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Webster v. CDI Indiana, LLC

United States Court of Appeals, Seventh Circuit

February 27, 2019

Courtney Webster and Brian Webster, Plaintiffs-Appellees,
v.
CDI Indiana, LLC, d/b/a CDI, d/b/a CDI Indianapolis, Defendant-Appellant.

          Argued February 4, 2019

          Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. l:16-cv-02677-JMS-DML - Jane E. Magnus-Stinson, Chief Judge.

          Before Wood, Chief Judge, and Easterbrook and St. Eve, Circuit Judges.

          ST. EVE, CIRCUIT JUDGE.

         This medical malpractice lawsuit arises from a radiologist's negligence. Courtney Webster had a CT scan performed at CDI Indiana, LLC's (CDI) diagnostic imaging facility in Carmel, Indiana. The radiologist, an independent contractor hired by Medical Scanning Consult- ants (MSC), missed Courtney's cancer, which then festered for over a year before being diagnosed.

         Courtney and her husband, Brian Webster, sued CDI. CDI, in response, insisted that the Websters could not hold it liable because CDI did not directly employ the radiologist. The district court rejected this argument and applied Indiana's apparent agency holding in Sword v. NKC Hosp., Inc., 714 N.E.2d 142, 152 (Ind. 1999), which instructs that a medical provider is liable if a patient reasonably relied on its apparent authority over the wrongdoer. The jury returned a $15 million verdict in favor of the Websters. We agree with the district court's analysis and so we affirm.

         I. Background

         In 2009, Courtney had outpatient surgery for rectal cancer, and by 2010, her medical examinations showed no further signs of cancer. A few years later in October 2014, Courtney visited her gastroenterologist complaining of constipation. She underwent a colonoscopy, which revealed a large mass. The gastroenterologist then referred Courtney for an abdominal and pelvic CT scan. Radiation technologists conducted Courtney's CT scan on November 17, 2014 at CDI's Carmel facility, and radiologist Dr. Brian Walker issued his report the following day. In his report, Dr. Walker did not identify any mass, despite the images showing a mass in the presacral space where Courtney's rectal cancer had originally occurred.

         Less than two years later, Courtney again complained of constipation. A scope performed in April 2016 revealed a tumor, and a CT scan the following week showed that the tumor had increased in size since the November 2014 CT scan. By the time the cancerous mass was diagnosed, Courtney's cancer had metastasized to her lungs and liver. The delay in diagnosing Courtney's recurrent rectal cancer resulted in a dramatic reduction of her prospects for survival.

         CDI has a network of medical diagnostic imaging facilities throughout the country, including Indiana. Relevant to this appeal, CDI had entered into a services agreement with MSC under which MSC provided independent contractor radiologists, such as Dr. Walker, to interpret CDI's imaging studies at CDI's Carmel facility.

         In October 2016, the Websters filed this medical malpractice lawsuit against CDI in federal court based on diversity jurisdiction. That is not the norm for Indiana medical malpractice claims. Typically, such claims fall under Indiana's Medical Malpractice Act (the Act), which limits liability for registered qualified health care providers and requires the presentation of a proposed complaint to a medical review panel before an action can be commenced in court. Thompson v. Cope, 900 F.3d 414, 424 (7th Cir. 2018); McKeen v. Turner, 71 N.E.3d 833, 834 (Ind. 2017) (per curiam). The Act sets up a voluntary, state-sponsored liability insurance program imposing statutory caps that limit a claimant's recoverable damages, Plank v. Cmty. Hosps. of Ind., Inc., 981 N.E.2d 49, 51 (Ind. 2013), and provides that Indiana's Patient Compensation Fund will pay amounts in excess of the qualified health care provider's total liability, Robertson v. B.O., 977 N.E.2d 341, 343 (Ind. 2012). For a health care provider to be "qualified" under the Act, it must register with Indiana's Department of Insurance by filing proof of financial responsibility and paying an annual surcharge that funds Indiana's Patient Compensation Fund. Atterholt v. Herbst, 902 N.E.2d 220, 222 (Ind. 2009); Wisniewski v. Bennett, 716 N.E.2d 892, 895 (Ind. 1999).

         Because CDI had not registered with Indiana's Department of Insurance as a "qualified health care provider" pursuant to the Act, the Websters sued CDI based on Indiana Code § 34-18-3-1. That section states "[a] health care provider who fails to qualify under this article is not covered by this article and is subject to liability under the law without regard to this article. If a health care provider does not qualify, the patient's remedy is not affected by this article." Unlike CDI, both MSC and Dr. Walker had registered as qualified health care providers under the Act. The Websters, therefore, filed a medical malpractice complaint with the Indiana Department of Insurance against Dr. Walker and MSC.

         After discovery in the CDI litigation, the Websters and CDI filed cross-motions for summary judgment under Federal Rule of Civil Procedure 56(a). In its motion, CDI argued that Dr. Walker was not its apparent agent under Sword because CDI did not employ or contract for Dr. Walker's services, rather MSC did. In a well-reasoned and thorough opinion, the district court concluded that the Supreme Court of Indiana's apparent agency holding in Sword applied to the circumstances of this case. Applying Sword's apparent agency standard-which focuses on the principal's manifestations and the patient's reliance-the district court concluded, "[g]iven the nature of health care services today, it is entirely possible for a reasonable, prudent patient to conclude from representations made by a medical center that the doctors and health care professionals that service patients within the center's facilities are agents or servants of the center." Webster v. Ctr. for Diagnostic Imaging, Inc., No. l:16-cv-02677-JMS- DML, 2017 WL 3839377, at *8 (S.D. Ind. Aug. 31, 2017). The district court denied the parties' summary judgment motions because there were "genuine issues of material fact in dispute as to whether Dr. Walker was an apparent or ostensible agent of the center" and whether CDI "may be held liable for any of Dr. Walker's asserted negligent acts." Id. at *9.

         The case proceeded to a jury trial, which lasted five days. MSC's medical director testified that CDI was responsible for every aspect of obtaining a patient's radiological imaging study except for the actual interpretation of the study itself. Further, the parties jointly stipulated that CDI was responsible for the training, hiring, employing, supervising, disciplining, and discharging of the radiation technologists and non-physician personnel at CDI's Carmel location. They also stipulated that MSC does business as CDI and that MSC uses the trade name CDI and related trademarks to assist in marketing its services as part of a national provider network. Courtney testified that she had no idea about the relationships among MSC, CDI, and Dr. Walker ...


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