Billeaudeau Effect: Recent Court Rulings Prove Uncertainty on Uncapped Credentialing Claims

By Adam Thames
​Partner, Taylor Porter

Louisiana law imposes on health care providers a duty to investigate, select, and retain only qualified and competent physicians to care for their patients. Historically, a health care provider’s liability and resulting exposure for breaching these obligations, often categorized as negligent credentialing, was considered inherently related to medical treatment and thus subject to the Louisiana Medical Malpractice Act (“LMMA”), including the limitations of liability, or “cap” on money damages, recoverable by an aggrieved patient. In October 2016, the Louisiana Supreme Court removed this layer of protection in the landmark decision of Billeaudeau v. Opelousas Gen. Hosp. Auth., 2016-0846 (La. 10/19/16), effectively subjecting health care providers to financial exposure beyond the $500,000 damages cap imposed by the LMMA.   

The Supreme Court’s decision sent shockwaves across the legal and medical community as it was in stark contrast to how Louisiana courts historically treated negligent credentialing claims. The Third Circuit Court of Appeal has since issued four separate rulings in Billeaudeau that have ramifications on health care providers that go well beyond that case; and, in some instances, only serve to provide more uncertainty as to how our courts are going to treat the now-uncapped credentialing claims.

For instance, in Billeaudeau II, the Third Circuit held that the defendant-hospital, Opelousas General Hospital Authority, was a “political subdivision” for purposes of the Louisiana Governmental Claims Act (LGCA). 2017-0735 (La. App. 3 Cir. 2/07/18), 2018 WL 738316. The LGCA limits tort liability on any claims for “political subdivisions” to $500,000 on general damages with no cap on medical and special damages. La. R.S. §13:5106. This is welcomed news for public hospitals as it confirms at least some monetary cap on damages that are recoverable for negligent credentialing. Unfortunately, however, private hospitals and providers do not fall under the LCGA and are still subject to fully uncapped exposure for negligent credentialing.

The Supreme Court’s decision also has ramifications on the type and extent of insurance available to providers to cover these now-uncapped claims. In Billeaudeau III, for example, the Third Circuit found that at least one of the defendant-hospital’s general liability policies did not insure negligent credentialing. 17-893 (La. App. 3 Cir. 4/11/18); 2018 WL 1736224. Specifically, the policy excluded “bodily injury” for performance or failure to perform “healthcare professional services” which was defined to include the work of any accreditation or standards committee in evaluating a provider’s professional services or failure to execute a decision or directive of a formal accreditation committee.  The court rejected the plaintiff’s argument that coverage should apply because employees outside of those on the actual committee assisted in gathering information related to the credentialing process, finding that the work of the committee included the work of all those tasked with gathering or providing information to the committee members for review. In upholding the coverage exclusion, the appellate court specifically noted that it was mindful of the dilemma caused by this newfound uncapped exposure for negligent credentialing.

In Billeadeau IV, the Third Circuit found that the defendant-hospital was not required to put its “claims made” liability insurer on notice of negligent credentialing until the trial court determined that this particular cause of action fell outside the scope of the LMMA. 2017-894 (La. App. 3 Cir. 4/18/18); 243 So. 3d 133, reh'g denied (June 13, 2018). The Court also found that the insurer’s bodily injury exclusion in the policy did not exclude coverage for a patient’s mental pain and suffering related to negligent credentialing and that it had to honor its duty to defend the hospital from those allegations.

​Finally, the Supreme Court’s rulings will have a drastic impact on the presentation of evidence at trial and the jury’s fact-finding duties. In Billeadeau V, Plaintiffs settled their medical malpractice claims against the doctor and hospital, but reserved their right to seek damages in excess of $200,000 against the Louisiana Patient's Compensation Fund and Oversight Board and for negligent credentialing against the hospital. 2017-895 (La. App. 3 Cir. 4/18/18); 2018 WL 1835588. The hospital filed a motion for partial summary judgment regarding the need to allocate fault to claims, not parties, and asked the trial court to require the jury to allocate a percentage of fault to each party and to further assigned a percentage of fault for both theories of liability asserted against the hospital: medical malpractice and negligent credentialing. The district court granted the motion, which was affirmed by the Third Circuit. Thus, a jury or fact-finder is now tasked with apportioning fault between claims of credentialing and medical malpractice, as well as apportioning fault among all parties and non-parties, when deciding dual claims of medical malpractice and negligent credentialing.

Short of a legislative amendment, this new landscape of uncapped liability for negligent credentialing is here to stay. Health care providers and those who sit on the committees formed to investigate, select and retain physicians must appreciate the seriousness of this ruling and its continued effect.  It is critical now more than ever for health care providers to be proactive in reviewing credentialing policies and procedures to ensure compliance, maintain adequate insurance to protect against this now-uncapped exposure and notify all insurers – general and professional liability carriers – as soon as a claim for negligent credentialing is made. 

About Adam Thames: Adam Thames is a Partner at Taylor Porter and a member of the Firm’s Healthcare Practice Team. He devotes a significant portion of his practice to representing physicians, hospitals, dialysis clinics, nurses, and other healthcare providers in medical malpractice and other professional liability claims. Thames also has extensive experience litigating class action, products liability, personal injury, and insurance defense claims. Adam is ranked by his peers among the 2017 Louisiana Super Lawyers’ “Rising Stars.”

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