PA Supreme Court Holds Nursing Homes and Affiliated Entities Subject to Direct Corporate Negligence Claims

In an opinion issued on November 21, 2012, the Pennsylvania Supreme Court held that a nursing home and affiliated entities are subject to potential direct liability for negligence, where the requisite resident-entity relationship exists to establish that the entity owes the resident a duty of care. Scampone v. Highland Park Care Center, LLC, No. 16 WAP 2011 (Pa. 2012)(Opinion by Castille, C.J.).

In the underlying case, plaintiff, Richard Scampone, as executor of the estate of Madeline Scampone, asserted claims of negligence under the Survival Act and of wrongful death alleging theories of corporate negligence and vicarious liability against defendants, Highland Park Care Center, LLC, a nursing home; and Grane Healthcare, the corporation providing management services to Highland Park, including periodic visits from nursing consultants, in-house training of nursing and administrative staff, assistance with regulatory compliance, and assistance in formulating policies and procedures. Testimony presented at trial established that during Ms. Scampone’s residency at Highland Park, there was limited personnel to accomplish all of the tasks required by her care plan which resulted in a failure of the staff to provide sufficient water and medication, track the daily activities and report changes in her condition, and to follow doctors’ directions. These failures caused dehydration and permitted a recurring urinary tract infection to progress, affecting Ms. Scampone’s heart and leading to an acute myocardial infarction and related death.

After the conclusion of plaintiff’s evidence at trial, the trial court granted a motion for compulsory nonsuit on the claim of corporate negligence against Grane Healthcare, but permitted the same claim against Highland Park to go to the jury. The jury returned a verdict in favor of the Scampone estate, finding Highland Park directly and vicariously liable for negligence. Following trial, both parties appealed to the Superior Court which affirmed in part, holding that the trial court properly allowed the claim of corporate negligence as to Highland Park. However, the Superior Court reversed the trial court’s improper nonsuit against Grane Healthcare. Thus, the Superior Court found that the plaintiffs should have been permitted to proceed with corporate negligence theories against both defendants and, therefore, remanded the case back to the trial court for a new trial. As a result, Grane Healthcare and Highland Park filed petitions for allowance of appeal to the Supreme Court. The Supreme Court affirmed, in full, the decision of the Superior Court.

In the opinion, the Court addressed the issues of categorical exemption from negligence liability of nursing homes and related entities, as well as claims regarding the specific duties of care of those entities. In so doing, the Court explained the difference between direct corporate liability and vicarious liability, noting that “a plaintiff may proceed against a defendant on theories of direct and vicarious liability, asserted either concomitantly or alternately. Liability for negligent injury is direct when the plaintiff seeks to hold the defendant responsible for harm the defendant caused by the breach of a duty owing directly to the plaintiff.” (citation omitted). On the other hand, under a theory of vicarious liability, a corporation “assumes the risk of its individual agents’ negligence.” (citations omitted). The Court then embarked on a detailed analysis of the history of corporate negligence in Pennsylvania, including its initial application to hospitals in Thompson v. Nason Hospital, 527 Pa. 330, 591 A.2d 703 (1991) and its subsequent “extended” application to HMOs and medical professional corporations in Shannon v. McNulty, 718 A.2d 828 (Pa. Super. 1998) and Hyrcza v. West Penn Allegheny Health Sys., 978 A.2d 961 (Pa. Super 2009), respectively.

In its examination of Pennsylvania case law, the Supreme Court rejected the argument that Thompson and its progeny categorically exempt nursing homes and affiliated entities from corporate negligence liability simply because that prior decisional law was addressed in the particular context of hospitals, HMOs and medical professional corporations. Rather, the Court noted that categorical exemptions exist only pursuant to legislative mandate, a privilege not bestowed upon nursing homes or similar entities.

The Court further rejected the former analysis employed in Thompson and its progeny, which focused on the question of “whether the entity providing medical care had assumed the role of a comprehensive health center responsible for arranging and coordinating the total healthcare of its patients.” (citations omitted). Instead, the Court instructed that the proper inquiry requires a broader, case-by-case analysis of whether the corporate defendant owes a duty of care to the plaintiff pursuant to the following five factors set forth in the post-Thompson case of Althaus v. Cohen, 756 A.2d 1166, 1169 (Pa. 2000): (1) the relationship between the parties; (2) the social utility of the actor’s conduct; (3) the nature of the risk imposed and foreseeabilty of the harm incurred; (4) the consequences of imposing a duty upon the actor; and (5) the overall public interest in the proposed solution. Thus, while the distinctions between a hospital and a nursing home may be relevant to a trial court’s ultimate determination of whether a duty exists, there no longer exists any viable argument for categorical exemption of an entity from potential liability for corporate negligence.

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