HOT TOPICS IN THE LAW
Hot Topic #1:
Tax Relief Available in Cook County for Owners of Contaminated Industrial Properties under Class 6C
Hot Topic #2:
Administrative Review in Property Tax Cases
Hot Topic #3:
An HMO May Be Liable For The Malpractice of a Physician
IN OUR "ARCHIVES" . . . FORMER HOT TOPICS
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Tax Relief Available in Cook County for Owners of
Contaminated Industrial Properties under Class 6c
In November 1996, the Cook County Board of Commissioners revised the Cook County Real Estate Classification Ordinance to create a new incentive classification, Class 6c, designed to encourage industrial development by offering real estate tax incentives for remediation of contaminated, abandoned or vacant industrial sites. Under the Class 6c incentive, sites which qualify will be assessed at 16% of market value on both land and improvements during the time of remediation and redevelopment of the site for a period of up to three years. Upon application, the owner may receive two one-year extensions in order to complete remediation. This is a significant reduction in the level of assessment for industrial real estate, which is assessed at 36% of market, and vacant land, which is assessed at 22%.
To qualify for the incentive, the property must be used for industrial purposes and must be subject to a Remedial Action Plan approved by the Illinois Environmental Protection Agency (IEPA). Additionally, site clean-up costs must exceed $100,000 or at least 25% of the market value of the real estate at the time of acquisition, whichever is less.
As with other incentive classifications, the owner must secure from the municipality in which the real estate is located, or from the Cook County Board of Commissioners if the real estate is located in an unincorporated area, an Ordinance or resolution expressly stating that the governmental entity supports and consents to the industrial use of the site and granting of the incentive and that it has reviewed and approved the estimated timetable and costs of remediation. This resolution must have already been obtained by the time the incentive is applied for.
Finally, the Class 6c incentive allows owners to combine Class 6b or industrial Class 8 with Class 6c. Property which has been remediated according to the Class 6c requirements and which has also been approved for Class 6b or Class 8, will be eligible for an additional three years of Class 6b or Class 8 at 16% of market value, provided the market value of the land at the time of acquisition, plus verified land remediation costs, exceeds the market value of the remediated land. Thus, Class 6c, especially in combination with the benefits of Class 6b or Class 8 incentives, can result in significant tax savings anywhere from three to ten years and in some cases, as long as 13 to 15 years, at varying rates.
If you want to learn more about Class 6c or some of the other classification incentives available to property owners, you may call our offices to discuss these issues in greater detail. We can review whether your property is eligible for incentive relief and assist you at all levels of the process in securing an abatement incentive.
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ADMINISTRATIVE REVIEW IN PROPERTY TAX CASES
With the recent expansion of the Property Tax Appeal Board ("PTAB") into Cook County, taxpayers should be aware of the procedure which governs review of the decisions of the PTAB. Commencing with the 1997 assessment year, decisions from the Board of Review of Cook County, formerly the Cook County Board of (Tax) Appeals, may now be appealed to the PTAB. Previously, only taxpayers outside of Cook County had the right to go to the PTAB, with Cook County taxpayers having the Circuit Court as their only avenue of relief.
All final decisions of the PTAB are subject to review under the Administrative Review Act (735 ILCS 5/3-101 et.seq.), pursuant to Section 16-195 of the Illinois Property Tax Code (35 ILCS 200/16-195). This review proceeds before the Circuit Court, except where the taxpayer seeks a change of $300,000 or more in assessed value, which then proceeds before the Appellate Court for the district in which the property is situated
(35 ILCS 200/16-195).
Before deciding whether to pursue administrative review of a PTAB decision, taxpayers should be aware that the administrative agency's decisions are deemed prima facie true and correct and will not be disturbed by a reviewing court unless the decision is without substantial foundation in the record or is against the manifest weight of the evidence. DuPage County Board of Review v. The Property Tax Appeal Board, 284 Ill.App.3d 649, 672 N.E.2d 1309 (1996); Lake County Board of Review v. The Property Tax Appeal Board, 192 Ill.App.3d 605, 548 N.E.2d 1129 (1989). In administrative review cases, the courts are usually asked to decide whether the decision of the PTAB is against the manifest weight of the evidence or whether the decision is contrary to law. The Court will not interfere with an agency's determination of issues of fact, such as reconciling appraisers' conflicting opinions of fair market value presented at the hearing. Courts will not reassess witness credibility, reweigh the evidence or make an independent determination of facts. Illini Country Club v. State Property Tax Appeal Board, 263 Ill.App.3d 410, 635 N.E.2d 1347 (1994). Thus, Courts allow administrative agencies wide discretion in their decisions, particularly regarding factual issues.
Furthermore, the Court is precluded from hearing or considering new or additional evidence in support of or in opposition to any finding, order, determination or decision of the administrative agency (735 ILCS 5/3-110). Technical errors or the agency's failure to observe the rules of evidence are not grounds for reversal of the decision, "unless it appears to the Court that such error or failure materially affected the rights of the party and resulted in substantial injustice" (735 ILCS 5/3-111(b)).
On the other hand, administrative agencies have far less discretion with regard to its findings and conclusions of law, which are not binding on the Courts. Chrysler Corp. v. State Property Tax Appeal Board, 69 Ill.App.3d 207, 387 N.E.2d 351 (1979). Therefore, a Petitioner's greatest chance of reversal would likely involve one of these issues.
Finally, the remedies available through administrative review are specifically limited to those enumerated in Section 3-11(b) of the Act. These include affirming or reversing the decision of the agency in whole or in part, staying the decision in whole or in part pending final disposition of the case or remanding the decision in whole or in part back to the agency with instruction.
Because the petition and summons for administrative review must be filed within 35 days from the date that the agency's decision was served upon the affected party, the affected party must move quickly to decide whether or not to pursue administrative review. Therefore, before making such a decision, it is recommended that a taxpayer consult with an attorney knowledgeable and experienced in the administrative review process.
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An HMO May Be Liable For The Malpractice of a Physician
With the recent First District Appellate Court Opinion of Petrovich v. Share Health Plan of Illinois, Inc., 1998 WL 122990 (March 20, 1998) (on appeal in the Supreme Court), HMOs may now be held vicariously liable for the negligence or malpractice committed by one of the HMO's healthcare providers. However, Petrovich notwithstanding, HMOs may still be insulated from liability under the ERISA shield. The ERISA shield will be addressed in the next issue of HOT TOPICS In the Law.
The Origin of Vicarious Liability of an HMO
The vicarious liability of an HMO was first addressed by the Illinois Court in Raglin v. HMO Illinois, Inc., 239 Ill.App.3d 642, 595 N.E.2d 153, 156 (1st Dist. 1992). In Raglin, the court observed that at the time, there had only been a few actions where HMOs were named as defendants, and that there were no cases where the HMO was actually held liable for medical malpractice. The Raglin court did acknowledge, however, that many theories of liability may be utilized to find an HMO liable, namely, vicarious liability on the basis of respondeat superior or ostensible agency, as well as corporate negligence based upon negligent selection and negligent control of the physician, corporate negligence based upon the corporation's independent acts of negligence, such as in the management of utilization control systems, breach of contract, and breach of warranty.
The Raglin court's forecast concerning the vicarious liability of an HMO was likely derived from the rationale pertaining to the vicarious liability of a hospital. In the hospital setting, a hospital can be held vicariously liable for the negligence of a physician providing care at the hospital, even if the physician is an independent contractor, unless the patient "knew, or should have known", that the physician was, indeed, an independent contractor. See Gilbert v. Sycamore Municipal Hospital, 156 Ill.2 511, 622 N.E.2d 788, 795 (1993) (vicarious liability of a hospital under the doctrine of apparent agency); See also Raglin 595 N.E.2d at 156 (where the Court acknowledged the possibility of an HMO being held vicariously liable for the negligence of a contracting physician under the theory of apparent agency, by noting that "[t]he practice of extending liability beyond the normally limited legal relationship has been legitimized in the hospital context . . . [where] hospitals might incur liability for the negligence of physicians, despite the fact that an independent contractor relationship may have existed between the hospital and the physician."); Steinberg v. Dunseth, 259 Ill.App.3d 533, 535, 631 N.E.2d 809, 810 (4th Dist. 1994) (The court noting in dicta that a physician who employs another physician may be held vicariously liable for the physician/employee's negligent acts committed while acting in the scope of employment, despite the argument that the physician/employee is an independent contractor.); Comfort v. Wheaton Family Practice, 229 Ill.App.3d 828, 833, 594 N.E.2d 381 (2nd Dist. 1992) (vicarious liability of a clinic). Recently, the Supreme Court in Dahan v. UHS of Bethesda Inc., No. 1-97-462, expanded the Gilbert rule by holding that a hospital may be held vicariously liable for the negligent acts of a physician who was not an emergency room doctor.
Vicarious Liability of an HMO
An HMO may be vicariously liable for the medical malpractice of one of its healthcare providers committed during the rendition of care to one of its enrollees. See Petrovich, supra; Raglin, 595 N.E.2d at 155 (An HMO, however, is not strictly liable for any injury that occurs to one of its enrollees during the course of medical treatment. Rather, some recognized legal theory must exist in order to hold an HMO liable for malpractice); see also Moshe v. Anchor Organization for Health Maintenance, 199 Ill.App.3d 585, 557 N.E.2d 451, 459 (1st Dist. 1990) (An HMO is not immune from liability). The vicarious liability of an HMO for medical malpractice is based upon the theories of respondeat superior and apparent/ostensible agency, depending upon whether the negligent provider was an employee of the HMO, or an independent contractor. Regardless, whether the provider is an employee of the HMO or an independent contractor, the HMO may still be held vicariously liable for the provider's medical malpractice.
Respondeat Superior
When an employer-employee relationship exists between an HMO and a healthcare provider, and malpractice is committed by the provider while rendering care under the health benefits plan, the HMO may be vicariously liable under the doctrine of respondeat superior. See Alford v. Phillips, 169 Ill.App.3d 845, 859, 523 N.E.2d 563, 571 (4th Dist. 1988) (vicarious liability in the hospital setting). In a staff model managed care setting, where the healthcare provider is an employee of an HMO, the doctrine of respondeat superior may therefore be used to hold the MCO vicariously liable for the medical malpractice of the employee-provider.
In order to establish the vicarious liability of an HMO under the doctrine of respondeat superior, not only must an employer-employee relationship exist between the provider and the HMO, but the negligent activity must have occurred within the scope of the provider's employment. Raglin, 595 N.E.2d at 156; See also Pyskaty v. Oyama, 266 Ill.App.3d 801, 825, 641 N.E.2d 552, 570 (1st Dist. 1994) (For employer to be vicariously liable for employee's tort under the doctrine of respondeat superior, the tort must have been committed within the scope of employment.). In addition, the employer- employee relationship of the staff model HMO may give rise to a presumption of agency. Pyskaty, 641 N.E.2d at 570.
Apparent Agency
In managed care settings where an employer-employee relationship does not exist between the HMO and the provider, such as in a direct contact plan or group model plan, an HMO may still be found vicariously liable for the misconduct of a healthcare provider under the doctrine of apparent/ostensible agency. Petrovich, supra, (Where the court held that the principles of apparent agency in medical malpractice cases do apply to HMOs.).
Vicarious liability based on agency principles stems from the doctrines of implied and apparent authority. See Gilbert, 156 Ill.2 511, 622 N.E.2d 788, 795 ("Apparent authority" is that authority which a reasonably prudent person, exercising diligence and discretion, would naturally suppose the agent to possess in view of the principal's conduct.). Apparent authority flows from the acts of a principal and is distinguished in the case law from implied authority which is derived from circumstantial evidence, and is established if the facts and circumstances indicate that the principal actually exerted sufficient control over the physicians to negate the independent contractor status, at least with respect to third-parties. Raglin 595 N.E.2d at 156, citing Johnson v. Sumner, 160 Ill.App.3d 173, 513 N.E.2d 149 (1987); See also Mateyka v. Schroeder, 152 Ill.App.3d 854, 504 N.E.2d 1289, 1295 (5th Dist. 1987) ("...implied authority is actual authority circumstantially proved by facts and circumstances"). Apparent authority, then, is the authority which a principal knowingly permits an agent to assume, or the authority which the principal holds the agent out as possessing. Gilbert, 622 N.E.2d at 795.
Under the theory of apparent/ ostensible agency as it applies in the hospital emergency room setting, a hospital is held vicariously liable for the medical malpractice of an emergency room physician if: (1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the agent was an employee or agent of the hospital; (2) the acts of the agent created the appearance of authority; (3) the hospital had knowledge of and acquiesced in the appearance of such authority; and (4) the plaintiff reasonably relied upon the conduct of the hospital or its agent. See Gilbert, 622 N.E.2d at 795. Reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to provide complete emergency room care, rather than on a specific physician, such that a plaintiff can even be unconscious, and the reliance prong is still satisfied provided the individual or emergency personnel which took the plaintiff to the hospital relied upon the hospital's ability to provide the services that the plaintiff required. Id. at 796; See also Monti v. Silver Cross Hospital, 262 Ill.App.3d 503, 508 637 N.E.2d 427, 430 (3rd Dist. 1994).
Applying the foregoing principles to the managed care setting, an HMO may be held vicariously liable for the medical malpractice of a contracting provider if: (1) the HMO or the healthcare provider acted in a manner that would lead a reasonable person to conclude that the provider was an employee of the HMO; (2) the provider's acts created the appearance of authority; (3) the HMO had knowledge of and acquiesced in the appearance of such authority; and (4) the enrollee reasonably relied upon the conduct of the HMO or the provider.
Vicarious Liability Limitations
An HMO may effectively limit its vicarious liability exposure in a direct contact plan and in a group model plan (where the healthcare providers are independent contractors and not employees of the MCO), by clearly establishing that its providers are indeed, independent contractors, and that it retains no authority over the rendering of the services to its member-patients. See Raglin, supra. This limitation may be attempted either through the subscription agreement, or through promotional material, such as advertising.
The vicarious liability of an HMO may also be extinguished if the Plaintiff settles the claim with the negligent healthcare provider. In Gilbert, the court held that any settlement between an agent, such as a physician, and a plaintiff, must also extinguish the vicarious liability of the principal (i.e., hospital). Gilbert, 622 N.E.2d at 798.
Statutory causes of action
In 1998, HB 3265, entitled "The Health Care Entity Liability Act" was proposed in the Illinois General Assembly and is currently pending. This Act provides for a private cause of action for an insured or enrollee of a managed care plan. The Act further provides that health insurance carriers, health care plans and other managed care entities have the duty to exercise ordinary care when making health care treatment decisions and are liable for damages for harm to an insured or enrolled proximately caused by the failure to exercise ordinary care. We will continue to monitor the status of this Act.
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