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Why Veterinarians Get Sued
Veterinarians need to manage various types of business, professional, and regulatory risks. We offer four suggestions for how you can limit your veterinary practice's liability exposure.
Like other types of healthcare practitioners, many veterinarians intuitively understand that they may incur legal liability for malpractice if they deliver substandard care. What may be less intuitive, however, are the liability risks that do not arise directly from the veterinarian-client-patient relationship.
In the course of practicing veterinary medicine, veterinarians develop relationships not only with clients and patients, but also with other veterinarians who may be business partners, non-veterinarian employees, product vendors, and regulators. Each one of these relationships, if not managed properly, could be a source of potential liability.
Consider the following hypothetical scenarios that could embroil a veterinary practice in a legal dispute for reasons not directly related to clinical care:
A veterinarian opens a new practice after leaving a former veterinary practice in the neighboring city. Shortly after starting the new business, the veterinarian receives a cease-and-desist letter from her former employer's attorney, alleging that she is in violation of the non-competition clause in her employment agreement.
A veterinary practice terminates a veterinary technician for suspected diversion of controlled substances in the practice's medicine inventory. The U.S. Drug Enforcement Administration (DEA) later learns of the diversion during an unannounced audit and initiates an enforcement action against the practice. Based on the DEA action, the Board of Veterinary Medicine initiates its own action against the practice owner's license, citing unprofessional conduct. Meanwhile, the technician files a lawsuit asserting that the diversion claim was a pretext for firing her for discriminatory reasons.
A veterinary practice purchases a substantial quantity of pet treats to sell in its office. The U.S. Food and Drug Administration later recalls the product as contaminated. In addition to being unable to sell its inventory of the treats, the practice is named in a lawsuit filed by a client who alleges his pet was harmed by consumption of the treat.
Just as preventative medicine can help to ward off future illness and injury, certain preventative measures can limit a veterinary practice's exposure to liabilities like those outlined above. We offer four such measures that we believe are fundamental to any veterinary practice seeking to minimize its legal risks.
1. Maintain the right organizational form for your practice
Determining whether to form a legal entity, such as a professional corporation, or to be an unincorporated sole proprietor is a threshold issue that a veterinarian should deliberate in managing his or her liability exposure. The primary benefit of structuring a veterinary practice through a legal entity is the limited liability it provides. A veterinarian who operates as a sole proprietor is personally liable for all general debts and liabilities of the practice, including those arising from vendor contracts and real estate and equipment leases.
By contrast, a shareholder of a corporation is not personally liable for the corporation's debts and liabilities. Likewise, the corporate form shields each veterinarian in a practice with multiple veterinarians from liabilities attributable to the acts of others in the group. One caveat to incorporation is that it comes with its share of costs, including franchise taxes and legal and accounting fees. In some cases, the costs may outweigh the benefits of limited liability, especially if the veterinary practice is adequately insured.
2. Carry appropriate levels of insurance
Insurance provides the financial protection against the risks that a veterinary practice encounters in its day-to-day operations. The most significant risks for most veterinarians are the risks of malpractice that arise in the delivery of veterinary services.
To protect against those risks, a veterinarian should obtain professional liability insurance with limits of coverage that are commensurate with the scope of the veterinarian's services and the types of animals treated by the veterinarian. Maintaining appropriate professional liability insurance (which, depending on the policy, might also cover the veterinarian in licensure proceedings) is especially important because even when a veterinary practice is structured as a corporation, the veterinarian is always personally liable for his or her own malpractice.
Another common form of insurance is general commercial or business liability insurance, which insures against risks of injuries to others that occur in the course of veterinary practice. For example, if an animal attacks a client on a veterinary practice's premises, general commercial or business liability insurance would cover the medical and legal costs resulting from the client's injuries.
Other types of insurance coverage include workers compensation insurance (for risks of worker injuries), employment practices liability insurance (for risks of employment-related claims, such as claims of wrongful termination, discrimination, and sexual harassment) and business automobile insurance (for risks associated with transporting animals).
3. Implement clear governance documents and policies and procedures
In veterinary practices that comprise multiple veterinarian practitioners, disputes among the practitioners can create another source of potential liability for the practice. Problem areas in group practices usually revolve around the day-to-day management of the practice, compensation, and exit issues relating to outgoing practitioners. Oftentimes, problems in these areas result when the group members are not aligned in their vision for running and growing the practice.
That's why, at the outset of forming any group practice, the veterinarian members should commit themselves to a mutually agreeable plan for the practice and memorialize that plan clearly in the practice's bylaws or other governing document and also in the individual members' shareholder agreements.
To mitigate disputes over management, for example, the practice's bylaws might put limits on the powers and duties of the CEO (e.g., that the CEO has unilateral authority to enter into contracts on behalf of the practice only up to a certain dollar amount). And to mitigate disputes relating to a member's departure, the practice might specify in its shareholder agreements the circumstances in which the member must sell his or her shares of stock in the practice back to the practice (e.g., death, loss of license, disability, termination of employment), along with the mechanism the practice will use to valuate the outgoing member's shares in a buy-back scenario.
As the hypothetical above involving the veterinary technician illustrates, a veterinary practice may incur liability in its role as an employer of non-veterinarian staff as well. The employer-employee relationship is subject to myriad federal and state rules regarding such matters as discrimination, harassment, and workplace health and safety, among others. Violation of such workplace regulations may be grounds for an affected employee to file a lawsuit against the practice or for a regulatory agency to commence an enforcement action.
To avoid these outcomes, a veterinary practice should develop policies and procedures that ensure compliance with applicable legal requirements and should disseminate them in the form of an employee handbook, which sets forth a progressive system of disciplinary action for violations.
4. Stay current on regulatory developments
In addition to general workplace regulations, veterinary practices are subject to other federal and state law requirements pertaining to the handling and transportation of animals, medical waste, controlled substances, and products regulated by the U.S. Food and Drug Administration, among other specialized regulatory requirements.
To prevent liability for violations of such regulatory requirements, a veterinary practice may consider implementing a compliance plan (either as a part of or as a supplement to its employee handbook) that outlines how the practice will satisfy its various regulatory obligations. As the regulatory landscape continues to rapidly evolve in such as areas as telehealth, moreover, a veterinary practice should make sure to stay up to date on relevant changes in the law and on regulators' enforcement priorities.
Protect your veterinary practice. Contact one of Jackson LLP's experienced veterinary medicine attorneys today.
At Jackson LLP, our attorneys understand the liability risks associated with veterinary practice and are experienced in providing a wide range of legal services to veterinarians. To schedule a complimentary phone consultation with a Jackson LLP attorney, call our office at (312) 985-6484 or click the button below.
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