, or a 

carpenter, who was employed to perform a certain task and is 

later determined to be insolvent. See Mavrikidis v. Petullo,

153 N.J. 117, 137-38 (1998) (rejecting contention that efforts 

to minimize cost and use of uninspected truck constitutes 

incompetence); Cassano v. Aschoff, 226 N.J. Super. 110, 112, 116 

(App. Div.) (rejecting contention that insolvency of tree 

surgeon constitutes indicia of incompetence), certif. denied, 

113 N.J. 371 (1988); Miltz v. Borroughs-Shelving, 203 N.J. 

Super. 451, 466 (App. Div. 1985) (confirming that financial 

responsibility is not reliable indicia of incompetence of 

carpenter). In those cases, lack of financial responsibility, 

including the absence of insurance, was not considered as 

indicia of a lack of skill or incompetence. Such dispositions 

are consistent with comment (g) to § 411 of the Restatement, 

which provides that § 411 “has no application where the 

contractor, although competent and careful, is financially 

irresponsible.”

Mavrikidis illustrates this rule and comment. In 

Mavrikidis, a trucking firm retained by a gasoline station 

operator to pave the surface of the station used a grossly 
34

overloaded truck with faulty brakes to haul hot asphalt to the 

gas station. 153 N.J. at 124-25, 128. Unable to stop due to 

the faulty brakes, the truck drove through a red light, struck 

the plaintiff’s car, hit a telephone pole and overturned, 

spilling hot asphalt onto the plaintiff’s car. Id. at 125. The 

Court refused to recognize a cause of action for negligent 

hiring of the asphalt hauler because the evidence presented at 

trial demonstrated that the retained contractor was a skilled 

and experienced paving contractor and there was no evidence that 

the gas station operator knew or had reason to know that the 

vehicle used to carry the asphalt was unsafe. Id. at 141-42. 

In a dissenting opinion, Justice Stein asserted that the 

majority viewed the Majestic incompetent contractor exception 

too narrowly. Id. at 152 (Stein, J., dissenting). The dissent 

also found substantial evidence to support the jury’s finding 

that the gas station operator negligently hired a contractor to 

pave and transport hot asphalt because it could set off the 

paving cost against a debt owed to it by the contractor, and it 

knew that the contractor operated uninspected trucks in a state 

of disrepair. Id. at 154-58.

In Puckrein v. ATI Transport, Inc., 186 N.J. 563, 579-80

(2006), the Court addressed the Majestic negligent hiring 

exception in the context of retaining independent contractors to 

perform tasks in a highly regulated industry. We recognized a 
35

cause of action against a principal engaged in the collection 

and disposal of solid waste and recyclable materials, who 

retained a trucking company to haul the waste to various out-ofstate waste disposal facilities. The principal demonstrated

little or no regard for the qualifications of the drivers or the 

conditions of the vehicles used to transport the materials. The 

contract between the business and the trucking firm retained by 

it required the trucking firm to comply with all applicable 

city, state, and federal requirements, and the trucking firm 

agreed to maintain required insurance and to indemnify the 

business that retained its services. Id. at 569-70. 

Discovery revealed that equipment bearing markings other 

than the retained trucking firm occasionally appeared at the 

facility to collect solid waste and recyclable materials. Id.

at 571. The transportation manager for the principal believed 

“they were the same company.” Ibid. Moreover, the 

transportation manager conceded that he never checked to 

determine if the trucks that appeared at his facility had passed 

inspection or held the requisite registration, insurance, 

licenses, or permits. Ibid.

The incident that formed the basis for the plaintiff’s 

complaint in Puckrein occurred when the driver of a tractortrailer drove through a red light and struck an automobile with 

three occupants. Id. at 568. Two of the occupants died; a 
36

third occupant was seriously injured. Ibid. At the time of the 

accident, the tractor-trailer contained tons of glass residue. 

Ibid. The vehicle also had faulty brakes and the liability 

insurance had lapsed. Id. at 568, 570. 

Relying on basic negligence principles and § 411 of the 

Restatement, the Court recognized a duty of an employer “to 

exercise reasonable care to employ a competent and careful 

contractor” to perform work that involves a risk of physical 

harm unless it is done with skill. Id. at 575. The Court 

concluded that

to prevail against the principal for hiring an 

incompetent contractor, a plaintiff must show 

that the contractor was, in fact, incompetent 

or unskilled to perform the job for which 

he/she was hired, that the harm that resulted 

arose out of that incompetence, and that the 

principal knew or should have known of the 

incompetence.

[Id. at 576 (citing Mavrikidis, supra, 153 

N.J. at 136-37).]

In so holding, the Court addressed the contrary result reached 

in Mavrikidis.

The Puckrein Court did not view its earlier opinion in 

Mavrikidis as the final word on the Majestic incompetent 

contractor exception; instead, the Court viewed the disposition 

in Mavrikidis as 

a difference of opinion over whether to 

consider that contract narrowly as a paving 

contract, or more broadly as including pre-
37

and post-paving activities. Although that 

issue may be debatable, what is not debatable 

is that the tipping point between the majority 

and the dissent in Mavrikidis was not a 

disagreement over the basic legal principles 

to which we have adverted. That is the 

backdrop for our inquiry.

[Id. at 577.]

Ultimately, the Puckrein Court determined that summary 

judgment had been improperly granted in favor of the business 

that had retained the wastehauler. Id. at 580. The Court noted 

that the tractor-trailer operator hauling the glass had been 

retained to perform the very task that was the subject of the 

contract between the business and the wastehauler. Id. at 578. 

Any driver performing those tasks had to have a valid driver’s 

license, the vehicle had to be registered and inspected, and the 

owner/operator of the vehicle had to maintain liability 

insurance. Ibid. As such, the Court concluded that 

the core question here is not whether [the 

retained trucker] was competent to transport 

[the business’s] loads upon the public 

highways -- it was not. The question is 

whether [the business] violated its duty to 

use reasonable care in selecting a trucker and 

whether it knew or should have known of [the 

retained trucker’s] incompetence.

[Id. at 579.]

A later case rephrased the essential question as whether the 

principal that engaged an independent contractor inquired “into 
38

an independent contractor’s essential competency.” Fox v. 

Millman, 210 N.J. 401, 427 (2012). 

A year following this Court’s decision in Puckrein, the 

Court restated the circumstances that would permit a person to 

prevail on a claim against a principal who retained an 

incompetent or unskilled contractor. Basil, supra, 193 N.J. at 

68. In Basil, this Court addressed a negligent hiring claim

brought against a workers’ compensation carrier that retained an 

uninsured physician to examine and treat persons who sustained 

workplace injuries. Id. at 43-45. The physician was not 

obliged to have medical malpractice liability insurance as a 

condition of his license to practice medicine in this State at 

the time the insurance carrier retained the defendant physician 

or at the time he performed the medical examinations of the

plaintiff. Id. at 72. Accordingly, the Court concluded that 

the physician could not be considered an incompetent contractor. 

Id. at 72-73.

The Court proceeded, however, to emphasize that the current 

state of the law requiring medical malpractice liability 

insurance as a condition of licensure imposed a continuing 

responsibility on an insurer that retains physicians to treat or 

examine injured workers to ensure that the retained physician is 

qualified to practice. Id. at 73. The Court stated:
39

State regulations now clearly require 

practicing physicians maintaining a 

professional office . . . to obtain a minimum 

amount of medical malpractice insurance as a 

condition for licensure. An IME contract 

physician who lacked malpractice insurance 

after . . . (the effective date of [N.J.A.C.

13:35-6.18(a)]), is unqualified to practice 

medicine. Consistent with our 2006 holding in 

Puckrein, supra, an insurance company that 

engages an IME physician for evaluative 

purposes now must be aware that it is under a 

continuing duty of inquiry in respect of 

malpractice insurance requirements in order to 

ensure that the physicians it engages are 

qualified to practice.

[Ibid. (internal citation omitted).]

In sum, Puckrein establishes that, when a business retains 

a contractor to perform a task that requires special skill and 

specific permits or licenses, its retention of a contractor 

without those necessary credentials subjects the business to 

liability for hiring an incompetent contractor. Similarly, 

Basil counsels that granting privileges to a physician without 

the appropriate credentials also exposes the health care 

facility to liability for hiring an incompetent contractor. 

The provision of medical care is highly regulated in this

State. Hospitals and the wide variety of alternative providers 

of health care services, including ambulatory care centers and 

surgical centers, are highly regulated. See, e.g., N.J.A.C.

8:43G-1.1 to -7A.10 (establishing hospital licensing standards); 

N.J.A.C. 8:43A-1.1 to -33.4 (promulgating manual of standards 
40

for licensing ambulatory care centers). No health care facility 

may provide medical care unless it obtains a license, N.J.S.A.

26:21-1 to -12(a), and that license is subject to renewal on an 

annual basis, N.J.A.C. 8:43E-5.3(c). Each set of regulations 

governing each type of health care facility recognizes that the 

health care administered in a facility is provided by employees, 

such as nurses and technicians, and independent contractors, 

such as physicians. Health care facilities are given broad 

responsibility to select the professionals who will provide 

medical care; however, regulations address the manner in which 

the medical staff shall be organized, the staff policies and 

procedures that should be addressed, and medical staff 

qualifications. N.J.A.C. 8:43G-16.1 to -17.1. The governing 

authority of each facility is required to establish criteria for 

delineating the privileges that will be granted, granting 

privileges to provide medical care in its facility in accordance 

with the adopted standards and procedures, and reviewing the 

granted privileges on a periodic basis. N.J.A.C. 8:43A-4.1, -7.2 

to -7.4. Physicians must submit an application to obtain 

privileges and must demonstrate that they are currently licensed 

to practice medicine in this State. See N.J.A.C.

8:43A-1.21, -3.5, and -12.3(a) (requiring provision of surgical 

privileges at ambulatory health centers to currently licensed 

physicians); N.J.A.C. 8:43G-16.3(a) (requiring all physicians 
41

with clinical privileges at hospitals to be licensed to practice 

medicine by BME). Obtaining and maintaining medical malpractice 

liability insurance in the amounts prescribed by law is a 

requirement to obtain and maintain a license to practice 

medicine in New Jersey. N.J.S.A. 45:9-19.17; N.J.A.C. 13:35-

6.18(b).

In the context of plaintiffs’ negligent hiring claim 

against MSSC, the basic element of competency for any physician 

seeking surgical privileges at MSSC’s facility is possession of 

a license to practice medicine in the State of New Jersey. An 

essential condition for such a license is possession of a policy 

of medical malpractice liability insurance or an acceptable 

letter of credit as required by statute and the regulations 

adopted by the BME. Moreover, the statutory financial 

responsibility requirements impose a continuing obligation on 

the physician to maintain the appropriate type and amount of 

insurance. 

As recognized in Puckrein and Basil, when the task that a 

principal retains an independent contractor to perform requires 

specific qualifications, such as possession of certain permits 

and licenses, the principal has an initial duty to ascertain 

that the contractor possesses the requisite license and a 

continuing duty to assure that the requisite license is 

maintained. Here, MSSC had a duty to withhold privileges to any 
42

physician who did not meet the financial responsibility 

requirements for a license to practice medicine in this State. 

To be sure, the Legislature delegated the authority to enforce 

the liability insurance requirement to the BME. The record 

before the trial court, however, demonstrates that MSSC knew 

that Dr. Kaul possessed an insurance policy that expressly 

excluded the procedure performed on plaintiff. The record also 

reveals that Dr. Kaul asserted that he advised the BME and MSSC 

that he possessed sufficient assets to satisfy the alternative 

letter of credit requirement. Yet, a simple representation that

a physician possesses sufficient assets does not satisfy the 

regulatory definition of a letter of credit. See N.J.A.C.

13:35-6.18(a). More importantly, the record is barren of any 

evidence that the BME accepted this bare representation of 

financial responsibility or that MSSC conducted any inquiry to 

confirm that the BME deemed such a representation as compliance 

with the statutory insurance requirement. In short, based on 

this record, the trial court erred in granting summary judgment 

in favor of MSSC. 

A negligent hiring cause of action is not a strict 

liability claim. To the contrary, it is founded on basic 

negligence principles. Thus, a plaintiff who asserts such a 

claim against a health care facility must do more than prove 

that the facility granted privileges to a physician without the 
43

statutorily required medical malpractice liability insurance or 

letter of credit. 

Here, having misconstrued the nature of plaintiffs’ claim 

against MSSC, the trial court dismissed the negligent hiring 

claim. As noted in this opinion, there are several open 

questions about whether Dr. Kaul complied with the alternative 

letter of credit requirement. As described by Dr. Kaul, his 

bare assertion of adequate financial assets to respond to a 

negligence claim does not comply with the BME definition of a 

letter of credit. N.J.A.C. 13:35-6.18(a). Moreover, Dr. Kaul 

asserts either he or MSSC personnel discussed the sufficiency of 

his purported letter of credit with BME personnel. Discovery is 

required to clarify this and other issues integral to this 

claim. We therefore reverse the summary judgment entered in 

favor of MSSC in the negligent hiring claim asserted by 

plaintiffs.

VIII.

In summary, we conclude that N.J.S.A. 45:9-19.17 does not 

create a direct action by an injured patient against a physician 

who does not possess medical malpractice liability insurance or 

a suitable letter of credit. Moreover, failure to comply with 

the statutory liability insurance mandate does not give rise to 

an informed consent claim. The inability to recover a judgment 

is not the injury contemplated by the informed consent doctrine. 
44

Finally, we hold that a cause of action for negligent 

hiring may be asserted against a health care facility that 

grants privileges to a physician who has not complied with the 

statutorily required insurance. A health care facility that 

grants privileges to physicians to use its facility has a 

continuing duty to ensure that any physician granted privileges 

maintains the required insurance, which is a condition of 

obtaining and maintaining a license to practice medicine in this 

State.

IX.

The judgment of the Appellate Division is affirmed in part 

and reversed in part and remanded for further proceedings 

consistent with this opinion.

JUSTICES LaVECCHIA, PATTERSON, FERNANDEZ-VINA, and SOLOMON 

join in JUDGE CUFF’s opinion. JUSTICE ALBIN filed a separate 

opinion dissenting in part and concurring in part, in which 

CHIEF JUSTICE RABNER joins. 
1

SUPREME COURT OF NEW JERSEY

A-42 September Term 2013

072363

JAMES R. JARRELL and SHEILA 

G. JARRELL, his wife,

Plaintiffs-Appellants,

v.

RICHARD A. KAUL, M.D. and

MARKET STREET SURGICAL 

CENTER,

Defendants-Respondents,

and

JOHN T. FORD, SUSSEX COUNTY 

TOTAL HEALTH CENTER, INC.,

Defendants.

JUSTICE ALBIN, dissenting and concurring.

The facts here present the quintessential case of lack of 

informed consent. Dr. Kaul did not have the medical malpractice 

insurance required by law to perform the invasive surgical 

procedure on his patient, plaintiff James Jarrell. Performing 

the procedure without the requisite insurance constituted 

professional misconduct. Yet, Dr. Kaul never explained any of 

this to his patient, presumably because plaintiff never would 

have agreed to the procedure had he been fully informed.

Dr. Kaul failed to disclose material facts to his patient. 

He denied plaintiff the right to decide whether a financially 
2

incompetent -- or worse yet, a professionally incompetent --

physician should perform invasive surgery on him. Dr. Kaul was 

credentialed only as an anesthesiologist; he was not insured to 

perform spinal surgery. 

A logical extension of our informed-consent jurisprudence 

would permit a cause of action if a plaintiff can establish four 

elements: (1) the physician was uninsured to perform the 

medical procedure, (2) the physician failed to inform the 

patient that he was uninsured, (3) the patient would not have 

undergone the procedure if properly informed, and (4) the 

plaintiff can prove damages. The majority, however, is not 

willing to take this natural step in the development of our 

common law.

A cause of action for lack of informed consent would 

recognize that a physician cannot hide material facts and that 

the patient has a right to make critical choices concerning his 

health. No reasonable patient would consent to spinal surgery 

knowing that his physician lacks malpractice insurance to 

perform that procedure. Because the majority is unwilling to 

find that Dr. Kaul breached a common-law duty by failing to 

disclose to the patient his lack of insurance to perform spinal 

surgery, I respectfully dissent. I concur in the remainder of 

the Court’s opinion. 

I.
3

A physician is statutorily required to maintain medical 

malpractice liability insurance. N.J.S.A. 45:9-19.17. The 

purpose of the law is “to ensure the citizens of the State that 

they will have some recourse for adequate compensation in the 

event that a physician or podiatrist is found responsible for 

acts of malpractice.” Assembly Health Comm., Statement to S. 

267 (Sept. 19, 1996). A physician who does not maintain medical 

malpractice liability insurance for a procedure he performs is 

subject to discipline for professional misconduct -- discipline 

that includes possible revocation or suspension of his license 

to practice medicine. See N.J.S.A. 45:1-21; N.J.A.C. 13:35-

6.18(e). The public therefore presumes that a physician is 

insured to perform a surgical procedure. 

Physicians are obligated to provide information that is

material to a reasonable patient’s ability to make an informed 

decision about whether to proceed with a course of treatment or 

procedure. Matthies v. Mastromonaco, 160 N.J. 26, 36 (1999). 

The doctrine of informed consent finds its source in the concept 

of negligence. Largey v. Rothman, 110 N.J. 204, 208 (1988). In 

an informed-consent analysis, the dominant issue is “whether the 

physician adequately presents the material facts so that the 

patient can make an informed decision.” Matthies, supra, 160 

N.J. at 36. A “‘physician violates his duty to his patient and 

subjects himself to liability if he withholds any facts which 
4

are necessary to form the basis of an intelligent consent by the 

patient to the proposed treatment.’” Largey, supra, 110 N.J. at 

208 (quoting Salgo v. Leland Stanford, Jr. Univ. Bd. of 

Trustees, 317 P.2d 170, 181 (Cal. Dist. Ct. App. 1957)); see 

also In re Conroy, 98 N.J. 321, 346 (1985) (explaining that 

under informed-consent doctrine, “no medical procedure may be 

performed without a patient’s consent, obtained after 

explanation of the nature of the treatment, substantial risks, 

and alternative therapies” (internal quotation marks omitted)). 

The informed-consent doctrine is about patient autonomy -- the 

right of the patient to make decisions that intimately and 

materially concern his health and life. Rothman, supra, 110 

N.J. at 209; see also Howard v. Univ. of Med. & Dentistry of 

N.J., 172 N.J. 537, 557 (2002) (recognizing informed-consent 

claim when objectively reasonable patient would not consent to 

procedure if physician’s inexperience had been known to 

patient). The physician cannot arrogate to himself decisions 

that vitally concern the patient’s health.

A patient has a right to know whether a physician 

performing a procedure is in a financially responsible position 

in the event that the patient suffers injuries due to medical 

malpractice. A reasonable patient would consider a physician’s 

lack of insurance a material factor in making a decision whether 

to have spinal surgery. That is so because an uninsured 
5

physician provides no financial safety net for a patient who is 

harmed by the physician. Lack of insurance also may suggest 

that the carrier considered the physician incompetent to perform 

the procedure. 

If the physician does not tell the patient that he is not 

lawfully permitted to perform the uninsured medical procedure, 

then the patient should be able to file a cause of action for 

lack of informed consent, provided he would not have undergone 

the procedure had he been properly informed and he can prove 

damages.

II.

The goals of tort law are to deter persons from engaging in 

unreasonable conduct and to compensate victims for the damage

done to them by tortfeasors. The application of the common law 

to this claim of lack of informed consent would have been an 

unremarkable extension of our jurisprudence. It is remarkable 

that a patient has no cause of action against a physician who 

performs a surgical procedure under the false pretense that he 

is insured.

For those reasons, I respectfully dissent in part and 

concur in part.
SUPREME COURT OF NEW JERSEY

NO. A-42 SEPTEMBER TERM 2013

ON CERTIFICATION TO Appellate Division, Superior Court

JAMES R. JARRELL and SHEILA

G. JARRELL, his wife,

Plaintiffs-Appellants,

v.

RICHARD A. KAUL, M.D. and

MARKET STREET SURGICAL

CENTER,

Defendants-Respondents,

and

JOHN T. FORD, SUSSEX COUNTY

TOTAL HEALTH CENTER, INC.,

Defendants.

DECIDED September 29, 2015

Chief Justice Rabner PRESIDING

OPINION BY Judge Cuff (temporarily assigned)

CONCURRING/DISSENTING OPINIONS BY Justice Albin

DISSENTING OPINION BY 

CHECKLIST

AFFIRM IN 

PART/

REVERSE IN 

PART/

REMAND

CONCUR IN 

PART/

DISSENT IN 

PART

CHIEF JUSTICE RABNER X

JUSTICE LaVECCHIA X

JUSTICE ALBIN X

JUSTICE PATTERSON X

JUSTICE FERNANDEZ-VINA X

JUSTICE SOLOMON X

JUDGE CUFF (t/a) X

TOTALS 5 2