The Court of Appeals of Indiana recently found that a trial court did not err by allowing a physician’s claims against a physician practice group, hospital, and nurse to proceed at trial for defamation and fraud.  After trial, the jury found for the physician and required the defendants to pay $4.75 million.   

A Nurse’s Belated Accusations

Dr. Rebecca Denman was an OB/GYN employed by St. Vincent Medical Group (“SVMG”) who held medical staff privileges at St. Vincent Carmel Hospital (“Hospital”).^[1]  While on-call during the evening of December 11, 2017, Dr. Denman left dinner and drove to the Hospital to check on a patient.^[2] Upon arrival, Dr. Denman stopped at the labor and delivery nurses’ station, where several nurses were present, including the charge nurse.^[3] After a brief exchange with the nurses, Dr. Denman proceeded to the patient’s room, assessed the patient’s condition, determined that the patient could continue labor, and then exited the labor and delivery unit.^[4]

After Dr. Denman left the unit, one of the nurses told the charge nurse that she had smelled “an overwhelming smell of alcohol” on Dr. Denman’s breath during their encounter at the nurses’ station.^[5]  The charge nurse had not smelled alcohol and told the other nurse that little could be done, since Dr. Denman had already left.^[6]  Nonetheless, the charge nurse advised her to report the incident to the Hospital’s Director of Nursing.^[7]  The nurse waited until the next morning, at the end of her shift, before reporting the incident.^[8]

Dr. Denman’s Lawsuit Against the Hospital and Medical Group

Upon receipt of the nurse’s email on December 12, 2017, the Director of Nursing met with Dr. Steven Priddy, the Hospital's Chief Medical Officer.^[9]  Dr. Priddy requested a meeting with Dr. Denman.^[10]  During the meeting, Dr. Denman learned of the allegations for the first time.^[11]  She denied drinking alcohol on the evening of December 11, and also asked Dr. Priddy if Hospital policies were followed, which dictated that whenever there was a reasonable suspicion of an impaired physician at work, the Hospital had to immediately perform an assessment of the physician, relieve the physician of duty, and request that the physician submit to immediate testing of urine or a blood screening.^[12] Dr. Priddy replied that the policies were not followed, so Dr Denman left the meeting expecting that no further action would be taken against her.^[13]

On December 13, 2017, Dr. Priddy contacted SVMG’s Chief Medical Officer and informed him of the allegations against Dr. Denman.^[14] The SVMG Chief Medical Officer was also one of four doctors on SVMG's Peer Review Executive Committee (“PREC”).^[15] SVMG's Peer Review Policy dictated that issues arising at any SVMG Practice Site must be directed in writing to the PREC for review.^[16]  It also stated that the PREC “shall be initially responsible to screen and determine, in their discretion, whether the alleged Peer Review Issues should be addressed as peer review or employment/contractual matters.”^[17]  These actions were not taken.

Over the course of two days, SVMG’s Chief Medical Officer conducted what he considered a “peer review screening process,” even though he did not consult the PREC, did not contact Dr. Denman, nor did he interview the nurse who initially reported Dr. Denman.^[18] Yet, he solely concluded that SVMG had received a credible, reasonable complaint of a possible impaired physician and that SVMG either had to report the complaint to the Indiana Medical Licensing Board or have the Indiana State Medical Association (“ISMA”) assess Dr. Denman.^[19] He also viewed the matter as exclusively a human resource issue rather than one calling for peer review intervention.^[20]  

On December 21, 2017, Dr. Denman attended a meeting with SVMG’s Chief Medical Officer and a representative from Human Resources.^[21] They instructed Dr. Denman to take a voluntary leave of absence and also stated that she could not return to work until she went to ISMA's Physician Assistance Program for assessment.^[22] During this meeting, Dr. Denman was under the impression that there would be consequences, such as suspension or termination if she did not comply with the instructions.^[23]

Over the course of Dr. Denman’s leave of absence, ISMA assessed her and she participated in a six-week inpatient treatment program.^[24] Dr. Denman returned to work on March 23, 2018, on the condition that she agree to ISMA’s five-year alcohol monitoring agreement, as well as agree to abstain from drinking alcohol during this period.^[25] She filed a lawsuit against the nurse, SVMG, and the Hospital approximately three months after she returned to work.^[26]

Dr. Denman Wins a Jury Verdict, which the Court of Appeals Affirms

Dr. Denman asserted the five following claims: (i) defamation against the nurse and the Hospital; (ii) tortious interference with an employment relationship against the Hospital; (iii) tortious interference with a contract against the Hospital; (iv) fraud, constructive fraud, and negligent misrepresentation against SVMG; and (v) civil conspiracy against all defendants.^[27]

First, Dr. Denman asserted a defamation claim against the nurse and the Hospital.^[28] Dr. Denman argued that the nurse’s email was false and belated.^[29] Dr. Denman argued that the nurse’s email caused a chain of events that resulted in a dramatic and detrimental effect on Dr. Denman’s life, including the employment conditions instituted on her return to work.^[30] At trial, the nurse admitted that she did not believe Dr. Denman was drunk while at the Hospital.^[31]  When asked why she waited twelve hours to email the Director of Nursing, the nurse stated that she “didn't know what to do,” especially since no one else smelled alcohol.^[32]  The nurse also testified that she failed to consult Hospital policies before emailing the Director of Nursing, even though she knew the policies were available on the Hospital’s intranet.^[33]  The defendants sought a directed verdict arguing that the nurse’s statement (that she smelled alcohol) fell within the qualified privilege.^[34] They argued that the nurse had a duty to report the incident to her manager, and there was no evidence that the nurse knew her report was false.^[35] But the trial court denied the motion.^[36] The court recognized that the nurse’s statement was subject to the qualified privilege, but the question of whether the privilege was abused was a question of fact.^[37]  The jury ultimately awarded Dr. Denman $1,000,000 for presumed damages and $1,000,000 for compensatory damages.^[38] On appeal, the appellate court found no error with the trial court’s denial of a directed verdict on the defamation claim.^[39]

Second, Dr. Denman asserted a claim of tortious interference with an employment relationship against the Hospital.^[40]  Dr. Denman based her claim on the actions of the Hospital’s Chief Medical Officer, Dr. Priddy, who told Dr. Denman’s employer, SVMG, about the nurse’s allegations.^[41]  The jury awarded Dr. Denman $500,000 in damages on this claim.^[42] On appeal, the Hospital argued there was no malicious intent to interfere with Dr. Denman’s employment with SVMG and stated that its actions were justified and motivated by legitimate concerns as a matter of law.^[43]  The appellate court concluded that Dr. Denman presented sufficient evidence that at the time Dr. Priddy told SVMG about the nurse’s report, he knew the nurse had not followed Hospital policy.^[44] Moreover, Dr. Denman was never tested per Hospital protocols, nor offered the opportunity to clear her name.^[45]  As a result, the appellate court affirmed the lower court’s denial of the Hospital’s motion for a directed verdict on this claim.^[46]

Third, Dr. Denman asserted three claims of fraud, constructive fraud, and negligent misrepresentation against her employer, SVMG.^[47]  Dr. Denman based these claims on her meeting with SVMG’s Chief of Medicine and Human Resource representative, which was conducted on December 17, 2017.^[48]  The Chief of Medicine allegedly misrepresented that peer review had been performed.^[49]  Dr. Denman relied on this representation, and she informed the trial court that she never would have agreed to an assessment and participated in the six-week inpatient treatment program had she known that PREC had never reviewed the issue.^[50] Additionally, SVMG’s Chief of Medicine did not consult with the PREC about placing Dr. Denman on administrative leave.^[51] Based on the evidence, the jury awarded damages in the amount of $1,000,000 for fraud, $1,000,000 for constructive fraud, and $250,000 for negligent misrepresentation.^[52]

On appeal, SVMG argued that it was entitled to a directed verdict during the trial because Dr. Denman did not identify a specific false statement that the Chief of Medicine made about peer review, nor did she prove her reliance on any SVMG statement.^[53] SVMG also argued that a reasonable doctor would not “sit idly by” after many months of being on leave and never ask anyone whether peer review had been performed.^[54] The Court of Appeals was not persuaded.^[55]  The court explained that the question was not whether Dr. Denman asked about peer review, but whether SVMG misrepresented to her that peer review had been done.^[56] Therefore, the court found no error with the trial court’s denial of a directed verdict on these fraud claims.^[57]

Dr. Denman’s fourth claim of tortious interference with a contract did not survive the defendant’s pre-trial motion, and the jury did not rule in her favor on her fifth and final claim of civil conspiracy against all defendants.^[58]

Dr. Denman’s Post-Trial Issues

After the Court of Appeals found that the trial court did not err by allowing Dr. Denman’s claims to proceed to trial, it turned to Dr. Denman’s post-trial issues related to the following: (i) Dr. Denman’s Motion to Correct Error when the trial court later reduced the jury’s damages on her fraud-based claims from $2.25 million to $1 million; (ii) whether Dr. Denman was entitled to accrue post-judgment interest on her of award of prejudgment interest; and (iii) whether the trial court erred in tolling the accrual of post-judgment interest based on Indiana Supreme Court’s COVID-19 Emergency Orders it issued to all state courts.^[59]  Ultimately, the Court of Appeals directed the trial court on remand to restore the original jury award on the fraud-based claims; recalculate the prejudgment interest based on the original award of $4.75 million; and recalculate post-judgment interest because post-judgment interest “is a creature of statute, borne of legislative authority,” thus beyond the trial court’s power to toll its accrual based on the court’s interpretation of the COVID-19 Emergency Orders.^[60]

Takeaways

Hospitals should take care to follow written physician impairment policies, which should afford physicians notice and the opportunity to provide input in the peer-review process. Hospitals should make the policies known and accessible to all staff, and routinely remind staff of proper reporting protocols to avoid missteps.

FOOTNOTES

[1] Rebecca Denman, M.D., v. St. Vincent Med. Grp., Inc., St. Vincent Carmel Hosp., Inc., No. 20A-PL-1236, 2021 WL 3641944, at *1 (Ind. Ct. App. 2021).

[2] Id.

[3]Id. at *2.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id. at 3.

[10] Id.

[11] Id.

[12] Id. at 5.

[13] Id. at 3.

[14] Id.

[15] Id.

[16] Id.

[17] Id.

[18] Id.

[19] Id.

[20] Id.

[21] Id.

[22] Id.

[23] Id.

[24] Id. at 4.

[25] Id.

[26] Id.

[27] Id.

[28] Id.

[29] Id. at 8.

[30] Id.

[31] Id. at 5.

[32] Id.

[33] Id.

[34] Id. 

[35] Id.

[36] Id.

[37] Id.

[38] Id.

[39] Id. at 9.

[40] Id. at 4.

[41] Id. at 11.

[42] Id. at 5.

[43] Id. at 11.

[44] Id. at 12.

[45] Id.

[46] Id.

[47] Id. at 4.

[48] Id. at 9.

[49] Id. at 8.

[50] Id. at 5, 9.

[51] Id. at 10.

[52] Id. at 9.

[53] Id. at 10.

[54] Id.

[55] Id.

[56] Id.

[57] Id. at 11.

[58] Id. at 4, 5.

[59] Id. at 12 – 18.

[60] Id. at 18.