It Is Now Possible for Medical Malpractice Plaintiff to Release a Vicariously Liable Principal and Reserve the Right To Pursue Plaintiff's Case Against the Agent

Pennsylvania - Medical Malpractice

In Maloney v. Valley Medical Facilities, Inc., d/b/a The Medical Center, et al., the plaintiff, Max C. Maloney ("Maloney"), initiated a professional malpractice cause of action alleging medical negligence for the failure to timely diagnose and treat his wife's osteosarcoma. Maloney's claims consisted of direct liability against multiple individual medical providers and vicarious liability claims against the corporate entities associated with those same individual medical providers.

Maloney entered into a Joint Tortfeasor Release ("Release") with defendant, Dr. Brennan; his primary insurer, the Medical Care Availability and Reduction of Error Fund; the institutional defendants associated with Dr. Brennan; and the institutional defendants associated with another defendant, Dr. Prendergast. However, Dr. Prendergast himself was not a party to the Release. In fact, the terms of the Release explicitly reserved Maloney's right to pursue his claims against Dr. Prendergast.

Following the execution of the Release, Dr. Prendergast and his affiliated institutional defendants ("Prendergast defendants") moved for Summary Judgment. Their argument was that, based on the common law governing releases and vicarious liability, Maloney had forfeited his right to pursue any and all claims against Dr. Prendergast ("agent") when he agreed to dismiss all claims against the Prendergast institutional defendants ("principals"). In support of their argument, the Prendergast defendants cited the holdings of Mamalis v. Atlas Van Lines, Inc., 522 Pa. 214, 560 A.2d 1380 (1989) (the release of an agent creates the automatic release of the principal for all vicarious liability claims regardless of any reservation of rights) and Pallante v. Harcourt Brace Jovanovich, Inc., 427 Pa. Super. 371, 629 A.2d 146 (1993) (extended the holding of Mamalis to allow for the release of an agent upon the release of the principal).

The Court of Common Pleas ruled in favor of the Prendergast defendants. On appeal, the Superior Court disagreed, holding that traditional contract principles should apply and the specific language of the Release should be interpreted as being the true intention of the parties. Furthermore, the Superior Court distinguished Pallante by noting that Pallante involved one instance of negligence, as opposed to the present matter, which involved multiple instances of negligence.

The Prendergast defendants instantly appealed to the Pennsylvania Supreme Court, primarily arguing that the Superior Court's decision ignored the holding of Mamalis and the extension of Mamalis by Pallante. Maloney argued that the specific terms of the Release should be honored, thereby allowing him to pursue his claims against Dr. Prendergast, despite the release of the Prendergast principals. Maloney argued that Pallante was distinguishable from the instant matter because (1) Pallante involved only one instance of negligence, whereas multiple instances of negligence were alleged against Dr. Prendergast, and (2) there was no indication in the Pallante opinion that the release in question contained a specific reservation of rights clause.

Justice Saylor, for the Majority, noted that the purpose of the review was to determine whether the Pallante holding was valid, i.e., whether the common law rule which effectuated the release of a principal upon the release of an agent also applied in the reverse situation. In summary, Justice Saylor and the majority of the Supreme Court affirmed the decision of the Superior Court. (The lone dissenter, Justice Greenspan, concurred with the ultimate decision of the Majority, but not their reasoning.)

The Supreme Court held that the parties to a Release agreement should be able to express their true intent within the language of the Release itself and effectuate the language in the Release, whether that Release involved joint tortfeasors or principals/agents, thus disapproving of the holding in Pallante. The Majority minimized the difference between joint and several liability and vicarious liability, noting that with either form of liability, any one defendant (whether a joint tortfeasor, principal, or agent) could be held responsible for 100 percent of the damages awarded by way of legal imputation. This weakened the Mamalis opinion by demonstrating that there was little reason to distinguish joint and several liability and vicarious liability in the settlement context.

The Supreme Court further reasoned that each judicial opinion should be interpreted based upon the specific facts of that case. Therefore, the Mamalis opinion, involving one agent and one principal, did not constitute controlling authority to the more complex situation involving the release of a principal and an express reservation of rights clause to pursue claims against the agent in a medical malpractice case with multiple agents and principals. Matters of medical malpractice, as noted by the Supreme Court, often involve multiple agents, principals, private and governmental organizations, as well as issues of serious bodily injury and death. Therefore, rigidly enforcing the Mamalis opinion in these complex medical malpractice cases does not serve the interest of justice. This is especially so when, as in the present matter, the party to be released as a matter of law is not the party alleged to have been directly negligent. Furthermore, the Supreme Court agreed with Maloney that enforcing such a rigid rule would impede settlements and undermine public policy which favors the voluntary compromise of claims, and disagreed with Dr. Prendergast's argument that such a ruling would expose him to excessive liability. The Majority noted that other provisions in the Release itself, including the primary-limits, pro-rata carve out, and hold-harmless provisions, actually insulated Dr. Prendergast from undue exposure and granted him credit for the amount of his principal's settlement.

* Jason is an associate in our Philadelphia, Pennsylvania, office and can be directly contacted at (215) 575-2698 or by email at jwbialker@mdwcg.com. 

Defense Digest, Vol. 16, No. 1, March 2010