Charitable Immunity

Testimony of Jeffrey S. Beeler
Massachusetts Judiciary Committee
March 14, 2006

Re: Charitable Immunity, M.G.L. c. 231, § 85K

H.B. 788, H.B. 960, S. 1001

Good afternoon, Mr. Chairman, Members of the Committee. My name is Jeffrey Beeler. I am here to testify on House Bill 788 and House Bill 960. I appear before you as a taxpayer and as an attorney who is tired of trying to explain to various tort victims the rationale behind the cap provisions of the Commonwealth’s Charitable Immunity statute, G.L. c. 231, § 85K. I have become frustrated with this statute over the last 13 years because there is no valid rationale for its continued existence. This is particularly the case because, as construed by the Courts, § 85K provides a windfall to liability insurers while shifting to taxpayers the burden of supporting tort victims who, but for the impact of § 85K, would have access to ample liability insurance coverage to fully compensate them for their injuries. Neither House Bill 788 nor 960 go far enough to address this misguided aberration of Massachusetts law which limits the liability of so-called charitable organizations to $20,000.

In order to understand fully the shortcomings of this statute, you must understand where it came from. This doctrine stems from dictum in an 1871 English case which was later repudiated. Massachusetts “apparently in ignorance of the English reversal” proceeded to adopt Charitable Immunity.^[1] For the next 100 years or so, Charitable Immunity was Massachusetts law. In 1969, however, in Colby v. Carney Hospital, 254 N.E.2d, 407, 408 (Mass. 1969) the Supreme Judicial Court stated its intention at the next opportunity to abrogate charitable immunity as it existed in Massachusetts. At the time Colby was issued, only three to four states continued to adhere to the charitable immunity doctrine. If the SJC had abrogated Charitable Immunity, that decision would have brought Massachusetts into line with the overwhelming majority of American jurisdictions.

The Legislature, however, apparently yielding to political pressure at the time, enacted § 85K. This statute abrogated Charitable Immunity, but only to the extent of the obviously inadequate $20,000 cap. This cap has further been construed by the state’s courts to apply to claims against non-profit organizations unless the conduct at issue is “entirely disconnected” from the Defendants’ charitable purpose.^[2] This standard of showing that the wrongful conduct was “entirely disconnected” from the charitable purposes of the organization is almost impossible to meet. As this Committee is no doubt well-aware, virtually any business can incorporate as a non-profit under G.L. c. 180. The result is that many businesses can avail themselves of the Charitable Immunity Cap regardless of their status as what would be commonly thought of as a “charity.”^[3]

The Committee should note that in practice the charitable immunity cap has been construed by the Courts to apply only as to claims against charitable organizations, not the organization’s agents, servants or employees. Accordingly, it is well-recognized in the Commonwealth that one way to get around the Charitable Immunity Cap is to drop the charitable organization as a defendant prior to trial and try your case against the responsible individual tortfeasors only. There are many reported decisions, however, where the plaintiff who was injured as a result of institutional negligence was unable to identify a responsible individual from within the charitable organization.^[4] In such circumstances, the plaintiff is left with, at best, the $20,000 available under the charitable immunity cap. As you might imagine, it is difficult to explain the rationale of this law to the family of a catastrophically injured child while being aware that the charitable organization had available to it many Millions of Dollars of liability coverage for which the liability insurer was fully paid.

The vast majority of purportedly not-for-profit organizations carry extensive liability coverage for the benefit of not only the organization, but its agents, servants and employees. This coverage is also intended to compensate those who are injured due to the organization’s operations. Because it is possible to seek full recovery from individual agents, servants or employees covered under these policies, at the time of underwriting, the insurers at issue charge premiums commensurate with the full exposure that they face. In the context of a suit, however, the insurer is able to take advantage of the organization’s charitable immunity cap to avoid paying the very loss it contracted to pay.

A recent case against Children’s Hospital illustrates § 85K in action. In this case, Testa v. Children’s Hospital, Children’s Hospital was sued in addition to one of its doctors and nurses. Since Children’s Hospital did not raise the charitable immunity defense as an affirmative defense, the plaintiff in that case tried his case against all three defendants. The case involved a catastrophically injured child who died. The jury, after hearing all of the evidence, found neither the doctor nor the nurse negligent. The jury did, however, find Children’s Hospital negligent and awarded a verdict against it of more than $20 million dollars.^[5] Post-judgment motions resulted in the reduction of the award from more than $20 Million to $20,000 under § 85K. Accordingly, instead of the tortfeasors’ insurers bearing the burden of the tortfeasors’ negligence, the insurers were the beneficiary of a $19,980,000 windfall due to the Charitable Immunity Cap, despite the existence of at least $52.5 Million in liability coverage. In contrast, the Testas, who lost their child, received a slap in the face.

Even worse for taxpayers of Massachusetts are similar cases where the tort victim survives. In such cases, the taxpayers are often required to bear the cost of necessary care for such victims through the Medicaid program. Giving liability insurers a free ride at the expense of Medicaid and the taxpayers is bad public policy.

Thus, as it currently exists in Massachusetts, the charitable immunity statute has the following effects.

First, Section 85K prevents innocent injured plaintiffs from fully recovering damages against the tortfeasor which all too frequently results in people unnecessarily becoming wards of the state.

Second, It provides a windfall to insurers for so-called charitable organizations which, while charging full premiums given the avenues around charitable immunity, nevertheless take advantage of the charitable immunity cap and reap unwarranted profits when plaintiffs are unable to identify responsible individual actors for cases that arise out of institutional negligence.

Third, Cautious counsel will dismiss organizational defendants from the case prior to trial in order to avoid having a repeat of the Children’s Hospital scenario in which a jury awards what it thinks is full compensation against the organizational Defendant to the exclusion of an award against the individual tortfeasors.

This issue is at a critical point. In addition to H.B. 788 and 960 this Committee recently held hearings on S. 1001. It is plain from the Bills under consideration that the Committee is well-aware of the impact § 85K has had on the efforts of Church sexual abuse victims to obtain full compensation for their injuries. Limiting relief from the cap under § 85K to minors and sexual abuse victims, however, would not go far enough.

Charitable immunity has outlived its usefulness given the appropriate and widespread use of liability insurance policies. Moreover, the fact that many nonprofit institutions have assets, and, more importantly, insurance coverage, far exceeding those of many for-profit organizations strongly counsels the removal of the charitable immunity cap. Indeed, § 85K provides a very limited exception to its cap for automobile cases, apparently in recognition that such torts would be covered by insurance. It makes little sense to provide an exception to the cap in cases where the mandatory minimum insurance coverage is $20,000 for auto-related torts, while subjecting claims such as those made in the Children’s Hospital case to the arbitrary $20,000 cap under § 85K, despite tens of Millions of Dollars in available liability coverage.

Unless the intention is to provide windfalls for liability insurers at the expense of tort victims and the taxpayers of the Commonwealth, the charitable immunity cap on damages should be abrogated as to all pending and future cases. After almost 100 years, it is time to allow the people of Massachusetts full access to Justice in their Courts.

If any additional information that I can provide would be of assistance to you, I would be pleased to provide it.

Thank you for the opportunity to address this important issue.

Respectfully submitted,

Jeffrey S. Beeler, Esq.

^[1]See Marilyn E. Phelan, Nonprofit Enterprises: Corporations, Trusts, and Associations §14:08, at 14-25 (2000); see also Keene v. Brigham and Women’s Hosp., Inc., 439 Mass. 223 (2003) (discussing § 85K policy issues and legislative history).

^[2]See, e.g., Linkage Corp. v. Trustees of Boston University, 425 Mass. 1, 28 n.37 (1997).

^[3]For example, day care providers, medical testing labs, radiological facilities, after school care providers and various parking-related entities are incorporated as non-profits.

^[4]See, e.g., Lyons v. Morphew, 424 Mass. 828, 833 (1997).

^[5]See Testa v. Children’s Hospital, Suffolk County Superior Court, C.A. 92-0158.