Opinion ID: 1383940
Heading Depth: 1
Heading Rank: 5

Heading: Traditional Agency Principles

Text: We must now determine whether LeBonheur may be held vicariously liable under traditional agency principles for the acts of state-employed physician residents who are immune from individual liability. We begin with a review of relevant agency principles. The creation of an agency relationship does not require a contract, an explicit agreement, or an understanding between the parties. White v. Revco Disc. Drug Ctrs., Inc., 33 S.W.3d 713, 724 (Tenn.2000). The existence of an agency relationship, however, is a question of fact under the circumstances of the particular case, id. (quoting McCay v. Mitchell, 62 Tenn.App. 424, 463 S.W.2d 710, 715 (1970)), and is determined by examination of agreements among the parties or of the parties' actions. Id. The principal's right to control the acts of the agent is a relevant factor when determining the existence of an agency relationship. Id. The amount of actual control exercised by the principal over the agent also may be determinative of whether an agency relationship exists. McDonald v. Dunn Const. Co., 182 Tenn. 213, 220, 185 S.W.2d 517 (1945). When an agency relationship exists, the principal may be bound by the acts of the agent performed on the principal's behalf and within the actual or apparent scope of the agency. White, 33 S.W.3d at 724. In Tennessee, the doctrine of respondeat superior permits the master/principal to be held liable for the negligent actions of his servant/agent. Smith v. Henson, 214 Tenn. 541, 551, 381 S.W.2d 892, 897 (1964). To hold the master/principal vicariously liable, it is enough that the servant or agent was acting in the business of his superior. White, 33 S.W.3d at 725 (quoting Kinnard v. Rock City Const. Co., 39 Tenn.App. 547, 551, 286 S.W.2d 352, 354 (1955)). Moreover, an agent may serve two masters simultaneously when the objectives of the dual masters are not contrary. Id. A person may be the servant of two masters, not joint employers, at one time as to one act, if the service does not involve abandonment of the service to the other. Id. (quoting Restatement (Second) of Agency, § 226 cmt. b.). Two parties may agree to employ a servant together or to share the services of a servant. If there is one agreement with both of [the parties], the actor is the servant of both [when] the servant is subject to joint control. Restatement of the Law, Second, Agency, § 226. Thus, a person serving two masters may subject both to liability for the same act if the act is within the scope of employment for both. White, 33 S.W.3d at 725 (quoting Restatement (Second) of Agency, § 226 cmt. a.). We hold, therefore, that a physician resident may be the agent of both the State and a private hospital. Whether an agency relationship exists is determined by the trier of fact. See Harris v. St. Mary's Med. Ctr., Inc., 726 S.W.2d 902, 906 (Tenn.1987). LeBonheur argues that if physician residents may also be agents of a private hospital, then the absolute immunity granted physician residents would be removed, contrary to legislative intent. LeBonheur contends that the immunity provided by statute to resident physicians could not apply to residents who have dual masters. LeBonheur's argument incorrectly presumes that an agent can act for only one master at a time. When a state-employed physician resident performs a rotation at a private hospital, the same acts or omissions may be within the resident's scope of employment with the State and within the resident's scope of employment with the private hospital. Permitting a finding of dual masters, therefore, does not serve to abolish the absolute immunity granted to a state-employed physician resident pursuant to section 9-8-307(h). LeBonheur also asserts that a principal/master may not be held vicariously liable under the doctrine of respondeat superior based solely upon the acts of an agent who is immune from liability. In support of this proposition, LeBonheur cites numerous cases. Our analysis of Tennessee case law, however, reveals that this proposition is not without limitation. Loveman Co. v. Bayless, 128 Tenn. 307, 160 S.W. 841 (Tenn.1913), represents the first category of cases addressing this issue. In Loveman Co., the employer's liability was predicated solely upon the doctrine of respondeat superior. 128 Tenn. 307, 311, 160 S.W. 841 (Tenn.1913). The jury rendered a verdict against the employer but in favor of the employees. Id. The Court held that when an action is filed against an employer based solely upon the tortious actions of its employee under the doctrine of respondeat superior, a verdict in favor of the employee entitles the employer to a discharge from liability. 128 Tenn. 307, 312, 160 S.W. 841, 842 (Tenn.1913). The Court reasoned that it is contradictory to find the master liable when the servant by whose act the injury occurred is exonerated on the same evidence. Loveman Co., 128 Tenn. 307, 315, 160 S.W. 841, 843 (Tenn.1913). Subsequently, the Court, in Raines v. Mercer, addressed the issue of whether a father could be held liable to his son's wife under the doctrine of respondeat superior for his son's negligent conduct. 165 Tenn. 415, 55 S.W.2d 263 (1932). The plaintiff, the wife of the defendant's son, filed suit against the defendant for his son's negligent operation of the defendant's vehicle. Raines, 165 Tenn. 415, 417, 55 S.W.2d 263 (1932). The negligent incident occurred before the marriage of the plaintiff and the defendant's son. Id. The Raines Court held that the rule of marital unity [2] extinguished the plaintiff's right of action against her husband. 165 Tenn. 415, 419, 55 S.W.2d 263, 264 (1932). The Court reasoned that since the plaintiff could not maintain a direct action against her husband, she could not avoid the forbidden frontal attack by an encircling movement against [the principal, her husband's father].... Raines, 165 Tenn. 415, 420, 55 S.W.2d 263, 264 (1932); See also Graham v. Miller, 182 Tenn. 434, 187 S.W.2d 622 (1945) (holding that the general rule prohibiting a child from suing his parent prevents the imposition of liability to the parent's employer under the doctrine of respondeat superior); Ownby v. Kleyhammer, 194 Tenn. 109, 250 S.W.2d 37 (1952); Smith v. Henson, 214 Tenn. 541, 381 S.W.2d 892 (1964). Thus, by extinguishing the right of action against the son, the marital unity rule precluded an action against the father. In Stewart v. Craig, 208 Tenn. 212, 344 S.W.2d 761 (1961), this Court established a third category of cases that prohibited a party from maintaining an action against the principal for vicarious liability under the doctrine of respondeat superior based solely upon the acts of an agent. In Stewart, the plaintiffs were injured in an automobile accident in which the driver was an employee of the defendant. 208 Tenn. 212, 213, 344 S.W.2d 761 (1961). The plaintiffs executed a covenant not to sue the employee/driver but then filed suit against the employer based on the doctrine of respondeat superior. Stewart, 208 Tenn. 212, 214, 344 S.W.2d 761, 762 (1961). The Stewart Court held that the covenant not to sue prohibited a suit for negligence against the employer based solely on vicarious liability. 208 Tenn. 212, 216, 344 S.W.2d 761, 763 (1961); See also Craven v. Lawson, 534 S.W.2d 653 (Tenn.1976). These cases indicate that a principal may not be held vicariously liable under the doctrine of respondeat superior based upon the acts of its agent in three instances: (1) when the agent has been exonerated by an adjudication of non-liability, (2) when the right of action against the agent is extinguished by operation of law, or (3) when the injured party extinguishes the agent's liability by conferring an affirmative, substantive right upon the agent that precludes assessment of liability against the agent. See Rankhorn v. Sealtest Foods, 63 Tenn.App. 714, 721, 479 S.W.2d 649, 652 (1971). The first and third categories above clearly do not apply to the facts of this case. The resident physicians in this case have not been exonerated by an adjudication of non-liability; and Ms. Johnson has not taken any affirmative action to prevent an assessment of liability against the residents. The second category similarly provides no basis for LeBonheur's assertion that the resident physicians' personal immunity should insulate LeBonheur from vicarious liability. The marital unity rule extinguished a spouse's right of action that was based upon the other spouse's tortious conduct. The statute conferring immunity upon the residents, however, does not extinguish a claimant's right of action. Section 9-8-307(h) of the Tennessee Code Annotated simply immunizes physician residents from individual monetary liability. The residents' conduct remains available as a basis for the imposition of liability in the Claims Commission against the State. Thus, Ms. Johnson's right of action against the residents survives. Fault may be assessed for the residents' tortious conduct, but the State has assumed responsibility for the damages assessed as a result of that fault. Accordingly, we hold that a physician resident's personal immunity does not prohibit LeBonheur from being held vicariously liable under the doctrine of respondeat superior based upon the actions of a physician resident. LeBonheur further maintains that it may not be held vicariously liable for the actions of the resident physicians because to do so would violate common law indemnity principles. Courts in Tennessee have long recognized that a principal is entitled to seek indemnification against a negligent agent. See Continental Ins. Co. v. City of Knoxville, 488 S.W.2d 50 (Tenn.1972); Cohen v. Noel, 165 Tenn. 600, 56 S.W.2d 744 (1933); Walker v. Walker, 52 Tenn. 425 (1871). LeBonheur asserts, however, that it would be barred from seeking indemnification against the residents. The residents are provided absolute immunity from individual liability. See Tenn.Code Ann. § 9-8-307(h). Moreover, the State has not consented to suit for indemnity claims based upon the actions of its employees. See Northland Ins. Co. v. State of Tennessee, 33 S.W.3d 727 (Tenn.2000) (holding that a waiver of sovereign immunity must be clear and unmistakable). We decline, however, to hold that the unavailability of an action for indemnity precludes the imposition of vicarious liability against a private hospital for the negligence of physician residents who are found to be agents of the hospital. Section 9-8-307(h) of the Tennessee Code Annotated eliminates the common law right to indemnification by providing absolute immunity to resident physicians who are working within the scope of their employment. It is within the prerogative of the legislature, therefore, to either modify this individual immunity or to waive the State's sovereign immunity to permit private, dual masters of state employees to seek indemnification against the State in the Claims Commission. Finally, LeBonheur argues that our holding in Carroll v. Whitney, 29 S.W.3d 14 (Tenn.2000), requires that LeBonheur receive the same immunity that the residents receive. In Carroll , we held that fault could be apportioned to a nonparty, notwithstanding that the nonparty was immune from suit. Id. at 15. This Court reasoned that if a nonparty may not be apportioned fault, then the doctrine of joint and several liability would be revived. Id. at 22. The Court determined, therefore, that fairness to the parties required linking liability with fault. Id. at 21. The decision in Carroll , however, in no way eliminated the doctrine of respondeat superior under which a principal may be liable solely for the tortious acts of his agent. Eliminating vicarious liability for private hospitals that utilize state-employed residents would encourage private hospitals to shift the risk of liability to the State simply because the residents are employed by the State. As we stated in White v. Revco Disc. Drug Ctrs., Inc., 33 S.W.3d 713, 722 (Tenn.2000), the allocation of risk is placed on the employer because, having engaged in an enterprise, which will on the basis of all past experience involve harm to others through the torts of employees, and sought to profit by it, it is just that [the employer], rather than the innocent injured plaintiff, should bear [the risk]; and [liability is placed on the employer] because [the employer] is better able to absorb [the risks], and to distribute them, through prices, rates or liability insurance, to the public, and so to shift them to society, to the community at large. Thus, fairness to the parties requires that a private hospital may be held vicariously liable under the doctrine of respondeat superior solely for the acts of a state-employed physician resident when that resident is found to be the agent or servant of the hospital.