## Facts

- Marilyn M. McClellan, age 39, obtained health coverage through an employer-sponsored HMO plan administered by the defendant entities.
- The HMO operated through a network model that contracted with participating physicians who were not employees of the HMO.
- Enrollees were required to choose a primary care physician from a participating-physician list supplied by the HMO; McClellan selected Joseph A. Hempsey, D.O.
- In October 1985, McClellan consulted Hempsey about a mole that allegedly had significantly changed in size and color.
- Hempsey removed the mole but allegedly discarded the tissue without sending it for pathology.
- The estate alleged the failure to obtain a biopsy delayed diagnosis and treatment of malignant melanoma, contributing to McClellan’s death.
- The estate alleged the HMO held itself out as screening, selecting, and presenting participating physicians as qualified and carefully chosen, while restricting members to its network.
- The estate alleged the HMO owed duties in selecting, retaining, and supervising participating physicians and in designing and administering the care-delivery system.

## Issues

1. Whether the complaint stated a claim that the HMO could be vicariously liable for the network physician’s alleged malpractice under ostensible/apparent agency.
2. Whether the complaint stated a claim that the HMO could be directly liable for negligence in selecting, retaining, or supervising participating physicians and in operating the HMO system.
3. Whether, applying the demurrer standard, it was clear and free from doubt that Pennsylvania law would not permit recovery against the HMO on the pleaded facts.

## Decision

- The Superior Court reversed the order sustaining the HMO’s preliminary objections in the nature of a demurrer.
- The court reinstated the complaint against the HMO and remanded for further proceedings.
- The court held the pleadings were sufficient to permit pursuit of both vicarious liability (apparent agency) and direct negligence theories against the HMO.

## Legal Principles

- On a demurrer, the court accepts as true all well-pleaded facts and reasonable inferences, sustaining the demurrer only if recovery is clearly barred as a matter of law.
- Apparent agency may support vicarious liability when a defendant’s words or conduct hold out another as its agent (or permit that appearance) and the plaintiff justifiably relies to their detriment.
- At the pleading stage, contractual labels such as “independent contractor” do not necessarily defeat an apparent-agency claim where the alleged relationship and the defendant’s representations could support agency as a factual matter.
- An HMO may owe a direct duty of reasonable care to subscribers regarding physician selection/retention/supervision and the operation of systems that affect access to, and quality of, medical care, analogous to corporate-negligence concepts applied to institutional providers.

## Conclusion

The court held that the estate’s allegations, if proven, could establish both apparent-agency vicarious liability for the network physician’s malpractice and direct negligence by the HMO in physician selection and plan operations; therefore, dismissal on demurrer was improper and the claims against the HMO were reinstated.


McClellan v. Health Maint. Org. of Pa., 604 A.2d 1053 (Pa. Super. Ct. 1992)