solely the contracting physician’s responsibility. The physician could also be personally responsible for
expenses incurred by the hospital if the hospital is named in a medical malpractice suit. Even if a nurse,
who is a hospital employee, kills a patient with a medication overdose, a physician who agrees to
indemnify the hospital could be held liable for all the hospital's damages if the hospital can show that the
overdose was “related to” the physician's provision of medical care – even though the nurse was negligent
for administering the overdose.
Finally, indemnification clauses may negate a physician’s malpractice insurance coverage. Liabilities
relating to indemnification clauses are not created out of the provision of medical care but rather are
created out of a contractual agreement. Malpractice insurance policies generally cover only damages
resulting from “diagnosis of, treatment for, or medical care for a patient's medical condition.” Because a
contractual agreement to reimburse a hospital does not meet any of those requirements, malpractice
insurance companies have no duty to defend or pay for expenses related to an indemnification agreement.
A physician who agrees to an indemnification clause may give a malpractice insurer the means to deny
coverage for a malpractice claim against a physician.
In some cases, courts have held that indemnification clauses which attempt to shift liability from a
company to a private individual are so unconscionable that they are invalid as a matter of law. In Yang v.
Voyagaire Houseboats, Inc., 701 N.W. 2d. 783, the Minnesota Supreme Court held that an
indemnification clause in a houseboat rental agreement that was being enforced against an individual who
had rented the houseboat was void as a matter of public policy. In Vicksburg Partners, LP v. Stephens, 911
So. 2d 507, the Mississippi Supreme Court held that indemnification clauses in contracts where one party
has minimal bargaining power were “unilaterally oppressive,” “substantive[ly] unconscionab[le],” and
therefore unenforceable.
If a physician's actions may have caused damage to either a group or a hospital, the physician can be sued
for negligence, breach of contract, or contribution. Indemnification agreements are a dangerous and unfair
means for employers to recover those damages. Do not commit to them.
Indemnification Clauses Between Hospitals and Contract Management Groups
While physician employment contracts should not contain indemnification clauses, some contract
management groups may elect to enter into indemnification agreements with hospitals. Aside from issues
related to recourse noted above, indemnification clauses within service provider agreements are a bad
idea for several other reasons. Hospitals that seek to enforce indemnification agreements against groups
or physicians may find that their legal strategies backfire.
Suppose that a hospital has entered into a broadly-worded mutual indemnification agreement with its
emergency department management group. Now suppose that the hospital is seeking indemnification
from the group for a payment in a malpractice case related to a patient's emergency department care. In
response, it is likely that the group would allege some negligent act on the hospital's part and would
exercise its right to seek indemnification from the hospital. After all, wouldn't an indemnification
payment made by a group be a “loss” or a “cost” for which the group could seek reimbursement based
upon the negligence of a hospital employee? I would certainly argue so if I were providing legal
representation to the group. In the ensuing litigation, each party would then attempt to prove how the
other party's shortcomings were responsible for the damages sustained. Meanwhile, both parties' “dirty
laundry” would potentially be incorporated into court filings for the public and the media to review.
Consider the New York case of Freeman v. Mercy Medical Center (2008 NY Slip Op 31337(U)). A patient
sued a county medical center after alleging that her pregnancy was mismanaged by an obstetrical resident,
causing premature delivery at 23 weeks gestational age and resulting in profound brain damage to her