United States: NJ Supreme Court Decision Expands Privileging Liability For Healthcare Facilities

Last Updated: October 30 2015
Article by Andrew J. Finan

On September 29, the New Jersey Supreme Court issued its ruling in Jarrell v. Kaul, deciding several issues in connection with whether a physician's failure to maintain statutorily mandated malpractice liability insurance gives rise to causes of action, in the event of the physician's alleged negligence, against both the physician and the facility at which a medical procedure was conducted.

The case arose from the treatment of James Jarrell (Plaintiff) by Dr. Richard Kaul (Defendant), a board-certified anesthesiologist whose practice focused on pain management and minimally invasive spinal procedures, for persistent back pain. Defendant performed a spinal fusion procedure on Plaintiff at the Market Street Surgical Center (the "Facility").

NJSA 45:9-19.17 requires a physician to either maintain medical malpractice liability insurance or produce a letter of credit to the New Jersey Board of Medical Examiners (BME). Defendant maintained a malpractice insurance policy, but the policy expressly excluded spinal fusion procedures. The procedure performed by Defendant resulted in new pain and limitations on the physical activity of Plaintiff, requiring him to have another surgical procedure with a different physician to attempt to alleviate the new symptoms.

Plaintiff's complaint alleged that Defendant was negligent in performing the original spinal fusion procedure. The complaint also asserted claims against Defendant based on his failure to satisfy the statutory malpractice insurance requirement and for his failure to obtain Plaintiff's informed consent regarding Defendant's insurance status. The complaint also alleged that the Facility was negligent in its hiring of Defendant. Plaintiff's claim of negligent performance of the spinal fusion procedure was allowed to proceed, but the remainder of his claims were dismissed prior to trial. At trial, Plaintiff received a jury award of $500,000. Defendant appealed the award and Plaintiff cross-appealed the dismissal of his additional claims. The New Jersey Superior Court Appellate Division affirmed the jury award and the dismissal of Plaintiff's claims. Both parties appealed the Appellate Division's decision to the state Supreme Court.

The Court addressed three issues in connection with the statutory requirement that physicians licensed in the State of New Jersey maintain malpractice insurance coverage or produce a letter of credit to the BME.

First, the Court addressed whether a patient in New Jersey has a direct cause of action against a physician for the physician's failure to satisfy the statutory malpractice insurance requirement. The Court held that the statutory requirement does not expressly or implicitly give an injured patient a cause of action against a physician who fails to satisfy the requirement. The Court explained that the remedy for a breach of the requirement is suspension or revocation of a physician's license by the BME and that, in its view, the state legislature did not intend to create a private cause of action for patients harmed by a violation of this provision. As a result, the Court affirmed the dismissal of this claim against Defendant.

Second, the Court addressed whether a physician in New Jersey has a duty to inform a patient of the physician's failure to meet the statutory malpractice insurance requirement. The Court held that a patient does not have a claim against an uninsured or underinsured physician for failure to obtain the patient's informed consent regarding the status of the physician's malpractice insurance coverage. The Court explained that the doctrine of "informed consent is predicated on the duty of the physician to disclose to the patient the information that will enable the patient to make a reasoned evaluation of the nature of the proposed treatment, any risk associated with it, and those risks associated with any alternative treatments. ... [T]he absence of insurance bears no relation to the nature of the proposed medical course or to the risks attendant to a proposed procedure or treatment." The Court affirmed the dismissal of Plaintiff's claim against Defendant based on lack of informed consent.

Finally, the Court addressed whether a New Jersey healthcare facility that grants privileges to a physician to treat patients at the facility has an ongoing duty to monitor the physician's compliance with the statutory malpractice insurance requirement. The Court held that a cause of action for negligent hiring may be asserted against a healthcare facility that grants privileges to a physician who has failed to satisfy the statutory requirement. The Court explained that an essential element of obtaining surgical privileges is the possession of a medical license in the State of New Jersey and that, in order to obtain and maintain a medical license in the state, a physician must obtain and maintain a malpractice insurance policy in compliance with state law. According to the Court, a healthcare facility has a duty to withhold clinical privileges from physicians who do not satisfy the requirement for a medical license in the state, including the statutory requirement to obtain and maintain malpractice liability insurance. Although Defendant had malpractice insurance, the Facility knew that his policy expressly excluded spinal fusion procedures. As a result, the Court reversed the dismissal of Plaintiff's negligence claim against the Facility.

The most interesting lesson from the Court's decision is the affirmative obligation that it has created. Before granting privileges to physicians, the credentialing bodies of New Jersey hospitals and healthcare facilities will need to obtain copies of the malpractice insurance policies of each of the physicians applying for privileges in order to review and identify any exclusions therefrom. Alternatively, the credentialing bodies may require physicians applying for privileges to represent and warrant that they have all necessary and appropriate malpractice insurance coverage and to indemnify the hospital or healthcare facility for any breach of such representation and/or warranty. Failure to do so may now expose the New Jersey hospital or healthcare facility to liability for negligent hiring of a physician.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions