## Facts

- Kadlec Medical Center, a Washington hospital, credentialed and hired anesthesiologist Robert Lee Berry after he had worked and held privileges at a Louisiana hospital and with a Louisiana anesthesia group.
- While in Louisiana, Berry was investigated for suspicious narcotics withdrawals and was found unresponsive during a shift, appearing sedated.
- Berry was terminated for cause by the anesthesia group, and the Louisiana hospital revoked his privileges; neither reportedly disclosed Berry’s impairment concerns to authorities or databases at that time.
- During Kadlec’s credentialing, Kadlec sent the Louisiana hospital a detailed questionnaire seeking evaluations of Berry’s competence, conduct, and reasons for leaving.
- The Louisiana hospital replied with a short, dates-only letter confirming Berry’s staff membership dates and did not answer the questionnaire’s specific questions or disclose the termination circumstances.
- Former colleagues in the anesthesia group provided strongly positive recommendation letters praising Berry’s clinical abilities without disclosing known impairment concerns or the for-cause termination.
- After receiving privileges at Kadlec, Berry allegedly practiced while impaired and a patient suffered catastrophic brain injury during anesthesia; Kadlec paid a large settlement.
- Kadlec later learned of Berry’s Louisiana termination circumstances and sued the anesthesia group, individual physicians, and the Louisiana hospital under Louisiana law in a diversity action.

## Issues

1. Whether Louisiana recognizes a tort claim for strict-responsibility misrepresentation.
2. Whether the physicians’ favorable recommendation letters, given what they allegedly knew about Berry, could support intentional or negligent misrepresentation and whether Kadlec could show justifiable reliance.
3. Whether the Louisiana hospital’s limited dates-only response to a detailed credentialing inquiry could support negligence or negligent misrepresentation based on omission, including duty, foreseeability, and reliance.
4. Whether physicians’ homeowners/umbrella insurers owed coverage where the alleged wrongful conduct arose from professional recommendation letters.

## Decision

- The court dismissed the strict-responsibility misrepresentation claim, concluding Louisiana law did not recognize it as an independent tort.
- The court denied summary judgment to the physician defendants on intentional and negligent misrepresentation claims, finding triable fact disputes about whether the letters were misleading and whether Kadlec relied on them despite internal concerns.
- As to the Louisiana hospital, the court declined to resolve duty and reliance on summary judgment and allowed Kadlec’s negligence/negligent misrepresentation theories to proceed based on fact disputes concerning omission and foreseeable reliance in credentialing.
- The court granted summary judgment to the physicians’ homeowners and umbrella insurers, holding business-pursuits exclusions barred coverage for claims arising from professional recommendation letters.

## Legal Principles

- Federal courts applying state law will not create a new state-law tort absent a clear basis; Louisiana law recognizes fraud and negligent misrepresentation but not strict-responsibility misrepresentation as an independent claim.
- A person who supplies information for the guidance of others may face liability for intentional or negligent misrepresentation when statements are misleading and foreseeable reliance causes harm; reliance is typically a fact question when the record supports competing inferences.
- In credentialing communications, omission-based theories may turn on fact-intensive questions about the existence and scope of any duty to speak, the context of the inquiry, and whether reliance by the requesting hospital was foreseeable and reasonable.
- Insurance business-pursuits exclusions can bar coverage when the alleged tortious conduct arises out of professional activities, including employment-related or practice-related recommendation letters.

## Conclusion

The court rejected strict-responsibility misrepresentation under Louisiana law but otherwise found genuine disputes of material fact on misrepresentation and omission-based negligence theories arising from physician reference letters and a hospital’s credentialing response, while also holding that business-pursuits exclusions eliminated the physicians’ homeowners/umbrella coverage for those claims.


Kadlec Med. Ctr. v. Lakeview Anesthesia Assocs., 2005 WL 1309153 (E.D. La. 2005)