Where “application of the operation-of-law exception would bar a vicarious liability claim that is timely filed within the [HCLA’s] extended statute of limitations solely because the statute of limitations had expired for any claims against the principal’s agents, the exception must give way to the [HCLA].”
In two nearly identical opinions, the Tennessee Supreme Court addressed the interplay between claims for vicarious liability, common law exceptions to the ability to assert vicarious liability claims, and the HCLA. In Ultsch v. HTI Memorial Hospital Corp., No. M2020-00341-SC-R11-CV (Tenn. July 20, 2023) and Gardner v. Saint Thomas Midtown Hospital, No. M2019-02237-SC-R11-CV (Tenn. July 20, 2023), the Supreme Court held that a vicarious liability claim filed within the 120-day extension of the statute of limitations could proceed against a principal, even when the relevant agents were not named as defendants, were not given pre-suit notice and thus not subject to an extended statute of limitations, and were barred from being sued by the statute of limitations at the point the complaint was filed against the principal.
In both cases, the plaintiff sent pre-suit notice to the hospital at which they were treated, but did not send pre-suit notices to any agents of said hospitals. The statute of limitations as to claims against the hospitals were extended 120-days pursuant to the HCLA, and the plaintiffs filed their vicarious liability claims against the hospitals beyond the one-year mark but before the 120-day extension had run.
The defendants in both cases filed motions to dismiss, arguing that the vicarious liability claims were barred by the common law. The trial courts agreed, granting dismissal, but the Court of Appeals reversed, and the Supreme Court ultimately agreed with the Court of Appeals that dismissal was not appropriate in these circumstances.
Under Tennessee common law, a plaintiff can choose to bring vicarious liability claims against a principal without also including the relevant agent as a defendant in the suit, unless certain exceptions apply. One of these exceptions is the operation-of-law exception, which bars a plaintiff from suing the principal for vicarious liability “when the plaintiff’s claim against the agent is procedurally barred by operation of law before the plaintiff asserts a vicarious liability claim against the principal.” (internal citation omitted). Defendants in this case argued that because the agents were not sent pre-suit notice, potential claims against them expired one-year after the alleged negligence, so by the time the defendants were sued within the 120-day statute of limitations extension, the claims against the relevant agents were procedurally barred. Defendants therefore asserted that the vicarious liability claims against them should be dismissed pursuant to the operation-of-law exception.
Because the HCLA does not expressly abrogate the operation-of-law exception, the question in these cases was whether the HCLA “necessarily implies or requires that the exception must be abrogated in the unique circumstances of this case.” The majority of the Court held that it did, explaining:
Applying the operation-of-law exception to bar Ultsch’s vicarious liability claims in these circumstances would directly conflict with the Act and frustrate its detailed procedural requirements. This conflict is best illustrated by identifying what Ultsch would have had to do to avoid the exception. One option would have been to file his vicarious liability claims against Skyline before January 12, 2019—when the one-year statute of limitations applicable to any claims against Skyline’s agents expired. But that option would effectively negate the Act’s automatic 120-day extension of the statute of limitations as to Skyline by forcing him to sue within the statute of limitations applicable to the agents. Another option would have been to provide presuit notice to Skyline’s agents, whom Ultsch did not intend to sue, so that the statute of limitations applicable to those claims would be extended too. But that option cannot be squared with the Act’s presuit notice provision, which requires only that notice be given “to each health care provider that will be a named defendant.” Id. § 29-26-121(a)(1) (emphasis added). A final option would have been to provide presuit notice to Skyline and its agents, and sue all of them. However, this last option is contrary to the general common-law rule that a plaintiff may choose to sue a principal, an agent, or both.
The bottom line is that, in the unique circumstances presented in this case, there is no way to simultaneously apply the operation-of-law exception and give full effect to the Act’s provisions. The structure and operation of the Act thus necessarily imply that the operation-of-law exception must be abrogated. Because a conflict exists, we must give precedence to the legislature’s policy choices reflected in the Act.
The Court emphasized that this was a narrow holding, applying only in the context of HCLA claims.
Justice Bivens wrote dissents in both cases (Gardner) (Ultsch), wherein he opined that because a plaintiff could comply with the HCLA and still assert the vicarious liability claims at issue here, the HCLA and the operation-of-law exception did not conflict and dismissal should be affirmed. Justice Bivens explained that an HCLA plaintiff could avoid dismissal of vicarious liability claims by filing them within the original one-year statute of limitations or by providing pre-suit notice to the relevant agents and thus extending the limitations period as to those agents.
Justice Lee wrote concurring opinions in both cases (Gardner) (Ultsch), wherein she agreed that the HCLA abrogated the operation-of-law exception, but also stated that the majority failed to specifically find that the operation-of-law exception would apply to the facts of these cases, and she believed that was an integral finding in these matters.
Ultimately, the Supreme Court affirmed the decision of the Court of Appeals, ruling that the operation-of-law exception was abrogated by the HCLA under these circumstances, and dismissal was reversed.
These opinions are important to all attorneys and litigants making vicarious liability claims under the HCLA, as they clarify that a plaintiff can choose to file suit against only the principal and still enjoy the 120-day statute of limitations extension without jumping through additional hoops to preserve a case against the relevant agents.
These opinions were released 15.5 months after oral arguments in these cases.