Mercy Hosp., Inc. v. Baumgardner

NOT FINAL UNTIL TIME EXPIRES
TO FILE REHEARING MOTION
AND, IF FILED, DISPOSED OF.

IN THE DISTRICT COURT OF APPEAL
OF FLORIDA
THIRD DISTRICT
JULY TERM, A.D., 2003

MERCY HOSPITAL, INC.
Appellant,

vs.
BARBARA BAUMGARDNER, and
ETHBERT BAUMGARDNER, and
ANNE M. JONES VALENTINE,
Appellees.

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CASE NOS. 3D02-3095
3D02-2686
LOWER
TRIBUNAL NOS. 02-6183
01-8858

Opinion filed December 24, 2003.
An Appeal from the Circuit Court for Miami-Dade County, Norman
S. Gerstein, Judge.
Stephens Lynn Klein Lacava Hoffman & Puya, and Marlene S.
Reiss, and Robert M. Klein; Lewis Fishman, for appellant.
Podhurst Orseck Josefsberg Eaton Meadow Olin & Perwin, and
Joel S. Perwin, for appellees.
William A. Bell; Parenti, Falk, Waas, Hernandez & Cortina, and
Gail Leverett Parenti, for the Florida Hospital Association, as
amicus curiae.

Before GERSTEN, GREEN, and FLETCHER, JJ.
GERSTEN, J.
Mercy Hospital, Inc. (“Mercy Hospital”) appeals an adverse
summary judgment finding the hospital liable for a staff

physician’s failure to comply with a financial responsibility
statute. Plaintiffs Barbara and Ethbert Baumgarder and Anne
Valentine (hereafter collectively referred to as “the plaintiffs”),
cross-appeal the dismissal of their negligence claims against the
hospital. We affirm on the main appeal and the cross-appeal.
The plaintiffs obtained judgments against Dr. Cesare DiRocco
(“Dr. DiRocco”) after successfully pursuing separate lawsuits for
malpractice. Dr. DiRocco had privileges to practice medicine at
Mercy Hospital, where the malpractice occurred.
Thereafter, Dr. DiRocco filed for bankruptcy, and the
plaintiffs were unable to recover on their judgments. The
plaintiffs then brought separate actions against Mercy Hospital
alleging strict liability under Florida’s financial responsibility
law, Section 458.320(2)(b), Florida Statutes (2002), and negligence
for failure to ensure that staff physician Dr. DiRocco complied
with the statute.
Mercy Hospital moved to dismiss both complaints, and the
plaintiffs filed motions for summary judgment on all claims. The
trial court granted the plaintiffs’ motions for summary judgment on
the strict liability claims and entered individual judgments of
$250,000 each for the plaintiffs. Mercy Hospital appeals the
adverse summary judgment. The plaintiffs cross-appeal the
dismissal of their negligence claims.
Section 458.320(2) requires physicians to comply with one of

three financial responsibility options in order to obtain hospital
staff privileges. A physician must have coverage in the amount of
$250,000 per claim, by either establishing an escrow account,
acquiring professional liability insurance, or maintaining a letter
of credit. See § 458.320(2), Fla. Stat. (2002). Alternatively, a
physician is exempt from the requirements of Section 458.320(2) if
he or she agrees to pay any medical-malpractice judgment creditor
$250,000 of any judgment, informs patients the doctor does not
carry medical malpractice insurance, and provides written
notification to the Florida Department of Health demonstrating
compliance with the statute. See § 458.320(5)(g), Fla. Stat.
(2002).
Mercy Hospital argues the trial court erred in granting
summary judgment for the plaintiffs, contending Section 458.320(2)
does not impose liability upon a hospital to ensure a physician’s
compliance. We disagree for the reasons expressed by our sister
districts in Robert v. Paschall, 767 So. 2d 1227 (Fla 5th DCA
2000), review denied, 786 So. 2d 1187 (Fla. 2001), and Baker v.
Tenet Healthsystem Hosp., Inc. 780 So. 2d 170 (Fla. 2d DCA 2001).
As noted in Robert v. Paschall, 767 So. 2d 1227, 1228 (Fla 5th
DCA 2000): “The obvious intent of the legislature [in enacting
Section 458.320(2)] was to make sure that a person injured by the
medical malpractice of a doctor with staff privileges would be able
to ultimately recover at least $250,000 of compensable damages. We

read section 458.320(2)(b) as imposing a statutory duty on the
hospital to assure the financial responsibility of its staff-
privileged physicians who use the hospital for medical treatment
and procedures.” See also Baker v. Tenet Healthsystem Hosp., Inc.
780 So. 2d 170 (Fla. 2d DCA 2001)(hospital has a statutory duty to
assure staff-privileged physicians are financially responsible).
We agree with the well-reasoned decisions of the Fifth and
Second Districts. The statute mandates financial responsibility as
a condition to maintaining staff privileges and imposes a duty on
the hospital to ensure compliance. Accordingly, we affirm on the
main appeal. Finding no error in the trial court’s well reasoned
decision to dismiss the negligence claims, we affirm on the cross-
appeal as well.
Affirmed.
FLETCHER, J., concurs.

GREEN, J. (dissenting)
Because the legislature has not expressly provided, or
evidenced any intent to provide, a private cause of action against
a hospital for a staff physician’s failure to comply with a
licensing statute, I must respectfully dissent.
Chapter 458 is regulatory and its specified legislative
purpose is “to ensure that every physician practicing in this state
meets minimum requirements for safe practice.” § 458.301, Fla.
Stat. (1999). Physicians who fall below the minimum standards
“shall be prohibited from practicing in this state.” Id. To that
end, Chapter 458 is a licensing statute.
As a condition of licensing, a physician is required to
demonstrate a financial ability to pay medical malpractice claims.
§ 458.320(1), Fla. Stat. (1999).1 As a continuing condition of
hospital staff privileges, a physician is also required to
establish financial responsibility by:
(a)
Establishing and maintaining an escrow account
consisting of cash or assets eligible for deposit in
accordance with s. 625.52 in the per claim amounts
specified in paragraph (b).
(b)
a n d m a i n t a i n i n g p r o f e s s i o n a l
O b t a i n i n g
liability coverage in an amount not less than $250,000
per claim, with a minimum annual aggregate of not less
than $750,000 from an authorized insurer as defined under

1 The statute provides that financial ability can be
demonstrated in various ways: 1) The establishment and maintenance
of an escrow account; 2) professional liability coverage or 3)
obtaining and maintaining an unexpired, irrevocable letter of
credit. § 458.320(1)(a),(b),(c).
5

s. 624.09, from a surplus lines insurer as defined under
s. 626.914(2), from a risk retention group as defined
under s. 627.942, from the Joint Underwriting Association
established under s. 627.351(4), through a plan of self-
insurance as provided in s. 627.357, or through a plan of
self-insurance which meets the conditions specified for
satisfying financial responsibility in s. 766.110.
(c)
Obtaining and maintaining an unexpired
irrevocable letter of credit, established pursuant to
chapter 675, in an amount not less than $250,000 per
claim, with a minimum aggregate availability of credit of
not less than $750,000. The letter of credit shall be
payable to the physician as beneficiary upon presentment
of a final judgment indicating liability and awarding
damages to be paid by the physician or upon presentment
of a settlement agreement signed by all parties to such
agreement when such final judgment or settlement is a
result of a claim arising out of the rendering of, or the
failure to render, medical care and services. Such
letter of credit shall be nonassignable and
nontransferable. Such letter of credit shall be issued
by any bank or savings association organized and existing
under the laws of this state or any bank or savings
association organized under the laws of the United States
that has its principal place of business in this state or
has a branch office which is authorized under the laws of
this state or of the United States to receive deposits in
this state.
§ 458.320(2)(a),(b),(c). A staff physician’s coverage is inclusive
of the coverage provided for licensure. Id.
Moreover, this financial responsibility statute expressly
provides that physicians need not comply with the enumerated
financial requirements if they agree to certain conditions. §
458.320(5). Specifically,
(5) The requirements of subsections (1) [and] (2) . .
. shall not apply to:

* * *
(g) Any person holding an active license under this
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chapter who agrees to meet all of the following criteria:
1. Upon the entry of an adverse final judgment arising
from a medical malpractice arbitration award, from a
claim of medical malpractice either in contract or tort,
or from noncompliance with the terms of a settlement
agreement arising from a claim of medical malpractice
either in contract or tort, the licensee shall pay the
judgment creditor the lesser of the entire amount of the
judgment with all accrued interest or either $100,000, if
the physician is licensed pursuant to this chapter but
does not maintain hospital staff privileges, or $250,000,
if the physician is licensed pursuant to this chapter and
maintains hospital staff privileges, within 60 days after
the date such judgment became final and subject to
execution, unless otherwise mutually agreed to in writing
by the parties. Such adverse final judgment shall
include any cross-claim, counterclaim, or claim for
indemnity or contribution arising from the claim of
medical malpractice. Upon notification of the existence
of an unsatisfied judgment or payment pursuant to this
subparagraph, the department shall notify the licensee by
certified mail that he or she shall be subject to
disciplinary action unless, within 30 days from the date
of mailing, he or she either:
a. Shows proof that the unsatisfied judgment has been
paid in the amount specified in this subparagraph; or
b. Furnishes the department with a copy of a timely
filed notice of appeal and either:
(I) A copy of a supersedeas bond properly posted in
the amount required by law; or
(II) An order from a court of competent jurisdiction
staying execution on the final judgment pending
disposition of the appeal.
§ 458.320(5)(g)(1). Failure to comply with the conditions of
subsection 1 results in an emergency order of suspension which may
be followed by disciplinary action. § 458.320(5)(g)(2),(3),(4).2

2 Specifically, the statute provides:

Conspicuously absent from the statute is any language
providing a third-party injured patient with a private cause of
action against a hospital for a staff physician’s breach of
statute. Without such language, or at a bare minimum, clear
legislative intent, courts have repeatedly declined to infer the
existence of a private cause of action to a regulatory statute.
See, e.g., Murthy v. N. Sinha Corp., 644 So. 2d 983, 986 (Fla.

2. The Department of Health shall issue an emergency
order suspending the license of any licensee who, after
30 days following receipt of a notice from the Department
of Health, has failed to: satisfy a medical malpractice
claim against him or her; furnish the Department of
Health a copy of a timely filed notice of appeal; furnish
the Department of Health a copy of a supersedeas bond
properly posted in the amount required by law; or furnish
the Department of Health an order from a court of
competent jurisdiction staying execution on the final
judgment pending disposition of the appeal.
3. Upon the next meeting of the probable cause panel
of the board following 30 days after the date of mailing
the notice of disciplinary action to the licensee, the
panel shall make a determination of whether probable
cause exists to take disciplinary action against the
licensee pursuant to subparagraph 1.
4. If the board determines that the factual
requirements of subparagraph 1. are met, it shall take
disciplinary action as it deems appropriate against the
licensee. Such disciplinary action shall include, at a
minimum, probation of the license with the restriction
that the licensee must make payments to the judgment
creditor on a schedule determined by the board to be
reasonable and within the financial capability of the
physician. Notwithstanding any other disciplinary
penalty imposed, the disciplinary penalty may include
suspension of the license for a period not to exceed 5
year. In the event that an agreement to satisfy a
judgment has been met, the board shall remove any
restriction on the license.

1994)(holding that regulatory statutes governing construction
industry did not create private cause of action absent evidence in
language or legislative history of intent to create private cause
of action). See also Fla. Physicians Union v. United Healthcare of
Fla., Inc., 837 So. 2d 1133, 1137 (Fla. 5th DCA 2003)(“The courts
of this state have long been reluctant to find the legislature
intended private parties to have causes of action to enforce
statutes . . . without strong indication that was the legislature’s
intent.”); Moyant v. Beattie, 561 So. 2d 1319, 1320 (Fla. 4th DCA
1990)(“In general, a statute that does not purport to establish
civil liability, but merely makes provision to secure the safety or
welfare of the public as an entity, will not be construed as
establishing a civil liability.”). Because there is no statutory
language creating a private cause of action, or indication that the
legislature ever intended to create a private cause of action, we
cannot create one by judicial fiat.
For that reason, I believe that Robert v. Paschall, 767 So. 2d
1227 (Fla. 5th DCA 2000) and Baker v. Tenet Healthsystem Hosps.,
Inc., 780 So. 2d 170 (Fla. 2d DCA 2001) were wrongly decided. In
Robert, the Fifth District held that a hospital was liable, up to
a limit of $250,000, for a staff–privileged physician’s failure to
comply with the financial responsibility statute. Robert, 767 So.
2d at 1228. The court held that this cause of action against the
hospital did not arise, however, until a judgment had been entered

against a staff physician which was not satisfied. Id. at 1228-29.
In inferring this private cause of action, the Robert court stated:
We believe this holding is compatible with the
legislative intent to make sure that plaintiffs, such as
the Roberts, are compensated assuming they are so
entitled, at least up to $250,000.
Id. at 1229. Similarly, the Second District, relying on Robert,
affirmed a dismissal without prejudice of a plaintiff’s claim
against a hospital under section 458.320, finding the claim
premature because the plaintiff had yet to establish liability on
the part of the staff physician. Baker, 780 So. 2d at 171.
Prior to these cases, there was nothing in the common law to
suggest that a hospital had a duty to ensure that its staff
physicians were financially responsible. As the First District has
said:

[N]o case, either in Florida or elsewhere, has recognized
the tort of negligent selection of a financially
“incompetent” physician. . . . It is true that the
corporate negligence doctrine is premised on the notion
that it is foreseeable that a hospital’s failure to
properly investigate an applicant for staff privileges
would present a foreseeable risk of harm to the
hospital’s patients. . . . No concurrent public reliance
on a hospital’s monitoring of a staff physician’s
malpractice judgment–paying skills has been noted in the
cases.
Beam v. Univ. Hosp. Bldg., Inc., 486 So. 2d 672, 673 (Fla. 1st DCA
1986), (citations omitted).
We cannot assume that the legislature intended to create a
cause of action and abrogate the common law without clear,
unambiguous and affirmative language to that effect. See Raisen v.
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Raisen, 379 So. 2d 352, 353-54 (Fla. 1979)(stating that, as a
general rule, common law should be changed through legislative
enactment, not judicial decisions); Assoc. for Retarded Citizens–
Volusia, Inc., 741 So. 2d 520, 525 (Fla. 5th DCA 1999)(“Had it been
the intent of the legislature to abrogate the well-settled common
law rule . . . the legislature no doubt would have specifically
said so.”). There is no such language in section 458.320. Thus,
I believe that the Second and Fifth Districts overstepped their
authority in creating a private cause of action where one was not
expressly provided for by the legislature and we should decline to
follow their lead in this case. I would therefore reverse and
certify conflict with the holdings from these Districts.