In 1978, the Michigan Supreme Court decided Grewe v. Mt. Clemens General Hospital, a seminal decision regarding the circumstances under which a hospital can be held vicariously liable for the negligence of physicians practicing under their roof. Grewe has been interpreted and applied by countless courts since that time.

On December 7, 2022, the Michigan Supreme Court decided Markel v Beaumont Hospital, 982 NW2d 151 (2022). In a 4-3 decision, the court offered a novel interpretation of Grewe which, in the words of dissenting Justice David Viviano, “overruled decades of precedent” and caused a “sweeping expansion of hospital liability.”

It remains well-settled that, in order for a hospital to be held liable for the negligence of a physician who provided care to the plaintiff at the hospital, there must be a finding of actual or ostensible agency. Prior to Markel, the widely established rule, by courts relying on Grewe, was that a finding of ostensible agency required, among other things, that the hospital “must have done something that would create in the patient’s mind the reasonable belief that the doctors were acting on behalf of the Defendant hospital” Vanstelle v. Macaskill, 255 Mich App 1, 10 (2003). A patient’s belief that a doctor was an agent of the hospital must have been the result of some “action or representation by the hospital” Id., 11. In Vanstelle, the absence of such representations, among other things, resulted in summary disposition on behalf of the hospital. In other words, the rule before Markel was that a prerequisite to finding ostensible agency was that the hospital acted affirmatively to create a belief of agency. By sharp contrast, the new rule established by the Markel court is that to avoid a finding of ostensible agency, the hospital must act affirmatively to dispel the belief of agency. This flipped the script to effectively create, as Justice Viviano put it, a “default rule” of ostensible agency.

In Markel, Plaintiff presented to the emergency room at Defendant hospital and was placed in the observation unit. While there, Plaintiff was seen by a hospitalist that was part of a practice group which contracted with Ms. Markel’s primary care physician to see hospitalized patients. Plaintiff alleged that the hospitalist was the ostensible agent of the hospital which, therefore, should be vicariously liable for his alleged negligence. Four of the seven Supreme Court Justices agreed. The court held that:

The rule from Grewe is that when a patient presents for treatment at a hospital’s emergency room and is treated during their hospital stay by a doctor with whom they have no prior relationship, a belief that the doctor is the hospital’s agent is reasonable unless the hospital does something to dispel that belief. Id., 153.

To arrive at this conclusion, the court seemingly relied on a singular excerpt from Grewe, arguably dicta, that there was “nothing in the record which should have put the plaintiff on notice that [the doctor]…was an independent contractor as opposed to an employee of the hospital.” Grewe at 253. The Markel court appears to have glossed over the statement of law immediately preceding this excerpt from Grewe that “before a recovery can be had against a principal for the alleged acts of an ostensible agent” a plaintiff must have a reasonable belief of agency which “must be generated by some act or neglect of the principal sought to be charged…” Id. Interestingly, and despite the aforementioned quote from the Grewe court, the court in Markel also determined that Vanstelle was “in direct tension with Grewe” to the extent that it required an” affirmative act by the hospital…to prove ostensible agency.”

In his dissent, Justice Viviano acknowledged marginal ambiguity in the “act or neglect” phrase used by the Grewe court. However, he criticized the majority for treating their interpretation of Grewe as “settled law” when no other court, including the Supreme Court in Reeves v. Mid-Michigan Health, 489 Mich 908 (2011), had interpreted Grewe that way. He observed that the decision “vastly expanded” hospital liability. In his opinion, not only did the court create a new rule, but they did so because of “a policy preference for insuring plaintiffs against loss, not an honest application of [agency] principles.” Markel at 161.